Country Report Zambia July 2008

Outlook for 2008-09

• The political scene will be dominated by the race to succeed the president, Levy Mwanawasa, who is seriously ill after suffering a major stroke.
• If the ruling Movement for Multiparty Democracy (MMD) is able to agree on a presidential candidate, he or she would be expected to win the presidential election. If not, the party risks splitting apart.
• Economic policy will be guided by the recently agreed poverty reduction and growth facility (PRGF).
• Continuing to exercise tight fiscal management and building capacity at ministry level will be key economic policy priorities, as will using the proceeds of the copper boom to diversify the economy.
• The mining sector looks set to be constrained by power shortages in 2008. Real GDP growth is therefore likely to be below potential in 2008, at 6.4%, before improving slightly, to 6.5%, in 2009.
• Rising global food and fuel costs are expected to push up inflation to an average of 11.6% in 2008; it will remain high in 2009, at an average of 10.2%.
• Exports will be buoyed by rising copper production, but rising import costs and, in 2009, falling copper prices will cause the current-account deficit to widen to a forecast 3.1% of GDP in 2008 and 3.7% of GDP in 2009.

Monthly review

• Although media reports that Mr Mwanawasa had died were incorrect, the president remains seriously ill in a Paris hospital.
• With Mr Mwanawasa unlikely to return to power, the country has begun to contemplate what will happen next. If the president does leave office, the constitution calls for a fresh election within 90 days.
• There are a number of potential presidential candidates within the MMD, although none has yet officially declared an intention to run.
• The finance and national planning minister, Ng’andu Magande—himself a potential successor to Mr Mwanawasa—was quick to provide assurances that economic policy would remain on track during this period of uncertainty.
• The kwacha recorded a marked depreciation as news of the president’s illness filtered through the markets.
• The rising cost of imported foodstuffs has caused another large increase in inflation, despite domestic food production remaining strong.
• The government has given an optimistic forecast for copper production in 2008 of 600,000 tonnes.

Source: Country Report