Zambia is a landlocked country located in Southern Africa, sharing borders with eight countries: Angola, Botswana, the Democratic Republic of Congo, Malawi, Mozambique, Namibia, Tanzania, and Zimbabwe. The country's geography mainly consists of a high plateau with some mountains. Zambia operates as a republic with a mixed economy, blending private freedom with centralized economic planning and government regulation.
Zambia is experiencing a large demographic shift and is one of the world’s youngest countries by median age. Its population, much of it urban, is estimated at about 19. 7 million (2022 population census) with a rapid growth rate of 2.7% per year, reflecting the relatively high fertility rate. As the large youth population attains reproductive age, the population is anticipated to double in the next 25 years, resulting in additional pressure on the demand for jobs, health care, and other social services.
Zambia is a developing country, and it achieved middle-income status in 2011. About one-half of the country's 16 million people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are under-populated. Zambia’s poor, youthful population consists primarily of Bantu-speaking people representing nearly 70 different ethnicities.
Key Economic Indicators
Real GDP has grown steadily, from 5.2% in 2022 to 5.8% in 2023, driven by wholesale and retail trade, agriculture, and mining and quarrying on the supply side and by household and corporate consumption on the demand side. Inflationary pressures persist, with inflation at 11.0% at the end of 2022 and 10.9% at the end of 2023, driven mainly by food, transport costs, and the nominal exchange rate. The fiscal deficit improved marginally, from 8.2% of GDP in 2022 to 6.6% in 2023, owing to higher mining sector revenue collections. The current account went from a surplus of 3.8% of GDP in 2022, on higher export volumes and prices and subdued imports of consumer goods, to a deficit of 1.1% in 2023.
International reserves declined from 4.4 months of import cover at the end of 2022 to 3.4 months in November 2023, on account of the use of the Extended Credit Facility and Special Drawing Rights from the International Monetary Fund. Improved financial sector performance in 2023 was due to increased economic activity. The ratio of nonperforming loans to gross loans improved from 6.1% in 2022 to 5.1% in 2023. About 60% of the population lives below the national poverty line, a slight improvement from 58% in 2015. Poverty levels are much higher in rural areas (78.8%) than urban areas (31.9%).
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The economy is projected to grow at 4.5% in 2024 and 2025, as the mining, services, and manufacturing sectors continue to recover, and global copper prices rebound. Inflation is expected to decelerate from 9.3% in 2024 to 7.0% in 2025, driven by falling food and fuel prices. Fiscal deficits are projected to narrow to 5.2% of GDP in 2024 and 3.4% in 2025 in response to ongoing fiscal reforms. The current account balance is expected to improve from a deficit of 1.1% in 2023 to surpluses of 3.3% in 2004 and 8.4% in 2025 as copper output rises. Downside risks to the growth outlook include continuing drought, fluctuating copper prices, slippages in reform program execution, and the inflationary impacts of Russia’s invasion of Ukraine on fertilizer and fuel prices.
Zambia needs to accelerate its structural transformation and diversification. Copper contributed disproportionately to GDP in 2022 (12.9%) and to export revenues (70%). The service sector contributed about 57% of GDP, while industry contributed 33.8%, with manufacturing contributing just 8.1%. Construction, utilities, and industrial activities accounted for about 10.9% of GDP. Agriculture’s contribution to GDP shrank from 9.3% in 2012 to 3.3% in 2022, even though the sector employs 24% of the labor force (58.5% men and 41.5% women). Productivity is low, as evidenced by widening productivity gaps between sectors.
Key Sectors
Mining
The Zambian economy has historically been based on the copper-mining industry. Copper and cobalt are among Zambia's main exports. Copper output has increased steadily since 2004, due to higher copper prices and the opening of new mines. By 1998, however, output of copper had fallen to a low of 228,000 tonnes, continuing a 30-year decline in output due to lack of investment, and until recently, low copper prices and uncertainty over privatization. In 2001, the first full year of a privatized industry, Zambia recorded its first year of increased productivity since 1973. The future of the copper industry in Zambia was thrown into doubt in January 2002, when investors in Zambia's largest copper mine announced their intention to withdraw their investment. However, surging copper prices from 2004 to the present day rapidly rekindled international interest in Zambia's copper sector with a new buyer found for KCCM and massive investments in expanding capacity launched.
