Chiluba: former president who sold off the mines

The deficit was blamed on sharp rises in public sector pay combined with spending increases ahead of presidential elections in December.

The need to tighten belts increases the pressure on President Levy Mwanawasa's new government, already in difficulties after an election which observers have alleged was rigged.

Alongside agriculture, copper has long been the mainstay of Zambia's economy, accounting for 80% of exports and a fifth of overall economic output.

But with the mines in trouble just three years after they were sold off, and much of last year's crop flooded out, the budget is expected to come under more strain, not less.

IMF aid in prospect

The government can take some comfort from an offer of $300m from the International Monetary Fund to help the country cope with Anglo's pullout.

"Zambia faces very difficult circumstances," Robert Sharer, the IMF's assistant director for Africa, said after meeting government figures in Lusaka.

"External resources have declined... in these difficult times, the IMF stands ready to continue helping Zambia."

The $300m package, comprising a mixture of new loans and debt relief, is to be discussed in Washington DC in April.

And despite the problems with Anglo, the economy has made some progress in pulling out of the dive it experienced in the 1980s.

Growth hit 5.2% last year, up from 4% in 2000, and inflation fell to 19% from 30% the year before.

Bad omens

But the rising deficit risks spoiling the party in the coming year.

On Saturday, the IMF said its assistance should help Zambia to get inflation down further to 13% this year, with growth projected at about 4-4.5%.

However, the Fund also said that cutting the budget deficit is key to restoring economic stability and boosting much-needed investment.

Zambian's are disillusioned with a decade of corruption

Anglo's decision to throw in the towel came as copper prices hit 14-year lows of $1,605 a tonne in London.

Plugging the investment gap left by Anglo may prove difficult.

Among foreign investors, political instability is increasingly being seen as a barrier to involvement in a country.

The continuing arguments about the election risk lumping Zambia in with neighbouring Zimbabwe, whose economic woes have been heightened by the increasingly erratic behaviour of President Robert Mugabe.