## Press Release: IMF Approves ESAF Loan for Zambia _IMF News, March 26, 1999_ ## Source details **Canonical URL:** [Press Release: IMF Approves ESAF Loan for Zambia](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9910) ## Other formats - [Markdown version](/en/news/articles/2015/09/14/01/49/pr9910/index.md) - [Structured JSON version](/en/news/articles/2015/09/14/01/49/pr9910/index.json) - [Bundle manifest](/en/news/articles/2015/09/14/01/49/pr9910/bundle-manifest.json) ## Bibliographic details - Published: March 26, 1999 --- ### IMF approval and financial terms - The IMF approved a three-year arrangement for Zambia under the Enhanced Structural Adjustment Facility (ESAF) equivalent to SDR 254.45 million (about US$349 million) to support the government’s 1999/2001 economic and financial program. - The first annual loan of SDR 40 million (about $55 million) is available in 4 equal installments, the first of which will be available on March 31, 1999. - Footnote on ESAF terms: ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years with a 5 ½ year grace period. ### Background: 1998 shocks and macro developments - 1998 setbacks: - Real GDP contraction of an estimated 2 percent in 1998 (compared with growth of 3.5 percent in 1997). - Pronounced fall in copper prices and sharp decline in copper production. - Agriculture adversely affected by El Niño. - Unexpected delays in the privatization of the Zambia Consolidated Copper Mines (ZCCM). - Fiscal and external outcomes in 1998: - Domestic revenue was more than 4 percent below budget estimates. - Expenditure overruns in wages, public service retrenchment, and settlement of domestic arrears. - A 35 percent decline in metal exports contributed to a significant weakening of the external position. - The kwacha depreciated by 39 percent. - International reserves fell by US$170 million to US$44 million at the end of 1998, or less than two weeks of import cover. ### The 1999 program: objectives and fiscal stance - Macroeconomic objectives for 1999: - Achieve real GDP growth of 4 percent. - Reduce inflation to 15 percent. - Strengthen gross reserves to the equivalent of 1 ½ months of imports. - Fiscal program targets and measures: - Reduce the overall budget deficit to 3 percent of GDP. - Increase revenue yield by 0.5 of 1 percentage point of GDP in 1999. - Firm control over the public wage bill. - Increase public investment and reorient outlays in favor of health and education. - Total revenue and grants programmed to increase to 28 percent of GDP. - Total expenditures (excluding the contingency reserve) budgeted to increase to 29 percent of GDP. - Priority on strengthening budget implementation, including improved control and analysis of spending commitments, cash outlays, and domestic arrears. ### Monetary policy and inflation - Monetary program targets: - Reserve money growth programmed to slow to 18 percent (from 36 percent in 1998). - Broad money growth projected at 20 percent. - Policy rationale: - The kwacha’s depreciation improved external competitiveness (as measured by the real effective exchange rate) but had inflationary effects; a rapid deceleration in inflation is needed to preserve competitiveness gains. ### Structural reforms - Privatization and state-owned enterprises: - Accelerate completion of ZCCM privatization. - Further divestiture of large state-owned enterprises in the nonmining sector. - Transport sector reforms: - Management contract entered with Zambia Railways. - In 1999, tendering of concessions for the railway system and management rights for the National Airports Corporation operations. - Public service reform: - Comprehensive public service reform in 1999 including a reduction in the public service workforce of 7,000 employees through retrenchment, natural attrition, and hiving off public institutions. - Monitoring of the World Bank-supported retrenchment plan requires reliable