ZAMBIA’S TRADE SITUATION: IMPLICATIONS FOR DEBT AND POVERTY REDUCTION

The supremacy of international trade as an engine of growth has regained its pre-eminence on the development agenda. Thus far external trade has been accepted as not only an engine of growth but also as a critical element of any strategy to satisfy domestic aggregate demand and fight poverty. For Zambia, international trade relations are very important given the country’s dependence on imports for the much-needed manufactured goods and earnings from the export of primary commodities. Within the global context, there is compelling evidence to show that most poor countries at the behest of the Bretton Woods Institutions are pursuing export-led policies within the framework of neo-liberalism. However, most of the least developed countries like Zambia are faced with declining terms of trade, export barriers and ambiguous trade protocols within the regional and multilateral trading systems (MTS). This results in chronic current account deficits and balance of payments (BOP) crises that militate against development in poor countries. As an interim measure to close the BOP deficits, the poor countries are usually forced to borrow domestically and externally with the resultant accumulation of huge domestic and external debt stocks. Most of the external debt poses adverse economic effects on the borrowing country given the austere conditionality and ‘shock therapies’ that donors attach to the loans.The problem of unsustainable external debts continues to be a major source of concern among the civil society, cooperating partners, government and indeed other stakeholders. With Zambia’s qualification to the Heavily Indebted Poor Country (HIPC) completion point in April 2005, the external debt relief and cancellation are likely to significantly reduce both Zambia’s external debt stock and debt service amounts, other things being equal. However, the unfair external trade regime at the international level threatens the sustainability of the external debt stock as it generates Balance of Payment (BOP) crises that require mitigation mainly through external borrowing. Thus, the Jesuit Centre for Theological Reflection (JCTR)’ s Debt and Trade Project is concerned that the relationship among debt, trade and poverty is a very important factor and must be explored and made part of the holistic policy environment, which leads to sustainable development. Therefore, this study was commissioned by the JCTR’s Debt and Trade Project to explore Zambia’s trade situation. Among the focus questions addressed are the following: What is Zambia’s trade situation like? How are the trade policies and negotiation positions formulated? Is there a linkage between trade and investment in Zambia? What are the main trade protocols that the country has so far ratified? What is the likely impact of the Economic Partnership Agreements (EPAs) on Zambia? Furthermore the paper sought to define clearly the link between trade and debt and how these impact on the Zambian people. The main conclusions drawn from the study are that: First, there is a very strong linkage among trade, debt and poverty. Second, Zambia’s comparative or competitive advantage in the non-traditional exports (NTEs) lies mainly in the Agriculture sector. Third, the full trade reciprocity with the European Union (EU) will be very costly for Zambia irrespective of how the issue is looked at. Further the paper recommends that there is urgent need to lobby for fair trade if debt sustainability and poverty reduction are to be a reality in Zambia. In this vein, there is need for closer cooperation among government, civil society organisations and other non-state actors. Moreover, the JCTR has a specific role to play in the advocacy for more just trade that will lead to poverty reduction and sustainable human development