With very large reserves of copper and cobalt, Zambia was one of the most prosperous countries in Sub-Saharan Africa until its economy foundered with the slump in world copper prices in the mid-1970s. This landlocked country’s transport network was also crucially disrupted by civil unrest or liberation wars in the surrounding countries of Angola, Congo, Mozambique, Namibia, South Africa and Zimbabwe. The economy remains vulnerable to fluctuations in copper prices, and to drought.
The early 1990s was a difficult period, with the impact of a two-year drought being exacerbated by weak copper prices. In 1992, the government launched an economic reform programme with substantial divestment of state enterprises. By 2004, 259 state enterprises had been sold off. In 2006, 75 per cent of the shares in Zambia National Commercial Bank (one of the few remaining major state-owned enterprises) was sold to Rabobank (of the Netherlands) and to the Zambian public. The reform programme encouraged a more diversified economy and development of exports such as flowers, fruit and vegetables, gemstones, cotton lint and sugar. It was continued, with the support of the IMF, into the 2000s, when the emphasis was on poverty reduction.
Tight fiscal policy brought inflation down from the very high levels of the mid-1990s (183 per cent in 1993) to be generally in single figures from the mid-2000s. Privatisation of the copper mines by 2000 resulted in new investment and better management, and by 2004 world copper prices were rising. However, the decision in 2002 of Anglo-American to pull out of mining in Zambia for a time put in peril the higher levels of growth needed to reduce poverty.
Zambia qualified in 2005 for debt relief under the IMF/World Bank Heavily Indebted Poor Countries Initiative, deriving US$224 million in debt relief, which released it from 80 per cent of its annual debt-service commitments. This development reflected macroeconomic stability and sound fiscal policies, which had resulted in good growth in the 2000s. From 2005 growth strengthened to more than ten per cent in 2010 and then continued at six or seven per cent p.a. during 2011–15, despite an adverse international economic climate.