Zambia WT/TPR/S/106 
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I. THE ECONOMIC ENVIRONMENT 
(1) MAJOR FEATURES OF THE ECONOMY  
1. The Republic of Zambia is a landlocked country located in southern central Africa.  It is 
bounded by Angola to the west, Namibia, Botswa na, Zimbabwe, and Mozambique to the south, 
Malawi to the east, and Tanzania and the Democratic  Republic of the Congo to the north.  In 2000, 
Zambia had a population of 10.7 million people, inha biting an area of 752,614 square kilometres.  The 
workforce (between 15 and 64 years) is estimated to be about 46% of the population.1  
2. With a gross domestic product per capita of US $302 in 2000, Zambia is a least-developed 
country.  It is ranked 153 out of the 173 countr ies covered by the United Nations Development 
Programme (UNDP) human development index, an index of development measured in terms of 
income per person, educational enrolmen t, adult literacy and life expectancy.2  Nearly three fourths of 
Zambians live under the poverty line, and severe h ealth problems, especially malaria and the 
HIV/AIDS pandemic, have compounded Zambia's development challenges.    
3. Topographically, the country occupies a plateau, whic h has five distinct regions:  the central 
highlands, which include the Copperb elt and Zambezi Valley;  the we stern plains, which consist of 
swamps and semi-arid deserts;  the Rift Valley w ith the Zambezi Lowlands;  the Muchinga Uplands; 
and north-eastern Zambia, which includes the Ba ngweulu Swamps as well as Lakes Mweru and 
Tanganyika.  Zambia has large reserves of known mi neral resources and, in considerable part, the 
regional distribution of population has been influe nced by employment opportunities related to the 
extraction of those resources. Provinces with a high population density are mostly situated along the 
railways linking the Copperbelt areas to the nearest  ports, and these provinces primarily constitute 
Zambia's urban and industrial centres.  In comp arison to other countries in sub-Saharan Africa, 
Zambia has one of the highest urban populations (46%), concentrated mainly around the capital city, 
Lusaka;  Copperbelt towns such as Ndola and K itwe; and tourist centres such as Livingstone. 
4. Metal products, primarily coppe r and cobalt, account for around two thirds of merchandise 
export earnings.  Mining and quarrying contribute to around 6% of real GDP and some 70% of 
Zambia's earnings from merchandise exports.  Agricultu re, including livestock, forestry and fishing, 
accounts for about 17% of GDP and over 70% of empl oyment.  The manufacturing sector is the source 
of just over 11% of employment and around 18% of GDP.  The services sector, meantime, provides the bulk of non-agricultural employment opportunities in Zambia
3, and accounts for nearly 60% of 
GDP (Table I.1).  
5. Zambia is one of the heavily indebted poor countries (HIPC).  External debt stood at 
US$5.6 billion in 2000, down from US$8.2 billion in 1990, but almost 200% of Zambia's GDP.  Most 
debt is medium to long term and of a concessional nature; it is overwhelmingly held with multilateral 
institutions, especially the World Bank, the IMF, and the African Development Bank.  Despite the 
high reliance on concessional debt, Zambia's debt se rvice as a ratio of exports was 35.5% in 2000.4  
Following the presentation of an interim Poverty Re duction Strategy Paper (I-PRSP) by Zambia, its 
bilateral and multilateral donors agreed to exte nd debt relief amounting to US$3.8 billion, 
                                                      
1 Zambia Investment Centre (2001). 
2 UNDP (2002). 
3 Ministry of Finance and Economic Development (2001),  Poverty Reduction Strategy Paper . 
4 World Bank (2001b). WT/TPR/S/106 Trade Policy Review 
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commencing 2001, under the Enhanced Heavily  Indebted Poor Country Initiative.5  Zambia's annual 
payments are expected to be reduced by a bout US$260 million over the 2001-05 period and by 
roughly US$130 million over 2006-15 period, i.e. a reduc tion of about 45% in debt service obligation.  