Rich deposits of Uranium have been discovered in some parts of Zambia. In 2007, the Zambian government sought scrutiny and guidance from the International Atomic Energy Agency (IAEA) on its developed guidelines to regulate the mining of uranium in the country. In 2008, deposits were found in Kaputa District, Northern Province. Albidon Zambia Limited also confirmed the presence of high-grade uranium mineralisation at its Njame east project near Chirundu. In the Southern Province, 31 km North of Siavonga, and north of Lake Kariba, there are 5 main Uranium Deposits: Mutanga, Dibwe, Dibwe East, Njame, and Gwabe explored under The Mutanga Uranium Project. The Canadian Toronto Stock Exchange (TSX) listed GoviEx Uranium Inc acquired 100% of the Mutanga Project also known as the Kariba Uranium Project in 2016.
Agriculture
The agriculture sector represented 2.7% GDP in 2019. Agriculture accounted for 85% of total employment (formal and informal) for 2000. Maize (corn) is the principal cash crop as well as the staple food. Other important crops include soybean, cotton, sugar, sunflower seeds, wheat, sorghum, pearl millet, cassava, tobacco and various vegetable and fruit crops. Floriculture is a growth sector, and agricultural non-traditional exports now rival the mining industry in foreign exchange receipts. The maize harvest was again good in 2005, helping boost GDP and agricultural exports. Zambia has the potential for significantly increasing its agricultural output; currently, less than 20% of its arable land is cultivated.
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Energy
Energy in Zambia involves the production of energy and electricity, for consumption or export. The Energy Regulation Board (ERB) has the mandate to balance and safeguard the interests of all energy stakeholders. The Energy policy is as guided by the Energy Regulation Act No. 12 of 2019, the Electricity Act No. In 2019, Zambia generated a total of 15,013GWh of Energy. 12,427GWh was Renewable and 2,586 GWh was non-renewable. In July 2022, the local National utility ZESCO, announced it had achieved an electricity generation surplus of about 1,156 MW. Zambia's national generation capacity stands at 3,456.8 MW versus a peak national demand of 2,300 MW. The close of 2022 brought in some serious challenges to the Zambian economy, when low water levels at the Kariba Dam significantly impacted the 1080MW Kariba Hydro Power plant's output capacity and resulted in load shedding for businesses and residents across the country. In April 2023, Zambia, through its state owned utility company ZESCO Limited, signed a ZMW 67 Billion (US$3.4 Billion) Power Purchase Agreement with Integrated Clean Energy Power Company of China to produce 2,400 Mega Watts of renewable energy. Implementation of the project is expected to be done in a phased manner with the first phase producing 600MW of solar energy distributed as one 300MW power plant in Central Province and another 300MW Power plant in Southern Province. Funded by Mediobanca.
Tourism
Zambia's tourism revenue has been generally raised from local and international tourists visiting the Victoria Falls in Livingstone, and its associated attractions such as the Livingstone Museum and the Mosi-oa-Tunya National Park.
Historical Economic Reforms
A major switch in the structure of Zambia's economy came with the Mulungushi Reforms of April 1968: the government declared its intention to acquire equity holdings (usually 51% or more) in a number of key foreign-owned firms, to be controlled by a parastatal conglomerate named the Industrial Development Corporation (INDECO). By January 1970, Zambia had acquired majority holding in the Zambian operations of the two major foreign mining corporations, the Anglo American Corporation and the Rhodesia Selection Trust (RST); the two became the Nchanga Consolidated Copper Mines (NCCM) and Roan Consolidated Mines (RCM), respectively. The Zambian government then created a new parastatal body, the Mining Development Corporation (MINDECO). The Finance and Development Corporation (FINDECO) allowed the Zambian government to gain control of insurance companies and building societies. However, foreign-owned banks (such as Barclays, Standard Chartered and Grindlays) successfully resisted takeover. In 1971, INDECO, MINDECO, and FINDECO were brought together under an omnibus parastatal, the Zambia Industrial and Mining Corporation (ZIMCO), to create one of the largest companies in sub-Saharan Africa, with the country's president, Kenneth Kaunda as chairman of the board. The management contracts under which day-to-day operations of the mines had been carried out by Anglo American and RST were ended in 1973.
