Press Release No. 11/84

Press Release No. 11/84
March 16, 2011

An International Monetary Fund (IMF) mission visited Lusaka March 3-16, 2011 to conduct discussions for the sixth and final review under the Extended Credit Facility (ECF). The mission had fruitful discussions with Hon. Situmbeko Musokotwane, Minister of Finance and National Planning; Dr. Caleb Fundanga, Governor of the Bank of Zambia, other senior officials as well as representatives from the private sector, civil society and labor unions.

At the conclusion of the visit in Lusaka today, Mr. George Tsibouris, mission chief for Zambia, released the following statement:

“The performance of the Zambian economy continues to be good. Real gross domestic product (GDP) growth in 2010 was adjusted upwards to 7.6 percent, boosted by the record maize harvest, a continued increase in copper and construction output and a rebound in tourism. Inflation declined in line with expectations in 2010, but has increased slightly since the beginning of 2011 (up to 9.0 percent in February). Nonfood price inflation remains in the low double digits. Net domestic financing of the government was 0.3 percent of GDP higher than targeted at end-2010 primarily as a result of higher interest payments and additional expenditures on the census and voter registration. The balance of payments for 2010 experienced a record-high current account surplus of about US$600 million (3.8 percent of GDP), with international reserves increasing to US$1.9 billion as of end-February 2011. Private sector credit has returned to pre-crisis levels in nominal terms, despite an increase in nonperforming loans and still high real lending rates. Following the Bank of Zambia’s recent action to mop up excess liquidity to fend off inflationary pressures, reserve money growth slowed to 10 percent (on an annual basis) through February 2011.

“Economic prospects for 2011 continue to be favorable. Growth is projected to remain strong in 2011 (at 6.8 percent) and over the medium term. The 2011 budget is consistent with the maintenance of sound macroeconomic policies, while providing for much-needed investments in infrastructure. Revenue collections are now expected to exceed the projections in the 2011 budget, due in large part to increased taxes from the mining sector, which should provide room for additional infrastructure and pro-poor expenditures. Drawing on the experience in 2010, the government will need to ensure that its maize marketing role does not hamper private sector incentives and minimizes budgetary costs.

“The good economic performance and prospects provide a strong platform for the government to pursue policies aimed at boosting employment creation and at protecting the most vulnerable so that the benefits of growth are broadly shared. As noted in the government’s Sixth National Development Program, economic diversification will be of key importance in this regard, including in the promising sectors of agriculture and tourism.

“Discussions related to the sixth review of Zambia’s ECF are expected to continue in the coming weeks.”