Compared with its actual debt service payments in 20 00, it is forecast Zambia  will save an average of 
some US$30 million per year over the next fifteen y ears, with reductions beginning immediately and 
continuing over the next three years.6  
Table I.1 
Main economic indicators, 1996-01 
1996 1997 1998 1999 2000 2001a
Miscellaneous   
GDP at market prices (US$ b illion) 3.29 3.92 3. 24 3.13 3.24 3.62
GDP at market prices (K b illion) 3,970 5,156 6, 033 7,480 10,075 13,079
Per capita GDP (US$) 348 401 321 301 302 ..
Real GDP (percentage change) 6.5 3.5 -1.9 2.4 3.6 5.2
Consumer prices (percentage change)b 46.3 24.8 24.5 26.8 26.1 21.7
Treasury bill ratec 52.78 29.48 24.94 36.19 31.37 44.28
Lending rated 53.78 46.69 31.8 40.52 38.80 46.23
Exchange rate (K/US$)e 1,207.9 1,314.5 1,862.07 2,388.02 3,110.84 3,610.94
Real effective exchange rate (percentage change)f 4.7 19.8 -8.7 -2.2 1.2 7.9
Monetary Sector (percentage change) 
Narrow money (M1) 19.4 31.0 16.8 23.6 51.2 34.2
Global monetary resources (M2) 35.0 25.1 25.6 27.7 73.8 13.6
Share of real GDP (percentage) 
Agriculture 17.2 15.8 16.3 17.5 17.2 16.0
Mining and quarrying 12.0 11.8 9.0 6.6 6.4 6.9
Manufacturingg 16.9 18.1 18.2 18.3 18.4 18.9
Services 53.9 54.3 56.5 57.6 58.0 58.2
Government finance (percentage of GDP) 
Overall public budgeth -2.4 -9.5 -5.5 -3.7 -7.0 -8.1
National accounts (percentage of GDP) 
Public and private final cons umption 68.0 73.7 96.0 100.9 96.9 ..
Gross fixed capital formation 43.1 37.4 14.9 17.9 18.3 ..
Increase in inventories 1.6 1.4 1.6 0.1 0.0 
Exports of goods and services 31.2 30.1 26.7 22.6 30.6 ..
Imports of goods and services 43.1 42.6 39.2 41.5 45.8 ..
  Table I.1 (cont'd) 
    
                                                      
5 In May 2002, Zambia presented the Boards of the IMF, and the International Development 
Association (IDA), its Poverty Reduction Strategy Paper (PRSP), aimed at promoting growth and diversification 
in production and exports, improving delivery of social services and incorporating cross-cutting policies for 
HIV/AIDS, gender and environment. 
6 World Bank (2001c). Zambia WT/TPR/S/106 
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1996 1997 1998 1999 2000 2001a
Memorandum   
International reserves (US$ m illion) 222.7 239.1 69. 4 45.4 244.8 183.4
International reserves (months of imports) .. .. 0.4 0.5 1.0 0.8
Trade in goods (percentage of GDP) 62.2 61.5 55.2 54.2 53.5 59.4
Terms of trade (percentage change) .. .. -13.9 -5.9 3.9 -3.8
.. Not available. 
a Provisional. 
b Annual average for the period. 
c For short-term securities. 
d For short-and medium-term loans to the private sector. e Average for the period. f Negative sign indicates depreciation. 
g Including electricity, gas, water, and construction. 
h Public deficit (-) or surplus (+). 
Source: IMF (2002), International Financial Statistics , July 2002;  World Bank (2001),  Zambia at glance ;  and data provided by 
the Zambian authorities. 
(2) RECENT ECONOMIC DEVELOPMENTS  
6. Since its last Trade Po licy Review (TPR) in 1996, Zambia has continued to implement its 
economic reforms with the support of  multilateral and bilateral donors.  In general, recent reforms 
have consolidated Zambia’s achievements during th e early 1990s, with the structural component 
aimed at increasing economic growth to a level th at would be sustainable for poverty reduction 
purposes. 