Zambia's economic transformation into a free market system began toward the end of 1991 following a change of government. The government privatised many state industries, and maintained positive real interest rates. Exchange controls were eliminated and free market principles endorsed. After the government privatized the giant parastatal mining company Zambian Consolidated Copper Mines (ZCCM), donors resumed balance-of-payment support. The final transfer of ZCCM's assets occurred on March 31, 2000.
Recent Economic Developments
In October 2021, to spur economic development, Zambia took measures to promote local development in its ambitious 2022 national budget. In April 2022, Zambia launched a mechanism aimed at unlocking the potential of the private sector as a driver of economic development and job creation. In May 2022, the inaugural European Union (EU)-Zambia Economic Forum was launched in Lusaka by President Hakainde Hichilema under the theme ‘Economic transformation through green growth’. In September 2022, Zambia and China launched the inaugural trade and investment forum aimed at unlocking trade and investment potential between the two countries. In mid-September 2023, President Hakainde Hichilema met with the General Secretary of the Chinese Communist Party, Xi Jinping in Beijing, China where they witnessed the signing of over 15 MOUs amounting to a potential investment of about ZMW 62.3 billion kwacha (US$3.0 billion) by China into Zambia and the leaders also agreed to increase the use of local currencies in trade between the two countries.
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GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Dollar figures for GDP are converted from domestic currencies using single year official exchange rates. For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used.
The Zambian people aspirations and vision is to make the country a prosperous Middle Income Nation by 2030. The socio-economic development objectives enshrined in the Vision 2030 are to: attain and sustain annual real growth of 6 percent (2006-2010); 8 percent (2011-2015); 9 percent (2016-2020); and 10 percent between 2021 and 2030. The Eighth National Development Plan (8NDP) sets out Zambia’s strategic direction in terms of the development priorities and implementation strategies for the period 2022 to 2026. This Plan is a successor to the Seventh National Development Plan (7NDP) that was implemented over the period 2017 to 2021. This is the fourth in the series of national development plans (NDPs) towards the national Vision 2030 in which Zambians aspire to live in a prosperous middle-income country. As the penultimate plan, the 8NDP will play a pivotal role as a building block towards the attainment of the national vision.
Zambia’s debt restructuring negotiations under the G20 Common Framework have taken considerably longer than the speedy process initially envisioned when the Common Framework was initiated. When Zambia was categorized as being in debt distress in 2017, multilateral development banks stopped providing nonconcessional financing. The major credit rating agencies may have escalated the debt crisis by overestimating sovereign risks.
Zambia has recorded several favourable macroeconomic indicators for over a decade. The average Gross Domestic Product (GDP) growth rate of 6 percent has been anchored by good performance in the mining, agriculture, manufacturing, services and construction sectors. During this period, the country's average GDP growth rate has also been generally higher than that achieved in the sub-Saharan Africa (SSA) region. Regarding foreign direct investment, inflows into Zambia rose from US$ 72 million in 2008 to a high of US$ 2,100 million in 2013, before reducing to US$ 1,300 million in 2014. In 2014 and first half of 2015, international prices of primary commodities were generally low, which temporarily affected the country's export earnings and some macroeconomic indicators.
By June 2016, Zambia had a total of US$1.8 billion in investment pledges across various economic sectors over the preceding six months. The energy sector registered the highest amount of the pledged investments, followed by the agriculture and the manufacturing. This represents an increase of 20%, compared with the US$1.5 billion investment pledges recorded in the first half of 2015. It should also be noted that as a result of Zambia's business environment reforms, the country is now ranked 8th in Africa, 5th in the Southern African Development Community (SADC) and 4th in the Common Market for Eastern and Southern Africa (COMASA) in terms of the ease of doing business. Furthermore, Zambia is ranked the 8th most competitive country in Africa on the Global Competitiveness Index.
In the area of trade, Zambia recorded a positive trade balance of US$ 300.6 million in 2014, as well as an increase in non-traditional exports (NTEs) over the years from US$ 1,381.8million in 2010 to USD 3,550.3 million in 2013. Zambia is also eligible to export duty-free goods to the United States under the African Growth and Opportunity Act (AGOA).
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