Copper mining is the backbone of Zambia’s economy, contributing significantly to GDP, export earnings, and employment. In 2020, copper accounted for more than 70% of Zambia’s export revenue. According to the Zambia Extractive Industries Transparency Initiative (EITI), in 2019, the mining sector contributed approximately 10% to the country’s GDP and over 77% to total exports.
The country’s major copper mines are concentrated in the Copperbelt Province and North-Western Province, with notable companies like First Quantum Minerals, Glencore, and Vedanta Resources operating significant mines. The production of copper in Zambia increased from around 763,287 metric tons in 2010 to 882,061 metric tons in 2020, showcasing the sector’s growth.
Zambia’s debt crisis has its roots in the mid-2010s, marked by excessive borrowing to finance large-scale infrastructure projects. The situation was exacerbated by a drop in copper prices and poor fiscal management. By the end of 2020, Zambia’s external debt had surged to approximately $12 billion, representing around 104% of its GDP. This unsustainable debt level led Zambia to become the first African country to default on its debt during the COVID-19 pandemic in November 2020.
The volatility of copper prices on the global market has a profound impact on Zambia’s economy. For instance, copper prices plummeted from over $9,000 per metric ton in 2011 to less than $5,000 per metric ton in 2016. This drastic decline resulted in reduced export revenues, putting pressure on the government’s finances and exacerbating the debt situation. Conversely, recent recoveries in copper prices, reaching over $10,000 per metric ton in 2021, provided temporary relief but underscored the economy’s vulnerability to commodity price swings.
The high debt burden has forced Zambia to allocate a significant portion of its revenue to debt servicing. In 2021, debt servicing accounted for about 45% of domestic revenues, leaving limited resources for essential public services and development projects. This situation has led to austerity measures, social unrest, and increased poverty levels, with the World Bank reporting that about 60% of the population lives below the poverty line.
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The Zambian government, under President Hakainde Hichilema, has made efforts to address the debt crisis through negotiations with creditors and seeking assistance from international financial institutions. In December 2021, Zambia reached a staff-level agreement with the International Monetary Fund (IMF) for a $1.4 billion extended credit facility aimed at stabilizing the economy and restoring fiscal sustainability. The government is also working on diversifying the economy to reduce dependency on copper mining.
