Zambia and the IMF
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A staff team from the International Monetary Fund (IMF) visited Lusaka during the period October 29 to November 12 to conduct the 2003 Article IV discussions with the Government of Zambia, review initial progress under the staff monitored program (SMP) covering the period July to December 2003 and initiate negotiations on a new arrangement under the Poverty Reduction and Growth Facility (PRGF).
Real GDP growth in 2003 is estimated to reach 4.2 percent, aided by strong growth in agriculture, manufacturing and construction. Inflation has been somewhat higher than expected, partly because of firmer food prices, and is now projected to be 17 percent at the end of 2003, compared with the target of 13 percent. Higher copper prices, and continued growth of non-traditional exports, have contributed to an improvement in Zambia's external position; the current account deficit is now expected to narrow to 6.2 percent of GDP in 2003 and the Bank of Zambia's international reserve position is stronger than expected under the program.
A central focus of the macroeconomic discussions between the staff team and the Government was on the need to contain the growth of government's domestic debt and the resulting pressures on domestic interest rates. Against this background, the Government and the staff team agreed that available fiscal resources would not be sufficient to meet public expenditures. Preliminary understandings, on which some further discussions will be needed, were reached on proposed revenue and expenditure measures for the 2004 budget to limit government's domestic borrowing requirements while protecting priority social spending.
Satisfactory progress under the SMP and an appropriate budget framework for 2004 would provide a basis for concluding discussions on a new PRGF arrangement with the IMF in support of the objectives of the Government's poverty reduction strategy. Satisfactory performance under the PRGF would also be required for Zambia to reach the completion point under the HIPC Initiative.
IMF EXTERNAL RELATIONS DEPARTMENT