Country Report Zambia April 2010

Highlights

Outlook for 2010-11

  • Despite the strong powers of incumbency that Rupiah Banda enjoys, there is now a realistic possibility that the opposition alliance's candidate-Michael Sata-will win the presidential election in 2011.
  • Zambia's relations with the West will remain strained as donors express concern about the government's commitment to fighting corruption.
  • Real GDP will grow by a buoyant 6.8% in 2010 as copper production rises in response to a recovery in copper prices and agricultural productivity is sustained by favourable rains and government subsidies.
  • The Bank of Zambia will attempt to reduce volatility in the value of the kwacha but will remain committed to an exchange rate that reflects market fundamentals.
  • Inflationary pressures are expected to ease in response to lower food prices and a stronger kwacha, with inflation declining from 13.4% in 2009 to 10% in 2010 and 9.3% in 2011.
  • The exchange rate will appreciate to ZK4,515:US$1 in 2010, underpinned by a strong recovery in copper exports, but depreciate slightly, to ZK4,615:US$1, in 2011.

Monthly review

  • The ruling party has attempted to appeal to historic rivalries between the Bemba and Tonga ethnic groups to undermine the electoral alliance between Mr Sata's Patriotic Front and the United Party for National Development.
  • A new political party, the National Restoration Party, was formed in March by a prominent Lusaka lawyer, Elias Chipimo. The party is unlikely to be able to mobilise significant grassroots support before the 2011 elections.
  • Mr Sata has stated that he does have a university degree, confirming that he is eligible to contest the 2011 presidential election.
  • China announced that it would extend a US$1bn concessional loan to Zambia during Mr Banda's state visit to China at the end of February.
  • An IMF mission that visited Zambia in February commended the government on its fiscal policy management in 2009.
  • The Fund stated that the key medium-term policy challenge would be to create greater fiscal space by raising domestic tax collection-including from the mining sector-and by improving the efficiency of government spending.
  • Three of Zambia's largest mines awarded their workers above-inflation pay rises in February, averting the possibility of strikes and ensuring that copper production would remain stable in the medium term.
© 2010 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
IMPRINT