Lending to Agribusinesses in Zambia



Zambia Economic Environment

Zambia is a landlocked Southern African country in with a land area of 752,600 square
kilometers (290,580 square miles) and a population of 12 million. The country shares
borders with the Democratic Republic of Congo (DRC) and Tanzania in the north;
Malawi in the east; Mozambique in the south east; Zimbabwe and Botswana in the south;
Namibia in the south west and Angola in the west. About 51% of the population lives in
urban areas. The majority of the population (64%) lives on less than $1 a day while 72%
of the rural population lives below the national poverty line.

Since the 1920s, Zambia’s economic development has been spurred by copper
and cobalt mining. Agriculture also plays an important role on the country’s economy,
with more than 70% of the rural population dependent on agricultural production.
Between 2000 and 2005, the GDP share of agriculture, forestry and fisheries has
averaged 20.5% at current prices (table 2).

Following independence from Britain in 1964, Zambia adopted economic policies
that were based on monopolistic public institutions characterized by heavy government
involvement in input, output and credit markets. The government simultaneously
implemented foreign exchange and import controls. These policies bred inefficient public
institutions that weighed down heavily on the government. Furthermore, rising oil prices
in the 1970s and 1980s, declining copper prices in the 1980s, high inflation, and severe
droughts compounded the fiscal drain on national revenue and led to rising poverty
levels. The country’s failure to make positive policy changes in response to the declining
economic environment further worsened the situation (IMF 2002). The country increased
its foreign borrowing to minimize the decline in living standards. During this time, the

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