Zambia Economy Facts
Zambia’s economy has grown substantially since the beginning of the 21st century. A major reason for this has been high copper prices, which is the country’s most important export product. Gross domestic product (GDP) has increased by 5-7 percent annually since 2003 – a higher growth rate than the average for sub-Saharan Africa.
The good growth, combined with the write-down of external debt, has significantly improved Zambia’s public finances. Nevertheless, the economic conditions for the population as a whole have not changed much. According to the World Bank, 60 percent of the population still lived in poverty in 2015.
- Countryaah.com: Major imports by Zambia, covering a full list of top products imported by the country and trade value for each product category.
In addition, the Zambian economy can be said to be fragile, as it is closely linked to the copper price in the world market. Zambia is one of the world’s largest copper producers and the country’s economic growth, trade balance and exchange rate are strongly affected by the copper price fluctuations.
The Government of Zambia is trying to reduce its dependence on copper, for example through agricultural development. Export income from agricultural products has increased in recent years, partly by growing large areas of unused land and partly by using more efficient cultivation methods on the land that is already being utilized.
The tourism industry has great growth potential. Not least, tourism is an important source of foreign currency.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including ZWB which represents the country of Zambia. Check findjobdescriptions to learn more about Zambia.
Debt and cuts
During Zambia’s first decade as an independent state (1964-1974), the economy grew rapidly. The growth was entirely based on copper extraction, which generated large export revenues and enabled important investments. Industrialization was prioritized and it took place largely under the auspices of the state. At the same time, agriculture was neglected, creating an imbalance between the city and the countryside that still exists.
When the world market price of copper fell significantly during the 1970s, it meant a severe blow to the Zambian economy. An acute economic crisis arose in the mid-1980s. The external debt was then more than twice the country’s GDP. Zambia was forced to take out loans from the World Bank and the International Monetary Fund (IMF), which demanded tightening and cuts in central government spending in exchange for the loans.
When President Frederick Chiluba and his party Movement for Multiparty Democracy (MMD) won government power in 1991, Zambia was the world’s most debt-ridden country in terms of GDP. Chiluba, formerly a union leader, underwent tough economic reforms to meet international lenders’ demands. In July 1992, Parliament passed a law on the privatization of large parts of the state business sector. Since then, hundreds of state-owned companies have been sold.
Economic policy was approved by the lenders and in 1996 Zambia had some of its debt written off. Four years later, the country was given the green light for new debt relief. The terms from the IMF and the World Bank were now that Zambia would invest in poverty reduction. Between 2002 and 2004, investments were made in agricultural development, the tourism industry and in the transport and energy sectors. Other areas that received more resources were education, health care and efforts to combat the HIV and AIDS epidemic (see Social conditions).
Zambia becomes a middle-income country
After 2004, Zambia received further debt write-offs, while export revenues grew. A temporary fall came in the fall of 2008, when the copper price fell as a result of the global financial crisis that erupted that year. Many mines had to close for a period, while the important maize harvest failed. However, Zambia handled the crisis better than many comparable countries. When the demand for copper again increased, foreign investors came back and the mines could open again in 2010–2012. Agriculture’s contribution to the economy increased, not least the maize crop. In 2015, Zambia was able to export some of its maize surplus to neighboring countries affected by drought or flooding.
In 2011, the World Bank began to classify Zambia as a lower average income country. This meant that Zambia was given more opportunities to take commercial bank loans. At the same time, access to the most favorable credits for poor, debt-burdened countries declined. Some donors also cut back on their programs in the country.
When President Michael Sata and his party the Patriotic Front (PF) came into office in 2011, a more expansionary fiscal policy was implemented. The subsidies to agriculture increased, among other things the farmers received government subsidies for the purchase of seeds and maize. Fuel subsidies were also introduced. In addition, the Sata government invested in improving the infrastructure, including the road network. As early as 2013, however, Sata was forced to abolish the subsidies on maize and fuel due to a growing deficit in the state budget.
Conflict with mining companies
In October 2014, the Sata government decided to significantly increase the foreign mining companies’ so-called royalty fees to the Zambian state. Some companies got their fees triple. At the same time, the corporate tax was abolished. The purpose of these changes was to increase the state’s revenue, as few mining companies paid corporate tax according to the government. The mining companies warned that they would be forced to close unprofitable mines and freeze planned investments.
An opening of the conflict with the mining companies came in July 2015 when President Edgar Lungu’s newly appointed government lowered royalty fees and introduced a 30 percent corporate tax. The decision was welcomed by the IMF and the World Bank, which urged the Lungu government to tighten state spending to prevent further budget deficits from escalating. The budget deficit in 2014 amounted to 5.5 percent of GDP.
In order to cover the budget deficits and at the same time to fund investments in, among other things, government bonds have been issued since 2012. The latest government bond from 2015 withdrew the equivalent of 1.25 billion US dollars. Foreign debt’s share of GDP is now considered manageable. In June 2015, the Minister of Finance stated that it was just under one fifth of GDP. Inflation, which exceeded 20 percent as late as the early 2000s, has been pushed back. In 2005–2014, the price increase rate averaged 9 percent annually.
Despite the positive economic development in Zambia, growth has not been high enough to seriously combat the widespread poverty. Although new schools, hospitals and roads have been built, the lack of materials and qualified staff remains great. For the vast majority of the population, growth has not significantly improved the standard of living. Most Zambians still live by simple farming for their own household – an unsafe way of living in a country that is often hit by drought.
FACTS – FINANCE
GDP per person
$ 1,540 (2018)
US $ 26,720 million (2018)
3.8 percent (2018)
Agriculture’s share of GDP
2.6 percent (2018)
Manufacturing industry’s share of GDP
8.5 percent (2018)
The service sector’s share of GDP
54.1 percent (2018)
10.0 percent (2019)
Government debt’s share of GDP
78.1 percent (2018)
US $ 16,309 million (2017)
Assistance per person
US $ 60 (2017)
The ex-president is cleared of charges
President Chiluba is set free on several charges but will soon face new corruption charges.