Zambia Democratic Republic of Congo at a Glance: 2001-02
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COUNTRY REPORT Zambia Democratic Republic of Congo At a glance: 2001-02 OVERVIEW Despite mounting opposition, the president, Frederick Chiluba, may contest the presidency again now that he has been adopted as the candidate of the ruling party, the Movement for Multiparty Democracy (MMD). The constitution will need to be amended to enable him to serve another term but, with or without Mr Chiluba, the MMD will probably win the presidential and legislative elections as they are the only party with a strong national following. The government’s economic policy priority for 2001-02 is to produce a poverty reduction strategy paper. Fiscal policy will be expansionary over the forecast period; we expect donor assistance to cover all of the financing gap in 2001-02. Monetary policy, recently loosened, may be tightened again to help support the kwacha. We expect an average rate of inflation of 28.4% in 2001 and 23.6% in 2002, largely because the kwacha is expected to weaken further, to an average of ZK3,395:US$1 in 2001 and ZK3,892:US$1 in 2002. Key changes from last month Political outlook • The MMD’s nomination of Mr Chiluba as its presidential candidate is likely to deepen the rift between the factions supporting and opposing a third term. Economic policy outlook • The government remains publicly committed to delivering on its privatisation programme but, as the elections draw nearer, delays can be expected. Economic forecast • Real GDP is forecast to grow by 6.2% in 2001 and by 5.3% in 2002. Higher export receipts will narrow the current-account deficit from 2.6% of GDP in 2001 to 0.2% of GDP in 2002. May 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. 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ISSN 1369-4839 Symbols in tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary Zambia 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2001-02 8 Political outlook 9 Economic policy outlook 10 Economic forecast 14 The political scene 17 Economic policy 20 The domestic economy 20 Economic trends 21 Mining and energy 23 Infrastructure 24 Agriculture 24 Foreign trade and payments Democratic Republic of Congo 27 Political structure 28 Economic structure 28 Annual indicators 29 Quarterly indicators 30 Outlook for 2001-02 32 The political scene 41 Economic policy and the economy List of tables 10 Zambia: international assumptions summary 12 Zambia: forecast summary 18 Zambia: government finances 22 Zambia: copper and cobalt production and prices 43 Congo: diamond production 44 Congo: budget, 2000 © The Economist Intelligence Unit Limited 2001 EIU Country Report May 2001 2 List of figures 13 Zambia: gross domestic product 13 Zambia: kwacha real exchange rates 20 Zambia: inflation rate 21 Zambia: exchange rate 21 Zambia: money supply growth, 2000 21 Zambia: copper and cobalt production 24 Zambia: foreign-exchange reserves, 2000 29 Democratic Republic of Congo: copper price 29 Democratic Republic of Congo: foreign trade 32 Democratic Republic of Congo: gross domestic product 42 Democratic Republic of Congo: diamond production EIU Country Report May 2001 © The Economist Intelligence Unit Limited 2001 3 Summary May 2001 Zambia Outlook for 2001-02 The MMD has voted to nominate President Chiluba as its candidate for the presidential election in October. The constitution will need to be amended for him to serve another term but, with or without Mr Chiluba, the ruling party will probably win both the presidential and legislative elections. The civil war in Angola will continue to test relations between the two governments. The government’s economic policy priority for 2001-02 is to produce a poverty reduction strategy paper and, on paper, the government remains committed to its privatisation programme. Fiscal policy will be expansionary; we expect donor assistance to cover all of the financing gap in 2001-02. Monetary policy, recently loosened, may be tightened again to support the kwacha. We expect an average rate of inflation of 28.4% in 2001 and 23.6% in 2002, largely because the kwacha is expected to weaken further, to an average ZK3,395:US$1 in 2001 and ZK3,892:US$1 in 2002. Real GDP is forecast to grow by 6.2% in 2001 and by 5.3% in 2002 supported by increased activity in the mining sector. The current-account deficit is expected to improve from 2.6% of GDP in 2001 to 0.2% of GDP in 2002, thanks to higher export receipts. The political scene With official MMD support, Mr Chiluba appears intent on running for a third presidential term. However, opposition from some MMD politicians and civil society groups is expected to increase. Importantly, Western governments have said they would like him to stand down. The Republican Party and the Zambia Alliance for Progress, have merged, forming the Zambia Republican Party. Economic policy The budget, announced in January, is intended to stimulate the tourism and agricultural sectors. The budget deficit is forecast to fall to 0.8% of GDP in 2001. However, although the finance minister, Katele Kalumba, has stated the privatisation programme will remain on track, privatisation commitments have been threatened by Mr Chiluba. The banking sector continues to cause concern, but the IMF has approved the release of US$126m under its poverty reduction and growth facility (PRGF). The domestic economy The government has forecast real GDP growth of 5% in 2001, supported by increased activity in the mining sector. The inflation rate has continued to remain high, but tight monetary policy has strengthened the kwacha. Konkola has reported losses of US$9.2m. Heavy rainfall has damaged the maize crop. Foreign trade and payments The IMF’s PRGF support has strengthened economic performance in early- 2001, and foreign-exchange reserves have increased significantly. Late note Mr Chiluba has dismissed members of the cabinet who oppose his third term, and a motion for his impeachment has come before parliament. © The Economist Intelligence Unit Limited 2001 EIU Country Report May 2001 4 Democratic Republic of Congo Outlook for 2001-02 The new president, Joseph Kabila, has exceeded expectations and appears to be consolidating his control over the government. His allies Angola and, particularly, Zimbabwe will continue to exert strong influence in government and Mr Kabila will need to pay careful attention to their concerns. Positive engagement with the peace process by the government has put the onus on the main rebel movements supported by Rwanda and Uganda to also show compliance. Deployment of UN forces is expected to continue amid halting progress with the peace process. The convening of the inter-Congolese dialogue will present risks as the government must give ground if the process is to be recognised as legitimate. The new government has shown some skill in diplomacy and in convincing the international community that it is committed to the peace process. The economic outlook is now positive for the first time in years. The government has made encouraging moves on economic reforms and new appointments. If appropriate policies are followed and international assistance consolidated, economic growth may resume for the first time since 1996. The political scene President Joseph Kabila was quickly inaugurated in late January following the assassination of his father, the late president, Laurent Kabila. A new government was installed in early April which swept away nearly all of the discredited cronies of the late president, replacing them with a relatively competent and clean cabinet. A commission of inquiry has been set up to investigate the assassination of Kabila senior. The late president’s aide-de-camp, Edy Kapend who is closely associated with Angola, has been arrested amid much speculation that he was linked to the assassination.