7. The main fiscal policy instruments have genera lly remained unchanged.  On the revenue side, 
no new policy measures have been introduced since 1996.  However, the measures in place to contain 
public expenditures have been enhanced.  The cash  budget system has been modified to address its 
effects on capital budgets.  The Government is also  introducing an Integrated Financial Management 
Information System (IFMIS) with the goal of ensu ring that funds allocated to various programmes, 
mainly rural development, education, and health, are expended in a more cost-effective and efficient 
manner.  IFMIS is intended to modernize the financ ial, administrative, and control systems for the 
Government through the use of automated, integr ated, and efficient information systems.  The 
Government has already set up a steering committee, a nd a short-term consultant has been engaged to 
oversee the implementation of the project.  The implementation process is forecast to take six months beginning October 2002.  
8. Monetary policy is still aimed at price stab ilization.  In August 2001, Zambia added 
repurchase agreements to its statutory reserve ra tio requirements, formerly used as the main 
instrument to control money supply growth for price stabilization purposes.  The Zambian kwacha (K) 
remains convertible for all external transactions, including goods, services, transfers, and capital 
movements, after payment of applicable taxes;  its exchange rate is still mark et determined.  In 2002, 
Zambia formally accepted the obligations under Ar ticle VIII of the IMF Statutes to refrain from 
imposing restrictions on payments and transfers fo r current international transactions, or engaging in 
discriminatory currency arrangements or multiple currency practices.
7 
9. The trade regime has remained broadly unchange d (Chapter III).  The elimination of the 
import declaration fee in 1998 has enhanced Zambia ’s adherence to the WTO principles.  Tariff 
                                                      
7 International Monetary Fund (2002b). WT/TPR/S/106 Trade Policy Review 
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changes have occurred within the prevailing range  (zero, 5%, 15%, and 25%), and as part of the 
ongoing tariff rationalization process.  Changes in ot her duties and taxes (ODT) have generally been 
undertaken in a revenue neutral manner, with reductions of ODT on inputs and “essential” products 
being somewhat offset by their increases on “l uxury” products.  Nevertheless, duty and tax 
concessions are still widely granted; this depicts inconsistencies in the taxation system, e.g. the 
customs tariff still displays negative escalation fro m primary to semi-processed products.  Moreover, 
Zambia’s trade regime (including its tariff schedule) has become more complex with the implementation of preferential provis ions contained in various regiona l and bilateral trade agreements 
to which it is a signatory (Chapter II(5)(ii) and (iii)). 
10. In general, Zambia’s macroeconomic performan ce has remained meagre;  the reforms have 
yet to show their full benefits.  Over the period 1 990 to 1999, Zambia had the lowest average annual 
economic growth rate in the SADC region at 1%, c onsiderably below sub-Saha ran Africa’s rate of 
2.4%.  This performance is partly attributable to the decline in metal production (by about 7% per year 
on average over the past decade), copper in particular.
8  The Government’s efforts to diversify 
production and exports away from metal towards non-traditional goods have not yet taken hold.  
Agriculture, a major non-traditional sector, has been fre quently affected by drought;  productivity in 
the sector remains far behind that of the whole economy. 
11. Inflation (measured by changes in annual aver age consumer prices), which is largely food 
driven, has remained high (over 20% per year).  It  has been fuelled by the Government’s domestic 
borrowing (mainly from the Bank of Zambia) to fi nance its deficit;  since 2001, the borrowing has 
become high due to shortfalls in budget support by foreign donors.9  Public expenditure related to the 
2001 elections, the substantial depr eciation of the kwacha in 2000, and increases in fuel prices have 
also played their part.  The public deficit, combined  with the tightening of money supply to the private 
sector, has maintained interest rates quite high and deterred private investment in the economy.10 
12. Low economic growth, and high inflation with  relatively stable nominal wages have 
contributed to increase poverty.  The share of population living below the official Zambian poverty line has risen slightly, from 70% in 1991 to nearly 75% in recent years.  A large informal sector 
provides job alternatives, but with average wages that do not meet livelihood demands.
11  Zambia’s 
external sector performance has also been mixed ( section (3)(i));  its gross international reserves 
hardly cover one month of potential imports (Table I.1). 
