Using high-resolution optical spectroscopy we determine the chemical abundance of the secondary star in the binary millisecond pulsar PSR J1023+0038. We measure a metallicity of [Fe/H] = 0.48 ± 0.04 which is higher than the Solar value and in general find that the element abundances are different compared to the secondary stars in X-ray binaries and stars in the solar neighbourhood of similar Fe content. Our results suggest that the pulsar was formed in a supernova explosion. We find that supernova models, where matter that has been processed in the supernova is captured by the secondary star leading to abundance anomalies, qualitatively agree with the observations. We measure Li abundance of A(Li) = 3.66 ± 0.20, which is anomalously high compared to the Li abundance of stars with the same effective temperature, irrespective of the age of the system. Furthermore, the Li abundance in PSR J1023+0038 is higher than the Cosmic value and what is observed in young Population I stars and so provides unambiguous evidence for fresh Li production. The most likely explanation is the interaction of high-energy gamma-rays or relativistic protons from the pulsar wind or intrabinary shock with the CNO nuclei in the secondary star's atmosphere via spallation which leads to substantial Li enrichment in the secondary star's atmosphere.