IMF gives Zambia $33.4m

IMF gives Zambia $33.4m
By Joe Kaunda
Monday June 11, 2007 [04:00]

THE executive board of the International Monetary Fund (IMF) has approved a US $33.4 million disbursement to Zambia following the completion of reviews of the country's Poverty Reduction and Growth Facility (PRGF).

And IMF's deputy managing director Takatoshi Kato has hailed the Zambian government for pursuing sound macroeconomic policies that have resulted in a sustained robust economic growth and a marked reduction in inflation. During the Board's meeting on Zambia's fifth and sixth (final) PRGF reviews that took place in Washington DC

on Friday, the Board also approved the request for waivers for the non-observance of performance criteria in view of the corrective actions taken by the Zambian government.
“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 IMF announced on its website yesterday.

The PRGF arrangement was approved on June 16, 2004 amounting to SDR 220.1 million (about US$333.6 million) with a request by the Zambian government to extend the original three-year arrangement to September 30, 2007 which was approved by the Board on May 25, 2007.
And commenting on Zambia’s performance, Kato said besides the prudent economic management he cited high copper prices and extensive debt relief as having helped strengthen Zambia’s external position and the 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. Continued 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. Better coordination between fiscal and monetary policy will help improve liquidity management,” said Kato.

“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. 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.”
Kato also noted that the public expenditure management and accountability reforms being implemented by the Zambian government were essential for the successful implementation of the government’s poverty-reduction programmes and the effective use of public resources more generally.

He further observed that budget execution and reporting, which were key elements of the reform, would be greatly enhanced by the planned establishment of a treasury single account and implementation of the integrated financial management and information system.

Kato also advised that a strengthened debt management would help ensure that new borrowing did 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,” said Kato.

The PRGF is the IMF’s concessional facility for low-income countries with an annual interest rate of 0.5 per cent and are repayable over 10 years with a 51¼2-year grace period on principal payments.

The PRGF-supported programmes are based on country-owned poverty reduction strategies adopted in a process involving civil society and development partners and articulated in the Poverty Reduction Strategy Paper (PRSP).