Lending to Agribusinesses in Zambia



country recognized the need to reduce the over-dependency on mining exports and sought
policies to broaden the economic base. The preferred strategy emphasized import
substitution with little attention on building export capacity (IMF 2002). The result was a
failed diversification strategy that did not help the already high unemployment and
poverty levels.

In 1991, the country changed its political system from a one party participatory
system to multi-party democracy. Since then, the new government has embarked on
policies that are aimed at putting the economy on a sustainable growth path and attaining
macroeconomic stability. Between 1992 and 1995, the country formally adopted a fast-
paced structural adjustment programme (SAP) to stabilize the economy and restore
economic growth. The programme consisted of market-oriented reforms and privatization
of government-owned enterprises. To date, the Zambia Privatization Agency has
privatized 92% of the companies out of a working portfolio of 284 parastatal companies
(ZPA 2007). Although this ambitious programme has put the country on course to
economic recovery, it has not been without challenges. By 1998, the country’s foreign
debt burden had reached a staggering $7.1 billion compared to a GDP of $8.3 billion in
the same year (representing 85% of GDP). By 2004, Zambia was determined to be
eligible for debt relief under the Highly Indebted Poor Countries (HIPC) Initiative.
Following Zambia’s attainment of the HIPC completion point in 2005, a number of the
country’s G8 and non-G8 bilateral lenders cancelled all or part of her debt. As of 2006,
the country’s external debt had declined to $502 million. Per capita GDP has risen from
$307 in 1999 to $943 in 2006 (UNDP 2006).

17



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