Maravi

(LUSAKATIMES) World Bank to drop budget support to Zambia next year

World Bank to drop budget support to Zambia next year
TIME PUBLISHED - Tuesday, October 16, 2012, 7:37 am

THE World Bank has indicated to Zambia that effective next year, it will not offer any budget support to the country following its graduation from lower income nation to a lower middle income status, says the Deputy Minister of Finance Miles Sampa.

Mr Sampa said the government has since engaged the World Bank for financial support through the International Development Association (IDA) that provides interest-free loans to governments of the poorest countries, adding that despite Zambia graduating to a lower middle income country, poverty levels are still high.

“We are still a country that requires some levels of grants, and we are engaging the World Bank on those levels. We can only uplift the lives of people from poverty from grants and not loans,” he said.

In an interview, Mr Sampa said following Zambia’s graduation from a lower income country to a lower middle income nation, it is no longer entitled to aid related to poverty reduction.

And Mr Sampa said Government is also finalising a programme with the International Monetary Fund (IMF) on how the country will relate with the fund to be concluded before the end of the year.

Zambia’s three year Extended Credit Facility arrangement which was approved in June 2008 by the IMF came to an end in June 2011 and Government has been studying the options available for future IMF support.

Meanwhile, Government says there is need to reform the public sector, the Farmer Input Support Programme (FISP) and maize marketing to avoid budget deficit and borrowing.

The IMF fiscal monitor report 2012 launched in Tokyo at the IMF and World Bank Group annual meeting notes that Zambia’s deficit is likely to rise this year due in part to lower copper prices, along with higher public wages and delays in subsidy reforms.

Mr Sampa said the issue of subsidies is very sentimental to Zambia.

“Subsidies are targeted towards the FISP and maize marketing subsidies. We can’t have it both ways, if we continue subsidising maize, we have no choice, the budget deficit will increase and it will mean we will have to borrow to meet the expenditure of our budget,” he said.

He said there is need for Zambia as a country to be bold, bite the bullet by reforming the maize input and marketing system.

“Government is clear; we don t want wastage of resources through subsidies. It’s not subsidy which is the problem but the manner in which it’s managed,” he said.

Mr Sampa said the system is not working well and has become a huge cost on the budget.

“Zambians don’t want to get back to the HIPC (Highly Indebted Poor Countries initiative) days and equally, they don’t want to be wasting money by programmes that do not benefit the intended beneficiaries,” he said.

He said subsidies for the vulnerable small scale farmers are welcome but pointed out that in most cases the resources do not end up to the right people.

On public wages, Mr Sampa said there is need to structure the civil service so that it becomes efficient.
Commenting on the IMF calls for governments to reform the financial sector, Mr Sampa said Zambia is a step ahead of the Fund’s programme citing recapitalisation of banks.

“What the IMF is calling for in terms of reforms in the banking sector, Zambia is one step ahead and I recommend the governor. The central bank has taken precaution in the financial sector,” he said.”

[Zambia Daily mail]

Labels: FISP, IMF, MILES SAMPA, World Bank

posted by MrK @ 6:05 PM