Govt requests for waivers from IMF

Govt requests for waivers from IMF
Written by Chiwoyu Sinyangwe
Thursday, June 18, 2009 3:15:19 PM

GOVERNMENT has requested the International Monetary Fund (IMF) for waivers for the non-observance of performance criteria for net domestic assets and gross international reserves as the country battles with the effects of the global financial crisis.

Net domestic assets determine the difference between the total money supply and the size of net foreign assets while gross international reserves show the equivalent of the available foreign exchange resources to meet essential import requirements.

According to a Letter of Intent addressed to IMF managing director Dominique Strauss-Kahn, finance minister Dr Situmbeko Musokotwane stated that under the current unfavourable economic conditions, it was not possible for the country to accumulate the gross international reserves (GIR) expected under the program last year.

Dr Musokotwane requested IMF that the second and third disbursements be made available upon completion of the first and second reviews by the executive board of the IMF.

“The sharp fall in copper prices has resulted in a large deterioration of the trade balance, reduced foreign direct investment, and led to an outflow of portfolio capital,” Dr Musokotwane stated.

“The kwacha has depreciated by about 40 per cent against the US dollar since early October, 2008. At times, pressure on the kwacha has been intense, requiring the Bank of Zambia (BoZ) to intervene to maintain orderly conditions in the foreign exchange market and sustain confidence in the currency. Under these circumstances, it was not possible to accumulate the gross international reserves (GIR) expected under the program in 2008.”

The government also requested for an increase of access under the Poverty Reduction Gross Facility (PRGF) arrangement from 35 per cent to 45 per cent of quota.

“This would be critical in helping Zambia to adjust to the severe external shock it has experienced and in maintaining a level of foreign exchange reserves that would foster market confidence and support the Bank of Zambia's ability to maintain orderly conditions in the foreign exchange market,” stated Dr Musokotwane.