13. Measures implemented in 2001 have contributed to make the kwacha more stable.  They 
include an increase in the reserve ratio from 12.5%  to 15%, compulsory sales of foreign currencies 
equivalent to US$100,000 or more through the Bank of Zambia’s dealing window, and a move from 
an independently floating exchange rate system to a managed floating system.  According to the 
authorities, a decision to make the repatriation of export proceeds compulsory has not been 
implemented.   
14. The Government expects a boost to its non-tr aditional exports and an improvement in 
economic performance from the decline in its de bt service following debt relief under the HIPC 
Initiative, and from the improved market access afte r full implementation of regional agreements to 
                                                      
8 See WTO (1996), for the reasons be hind the decline in Zambia’s mineral production;  these reasons 
have remained broadly unchanged.  In particular, metal prices have dropped substantially in recent years. 
9 Shortfalls in foreign aid have resulted from Zamb ia's failure to meet conditionalities set by donors, 
including structural reforms and gove rnance issues.  External aid declin ed by around 20% in 2001 compared 
with its 2000 level. 
10 The risk-averse position of the local banks has aggravated the situation. 
11 Ministry of Finance and Economic Development (2001),  Poverty Reduction Strategy Paper . Zambia WT/TPR/S/106 
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which Zambia is a signatory and non-reciprocal preferential treatment (e.g. under the U.S. African 
Growth and Opportunity Act, and the EU Everything But Arms Initiative). 
(3) TRADE PERFORMANCE AND INVESTMENT  
(i) Trade in goods and services 
15. As a result of poor performance by its mining sector and its financial difficulties (depletion of 
its international reserves), Zambia’s merchandise trade as a share of its GDP declined from around 
62% in 1995 to below 54% in 2000, despite the subs tantial liberalization of its trade regime; both 
imports and exports turned downward (Table I.2).  Zambia's vulnerability to external shocks is 
reflected in its external trade account, where the price of copper, the cost of imported petroleum fuel, 
and the weather-related need for maize imports play an important role.   
Table I.2 
Balance-of-payments, 1996-01 
(US$ million) 
1996 1997 1998 1999 2000 2001a 
Current account -122 -239 -574 -532 -609 -743 
Balance on goods -62 -27 -153 -149 -221 -355 
Exports 993 1,191 818 773 757 898 
Imports -1,055 -1,218 -971 -922 -978 -1,253 
Balance on services -141 -189 -179 -211 -225 -229 
Exports .. .. 103 87 115 143 
Imports .. .. -282 -298 -340 -372 
Balance on income -206 -205 -215 -156 -145 -139 
Credit .. .. 4 10 21 22 
Debit .. .. -219 -166 -166 -161 
Net current transfers 287 182 -27 -16 -18 -20 
Credit .. .. 0 .. 0 0 
Debit .. .. -27 .. -18 -20 
Capital account 49 166 203 153 153 196 
Credit 304 347 203 .. 153 196 
Debit 255 181 0 .. 0 0 
Financial account 1 0 118 169 -71 194 
Including foreign direct investment 97 117.1 198 163 122 72 
Net errors and omissions -8 -54 -200 -124 154 -75 
Overall balance -80 -127 -453 -334 -373 -428 
Financing 80 127 453 334 373 428 
.. Not available.  
a Provisional. Source:  Information provided by the Zambian authorities. 
16. Zambia’s relatively large trade deficit in 200 0 reflects increased imports related to the 
refurbishment of plants by new companies (mainly in the mining sector following the privatization of 
the Zambia Consolidated Copper Mines (ZCCM));  ma chinery, crude oil, chemicals, iron, steel, 
textiles, and vehicles are its predominant imports.  Me tals account for some 20% (on average) of total 
merchandise imports (Table I.3).  The share of petr oleum soared in 1999 and 2000 due to increases in 
world prices of crude oil.  The share of maize in total merchandise imports has reflected the intensity 
of droughts. WT/TPR/S/106 Trade Policy Review 
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Table I.3 
Composition of imports, 1996-00 
 1996 1997 1998 1999 2000 
 (percentage of total valu e of merchandise imports) 
Petroleum 7.4 8.2 4.3 13.2 17.5 
Metals 22.4 27.4 22.8 13.9 16.9 
Fertilizer 7.6 4.7 5.6 0.2 13 
Maize 2.4 1.1 11.1 0.0 0.0 
Others 60.2 58.5 56.3 72.6 64.4 
Source:  Information provided by the Zambian authorities. 
