Zambia: All eyes on the copper price

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Zambia: All eyes on the copper price

Zambia's economy remains as dependent as ever on copper, and there is no immediate prospect that the current depressed price of this commodity will improve. Zambia also desperately needs currency stability. The kwacha has fallen by more than 70% against the dollar in the past two years and interest rates are over 30%. Helen Henton reports

The signing of a memorandum of understanding with Anglo American Corporation for the privatization of Zambia's two main copper mines, Nchanga and Nkana, has provided a significant boost to the country's economic prospects. Not least because it opened the way to the approval of an IMF enhanced structural adjustment facility (Esaf) and a subsequent debt-rescheduling agreement by the Paris Club.

However, 1999 is still set to be a difficult year as the agricultural sector struggles to offset the impact of a continuing fall in copper output and knock-on effects on the manufacturing and service sectors. Concluding the privatization deal and maintaining donor support are vital to Zambia's prospects.

The target date of March 31 for a handover of the Nchanga and Nkana copper mines to the new owners has passed without agreement, as Anglo has had difficulty finding a partner. In April, Codelco, the world's largest copper producer, controlled by the government of Chile, announced that it was considering a joint venture with Anglo American, though a final decision may not be made until mid-year.

Delays are costly, with arrears from Zambia Consolidated Copper Mines (ZCCM) to its suppliers reportedly building at a rate of $20 million a month, and having a serious impact on the manufacturing and service industries in the copper belt.

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