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Over 70% of Zambians live in poverty. Per capita annual incomes are currently at about one-half their levels at independence and, at $395, place the country among the world's poorest nations. Social indicators continue to decline, particularly in measurements of life expectancy at birth (about 37 years) and maternal mortality (729 per 100,000 pregnancies). The country's rate of economic growth cannot support rapid population growth or the strain which HIV/AIDS related issues (i.e., rising medical costs, decline in worker productivity) place on government resources. Zambia is also one of Sub-Saharan Africa's most highly urbanized countries. Almost one-half of the country's 10 million people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are underpopulated. Unemployment and underemployment are serious problems.
HIV/AIDS is the nation's greatest challenge, with 16% prevalence among the adult population. HIV/AIDS will continue to ravage Zambian economic, political, cultural, and social development for the foreseeable future.
Once a middle-income country, Zambia began to slide into poverty in the 1970s when copper prices declined on world markets. The socialist government made up for falling revenue by increasing borrowing. After democratic multi-party elections, the Chiluba government (1991-2001) came to power in November 1991 committed to an economic reform program. The government was successful in some areas, such as privatization of most of the parastatals, maintenance of positive real interest rates, the elimination of exchange controls, and endorsement of free market principles. Corruption grew dramatically under the Chiluba government. It remains to be seen whether the Mwanawasa government will be aggressive in continuing economic reform. Zambia has yet to address effectively issues such as reducing the size of the public sector and improving Zambia's social sector delivery systems. Zambia's total foreign debt exceeded $6 billion when the country qualified for Highly Indebted Poor Country Initiative (HIPC) debt relief in 2000, contingent upon meeting certain performance criteria. Initially, Zambia hoped to reach the HIPC completion point, and benefit from substantial debt forgiveness, in late 2003. In January 2003, the Zambian Government informed the IMF and World Bank that it wished to renegotiate some of the agreed performance criteria calling for privatization of the Zambia National Commercial Bank and the national telephone and electricity utilities. Although agreements were reached on these issues, subsequent overspending on civil service wages delayed Zambia's final HIPC debt forgiveness from late 2003 to early 2005, at the earliest. In an effort to reach HIPC completion in 2004, the government drafted an austerity budget for 2004, freezing civil service salaries and increasing a number of taxes. The labor movement and other components of civil society have objected to the sacrifices called for in the budget, and, in some cases, the role of the international financial institutions in demanding austerity.
The Zambian economy has historically been based on the copper-mining industry. Output of copper had fallen, however, to a low of 228,000 metric tons in 1998, after a 30-year decline in output due to lack of investment, low copper prices, and uncertainty over privatization. In 2002, following privatization of the industry, copper production rebounded to 337,00 metric tons. Improvements in the world copper market have magnified the effect of this volume increase on revenues and foreign exchange earnings.
The Zambian Government is pursuing an economic diversification program to reduce the economy's reliance on the copper industry. This initiative seeks to exploit other components of Zambia's rich resource base by promoting agriculture, tourism, gemstone mining, and hydro power. In 2003, nonmetal exports increased by 25%, and accounted for 38% of all export earnings, up from 35%.
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