17. The Government efforts have fallen short of increasing non-trad itional exports by the annual 
target rate of 20%.  Nevertheless, the share of non-traditional exports in total merchandise exports in 
terms of value has increased from nearly one quarter  in 1996 to around one third in recent years 
(Table I.4).  Metal exports (copper followed by coba lt) continue to dominate.  Other mineral exports 
include various gemstones.  Growth has been evident over a wide range of products, notably:  
floricultural products (cut flower s in particular) and horticultural products for the European market, 
processed foods mainly for regional markets, and several categories of primary products, including 
cotton, tobacco, and sugar sold on the world market.  In the manufacturing sector, textiles and 
building materials have shown the greatest dynami sm.  Non-metal exports (primary agricultural 
products and engineering products, in particular) recorded a downw ard trend between 1997 and 2000 
largely attributable to low international prices for cotton and coffee, reduced demand in neighbouring 
countries due to conflicts and strife, reduced dema nd in Asia following the financial crisis, and the 
decline in the value of the currencies of Zambia's ma jor trading partners, relative to the U.S. dollar.  
Table I.4 
Composition of exports, 1996-01 
 1996 1997 1998 1999 2000 2001 
 (percentage of total value of merchandise exports) 
Metal exportsa 75.7 71.0 66.8 60.6 66.4 65.4 
24.3 29.0 33.2 39.4 33.6 34.6 
3.7 3.7 3.4 3.0 2.6 2.4 
1.8 1.9 3.5 5.5 4.3 3.8 
1.1 1.3 1.2 1.8 2.0 2.3 
0.9 1.4 2.2 3.1 3.5 4.0 
3.8 8.0 6.6 9.4 4.7 5.7 
3.4 2.7 5.2 4.3 4.5 4.8 Non-traditional exports 
of which engineering products 
Floricultural products  
Gemstones 
Horticultural products 
Primary agricultural products Processed foods 
Textiles 4.1 4.4 4.5 4.8 4.6 3.8 
a Copper accounts for about 84% of metal expor ts in value, and cobalt for about 9%. 
Source: Bank of Zambia (2002), EBZ Exporter Audits 1996-01 . 
18. Zambia remains a net importer of services, with increasing deficits on the services account. 
High transportation costs, mainly due to Zamb ia's landlocked situation, largely contribute 
to the deficits.  Services exports registered a meag re 1% average annual growth rate over the period 
1990-99.  Tourism constitutes the main component  of services exports, though remains largely 
underdeveloped.  Nevertheless, the introduc tion of new world-class accommodations, the 
refurbishment of key tourist airports, the divers ification of tourist produc ts and a reputation for 
political calm are increasing the number of tourist arrivals to Zambia.  Given that the tourism 
subsector is rural-based and relatively labour intensive, its developm ent and expansion could Zambia WT/TPR/S/106 
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contribute directly to poverty reduction throu gh increased employment and increased demand for 
agricultural products.   
19. South Africa is the main supplier of merchandise to Zambia;  it accounted for about 47% of 
Zambia's total merchandise imports in value in  2000 (up from around 28% in 1996).  Since 1998, 
Zimbabwe has overtaken the United Kingdom (still Za mbia's main European trading partner) as the 
second largest supplier of imports  to Zambia (Chart I.1). 
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%19961997199819992000Chart I.1
Source of imports, 1996-00
Source: IMF, Direction of Trade Statistics,  various issues.South Africa Others Saudi Arabia U.S. U.K. Zimbabwe
 
20. Zambia exports its copper mainly to Japan, th e single largest market for its merchandise 
exports (Chart I.2).  In general,  Zambia's export markets are more diversified than its import sources. 
