SNAP ANALYSIS: Zambia's Banda on tightrope after narrow win

(Reuters) - Rupiah Banda, the pro-business candidate of Zambia's ruling party, was sworn in as president on Sunday after a narrow election victory, but the main opposition candidate vowed to challenge the result in court.

IMPACT ON POLICY

* Banda has pledged to continue the policies of his predecessor, late President Levy Mwanawasa, who was praised by foreign lenders and investors for spurring robust economic growth, taming inflation and battling corruption.

* The narrow margin of victory, Banda won 40.1 percent of the vote versus 38.1 percent for the Patriotic Front leader Michael Sata, could force his government to spend more to fight poverty and unemployment and improve social services -- both important platforms of the opposition.

Banda has declared he will make the "fight against poverty the focus" of his government.

INVESTOR CLIMATE

* Sata's court challenge, if it leads to a prolonged battle, could cast a cloud over the government and unsettle foreign investors, particularly those in the mining sector. Zambia is Africa's largest copper producer.

* The PF could call for street protests to press its demand for a recount, as it did after a disputed 2006 election. The party has the means to pinch the economy through its control of municipal councils, especially in Lusaka, and has some support from trade unions.

PROSPECT OF VIOLENCE

* Sata accused Mwanawasa of cheating in the 2006 presidential election but ultimately accepted the result. This time he has been more strident in his accusations of electoral fraud and is adamant that he will not tolerate a Banda victory.

* The Zambian election has similarities to the 2007 presidential poll in Kenya, which was disputed by the challenger and led to a wave of deadly political violence and, eventually, the establishment of a power-sharing government.

* The army has been placed on high alert to quell any unrest and its chief has promised a crackdown if there is violence.

(Writing by Paul Simao; editing by Matthew Jones)