The Executive Board of the International Monetary Fund (IMF) has completed the fifth as well as the sixth and final review of Zambia’s economic performance under a Poverty ReductionÂ and Growth Facility (PRGF) arrangement.
And the baord has since approved a further disbursementÂ of about US$33.4 million
quivalent to Speacial Drawing Rights (SDR)Â 22 million .
In statement issued by the fund on its web site obtained by ZANIS in Lusaka this
evening, the executive board has also approved the request for waivers of the
nonobservance of performance criteria in view of the corrective actions taken.
These include the end-June 2006 and end-December 2006 quantitative performance
criteria on net domestic financing of the central government; the end-June 2006
quantitative performance criterion on gross international reserves of the Bank of
Zambia; and the end-September 2006 and end-March 2007 structural performance
criteria on the initiation of the piloting of the Integrated Financial Management
and Information System (IFMIS).
The decision was madeÂ during the JuneÂ 8 , board discussion held over Zambia’s
report on the sixth and final review of Zambia’s economic performance under a
The PRGF arrangement was approved on June 16, 2004Â in the amount of US$333.6
million and the bank in May this year approbved Zambia’sÂ request to extend the
original three-year arrangement to September 30, 2007 .
And FundÂ Deputy Managing Director Mr. Takatoshi Kato has commended the Zambian
government for pursuing sound macroeconomic policies that have sustained robust economic growth and achieved a marked reduction in inflation.
Mr Kato said High copper prices and extensive debt relief have helped to strengthen
Zambia’s external position and allow a build up of international reserves.
“Going forward, the challenge for the authorities is to consolidate macroeconomic
stability and implement structural reforms to raise productivity and diversify the
economy,’ he added.
He said prudent fiscal policy is needed to restrain the growth of government domestic debt, while monetary policy will need to remain firm in the months ahead to keep inflation on a downward path adding that better coordination between fiscal and
monetary policy will help improve liquidity management.
“It will be important to press ahead with tax reform to broaden the tax base while
making the tax system simpler, more efficient, and equitable,’ he said..
The fund Managing Director stated that higher levels of tax revenue will be required
over the medium term to accommodate spending on infrastructure, agriculture and the
social sectors as envisaged in the Fifth National Development Plan.
He said the public expenditure management and accountability reforms being
implemented are essential for the successful implementation of the government’s
poverty-reducing programs and the effective use of public resources more generally.
He added that budget execution and reporting, which are key elements of the reform,
will be greatly enhanced by planned establishment of a treasury single account and implementation of the integrated financial management and information system.
He observed that strengthened debt management will help ensure that new borrowing
does not undermine debt sustainability.
“To foster diversification of the economy and boost economic growth and employment,
it will be important to implement vigorously the economic reform agenda set out in
the Fifth National Development Plan, particularly the measures to stimulate the
private sector development,” Mr. Kato said.
The PRGF is the IMF’s concessional facility for low-income countries. PRGF-supported
programs are based on country-owned poverty reduction strategies adopted in a
participatory process involving civil society and development partners and
articulated in the Poverty Reduction Strategy Paper (PRSP).
This is intended to ensure that PRGF-supported programs are consistent with a
comprehensive framework for macroeconomic, structural, and social
policies to foster growth and reduce poverty.
PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10
years with a 5Â½-year grace period on principal payments.
Meanwhile IMF Executive Director for Zambia, Dieudonne Nintunze, and his Senior
Advisor, Peter Gakunu saidÂ the Zambian government remained steadfast in pursuing
prudent economic and financial policies that are fostering macroeconomic stability
despite the difficulties and challenges of an election year.
The duo said theÂ ongoing deepening of structural reforms under the three broad
initiatives, namely, the public sector reform, whose important component is the
public expenditure management and financial accountability (PEFMA) program; the
financial sector development plan; and the private sector development initiative; is
translating into the broadening of the sources of growth and employment creation,
with marked recovery and expansion in the mining, construction, agriculture, and services sectors.
They said the Fifth National Development Plan (FNDP) launched recently offers
credible policies and reforms necessary to tackle the remaining challenges as it aims at consolidating macroeconomic stability, improving economic productivity and competitiveness.
They addedÂ the FNDPÂ includes ambitious social programs which will help curb the
widespread poverty, improve quality and delivery of social services, increase ob
creation and help reach the MDGs.
‘ Real GDP is projected to grow at an average rate of 6-7 percent annually over the
medium-term, and could even grow higher if the expected scaling up of donor support materializes,’ they stated.
They further stated that the implementation of sound macroeconomic policies and a
strong structural reform agenda has started to produce positive results, as reflected in the robust economic performance over the last six years, which has reversed episodes of stagnation of the pastdecades.