(ii) Investment 
21. Zambia’s gross fixed capital formation (GFCF) declined from about 43% of GDP in 1996 to 
around 18% in 2000.  This trend is largely due to  the poor performance of the mining sector in recent 
years.  Investment commitments by Zambians a nd foreigners increased fro m US$185 million in 1996 
to US$1,013.2 million in 1998, and declined to US$82.2 million in 2000 and US$110.3 million 
in 2001. WT/TPR/S/106 Trade Policy Review 
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%19961997199819992000Chart I.2
Destinations of exports, 1996-00
Source: IMF, Direction of Trade Statistics , various issues.Japan Others Thailan d Saudi Arabia India
 
22. The implementation of the privatization progra mme, including the sale of state-owned mining 
companies, has largely influen ced the evolution of FDI.  Ne vertheless, despite a decade of 
liberalization reforms, FDI flows still constitute only a small fraction of overall net resource flows into 
Zambia (only 13% since 1994, according to World Bank estimates);  this partly reflects large official 
transfers to Zambia.  In 1999 and 2000, however , FDI constituted 36% and 26% of net resource 
flows.12  
23. Foreign direct investment (FDI) flows increased from US$97 million in 1996 to 
US$198 million in 1998 but declined to US$72 million in 2001.  On the basis of commitments, South 
Africa ranks first among the sources of investme nts, followed by the United Kingdom (Table I.5).  
Zambians accounted for more than one quarter of the investment commitments made over the period 
1995-01, and nearly 15% were made jo intly by Zambians and foreigners. 
24. Table I.6 presents the investments commitments by sector over the period 1995-01. 
                                                      
12 World Bank (2001b). Zambia WT/TPR/S/106 
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Table I.5 
Investments certificates by country of origin, 1995-01 
Origin Totala 
(US$ million) Share 
(per cent) 
Zambia 535.0 26.1 
Joint-ventures Zambia–foreigners 302.0 14.7 
South Africa 241.4 11.8 
United Kingdom 218.0 10.6 
United States 183.8 9.0 
Australia 113.0 5.5 
Netherlands 97.4 4.7 
People's Republic of China 91.2 4.4 
Zimbabwe 48.2 2.4 
India 25.4 1.2 
Uganda 23.0 1.1 
France 15.0 0.7 
Lebanon 14.8 0.7 
Tanzania 11.7 0.6 
Germany 10.9 0.5 
Italy 9.0 0.4 
Canada 8.0 0.4 
Others 104.4 5.2 
Total 2,052.2 100.0 
a Total amount over 1995-01. 
Source:  Data provided by the Zambia Investment Centre. 
Table I.6 
Investment commitments by sector, 1995-01 
(US$ million) 
  Agriculture Mining Manufac turing Services Total 
No. of projects 79 5 87 69 240 1995 
Amount 64.1 2.4 73.7 108.0 248.2 
No. of projects 39 0 39 35 113 1996 
Amount 101.5 0 53.4 30.3 185.2 
No. of projects 33 1 61 49 144 1997 
Amount 28.1 5.5 107.1 121.2 261.9 
No. of projects 25 1 53 55 134 1998 
Amount 43.4 245.0 145.5 579.3 1,013.2 
No. of projects 20 4 43 44 111 1999 
Amount 29.7 10.2 29.6 81.6 151.1 
No. of projects 21 3 47 40 111 2000 
Amount 9.0 2.3 39.7 31.2 82.2 
No. of projects 15 6 28 26 75 2001 
Amount 26.4 14.5 35.2 34.2 110.3 
No. of projects 232 20 358 318 928 1995-01 
Amount 302.4 280.0 484.2 985.6 2,052.2 
Source:  Data provided by the Zambia Investment Centre. 
(4) OUTLOOK  
25. In the medium-term, the Government expects real GDP growth of between 4% and 5%, 
subject to relative price stability, a build-up of gro ss international reserves, and a targeted reduction of 
fiscal deficit to under 6% of GDP by end 2004.13  Due to uncertainties in the mining sector, however, 
export growth over the period 2002-04, is projected to be slower than the 13% previously recorded.  A 
possible reduction in imports due to reduced borrowing (investment) by copper companies will 
                                                      
13 Government of Zambia (2002) WT/TPR/S/106 Trade Policy Review 
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dampen increases in food imports  as a result of the drought-induced food shortages up to 2003.  
Beyond the immediate horizon, Zambia's substan tial progress in implementing structural reforms, 
including efforts to diversify from metal exports to non-traditional exports, agricultural, and agri-
processing exports in particular, should translate into improved longer-term economic prospects.  
Should the current momentum of reform be ma intained by pursuing macroeconomic stability, 
investment in rural infrastructure, and the dere gulation and privatization of the economy, Zambia 
should raise and sustain GDP growth to between 5% and 6% per annum.  
26. Two factors, in particular, stand to redound in Zambia's favour as it attempts to escape its past 
history of stagnant economic growth: debt relief and export growth.  The decision by the IMF and 
World Bank, in December 2000, to declare Zambia  eligible for substantia l debt reduction under the 
HIPC initiative offers – for the first time in decad es – real promise that the treadmill of continuous 
refinancing of an unmanageable debt burden can finally be halted.  Enlarged access to regional 
markets, thanks to Zambia's participation in regi onal trade agreements (Chapter II(5)(ii)), and further 
exploitation of non-reciprocal preferential treatme nt provided by developed countries (e.g. the U.S. 
African Growth and Opportunity Act (AGOA) an d the EU Everything But Arms Initiative) should 
provide a boost to non-traditional exports and stim ulate further product diversification within the 
export basket. 
27. A few key obstacles, however, linger.  In the nea r-term lies the threat of famine, along with all 
its attendant humanitarian implications. Accord ing to the UN Food and Agriculture Organization 
(FAO) and the World Food Programme (WFP), crop asse ssments in six Southern African countries, 
including Zambia, point to the region facing its wo rst food crisis since the 1992 drought:  provisional 
figures suggesting that as many as 2.3 million people, i. e. 21% of Zambia's population, will be in need 
of food relief through March 2003.  According to UNI CEF, 59% of Zambian children under five were 
already malnourished in 2000.  Projected increases in food prices, the main component (over 50%) of 
Zambia’s consumer price index, and the cost of relief measures are expected to place a heavy burden 
on public finances.  
28. Following the privatization of the Zambia Consolidated Copper Mines (ZCCM) in 2000, the 
copper industry, which still the mainstay of the ec onomy and the major source of its exports, boasted a 
rosy future.  However, the recently announced pull- out of Anglo American Corporation Plc, the major 
private shareholder in the largest mining company in the country, Konkola Copper Mines (citing lack 
of viability in the Konkola Deep Mining Project due to low world prices of copper), brings with it uncertainties with respect to the future  of the industry (Chapter IV(3)(i)(b)). 
29. Aside from malaria, the main health-related obstacle is the devastating spread of the 
HIV/AIDS pandemic, which has already reduced lif e expectancy, sharply - from 54 years two decades 
ago to 38 years today. AIDS has already killed 700, 000 adults and children in Zambia.  Currently 20% 
of the population between the ages 15-49 is thought to be infected with AIDS.
14  As a result, health 
facilities in Zambia are seriously challenged;  teach ers, nurses, and state officials are dying at rates 
faster than they can be replaced; and high absenteeism , steeper health care, pension, and funeral costs, 
and loss of productive workers are a challenge to  business prospects.  A few hopeful signs have 
emerged, however, with HIV prevalence among Zambians in their late teens appearing to drop:  in the 
capital, Lusaka, the prevalence rate fell from 28% in 1994 to 15% in 1999, among 15-19 year olds.  The impact of the disease on skilled labour suppl y, savings and investment, and financial 
intermediation is expected to have a significant e ffect on potential growth over the medium term.  The 
Government is directly confronting these problems. 
                                                     
 
14 UNAIDS (2002). 