payroll data and effective controls on the establishment register. - Continued reorganization of ministries. - Banking and supervision: - Strengthening of monetary and banking supervision is part of the program. ### Social issues and poverty mitigation - Poverty indicators: - World Bank estimates: in 1996 about 70 percent of Zambians were living in poverty, with 58 percent of the population lacking basic nutrition. - Safety net and social spending: - The Public Welfare Assistance Scheme (PWAS) is the main vehicle for assisting the poorest but has limited coverage and effectiveness. - The World Bank is supporting reforms to make PWAS more community-based. - Government intends to reorient public expenditure toward the social sectors, primarily health and education. ### The challenge ahead - 1998 economic setbacks significantly weakened the economy and eroded prior adjustment gains. - The 1999 program aims to restore macroeconomic stability and promote sustainable growth by: - Reducing inflation. - Strengthening the external position. - Emphasizing private sector development. - Steadfast implementation of the 1999 program is expected to restore private sector confidence and lay the basis for sustained medium-term growth. ### Zambia’s IMF membership and quota - Zambia joined the IMF on September 23, 1965. - Its quota is SDR 489.1 million (about US$670) and its outstanding use of IMF resources currently totals SDR 843 (about US$1.2 billion). - Note on quota: A member’s quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs. ### Selected economic and financial indicators, 1996-2001 (highlights and exact figures) - National income and prices - Real GDP: 1996: 6.6; 1997: 3.3; 1998: -2.0; 1999 (Program): 4.0; 2000: 4.5; 2001: 5.5 - GDP deflator: 1996: 23.4; 1997: 26.8; 1998: 23.1; 1999: 20.8; 2000: 11.3; 2001: 5.4 - Consumer prices (annual average): 1996: 43.1; 1997: 24.4; 1998: 24.5; 1999: 21.6; 2000: 11.6; 2001: 5.3 - Consumer prices (end of period): 1996: 35.2; 1997: 18.6; 1998: 30.6; 1999: 15.0; 2000: 8.0 - Nominal GDP (in billions of kwacha): 1996: 3,945; 1997: 5,169; 1998: 6,241; 1999: 7,839; 2000: 9,118; 2001: 10,135 - Copper production (in thousands of metric tons): 1996: 314; 1997: 291; 1998: 300; 1999: 330; 2000: 347 - External sector - U.S. dollar value of exports of goods and services (annual percent change): 1996: -13.1; 1997: 17.2; 1998: -24.6; 1999: 8.3; 2000: 15.1; 2001: 14.6 - Of which: copper (annual percent change): 1996: -33.3; 1997: 14.4; 1998: -33.6; 1999: 4.9; 2000: 13.2; 2001: 18.5 - U.S. dollar value of imports of goods and services (annual percent change): 1996: -11.2; 1997: 15.5; 1998: -15.5; 1999: 13.8; 2000: 8.7; 2001: 7.6 - Export volume: 1996: 9.4; 1997: 7.0; 1998: -12.4; 1999: 11.8 - Import volume: 1996: -10.9; 1997: 25.3; 1998: -10.2; 1999: 7.2; 2000: 6.5 - Copper export volume: 1996: -4.1; 1997: -8.0; 1998: -13.9; 1999: 15.7; 2000: 10.0; 2001: 5.0 - Copper exports (in thousands of metric tons): 1996: 327; 1997: 301; 1998: 259 - Copper export prices (average, US$ per metric ton): 1996: 1,734; 1997: 2,156; 1998: 1,661; 1999: 1,507; 2000: 1,550; 2001: 1,750 - Nominal effective exchange rate (percent change): 1996: -26.4; 1997: -1.7; 1998: -24.1 - Real effective exchange rate (percent change): 1996: 3.8; 1997: 19.8; 1998: -8.7 - Average official exchange rate (kwacha per U.S. dollar): 1996: 1,208; 1997: 1,315; 1998: 1,862 - Terms of trade (percent change): 1996: -22.8; 1997: -10.3; 1998: -5.1; 1999: 0.8; 2000: 6.0 - Money and credit (percent changes and levels) - Net foreign assets (percent change): 1996: -23.6; 1997: -100.3; 1998: 11.1; 1999: 9.2; 2000: 10.6 - Net domestic assets (percent change): 1996: 27.4; 1997: 4.4; 1998: 65.8; 1999: -0.8; 2000: -0.4; 2001: -1.4 - Net domestic credit (percent change): 1996: 36.3; 1997: 6.9; 1998: 91.0; 1999: -2.4; 2000: -1.2; 2001: -4.4 - Net claims on government (percent change): 1996: 22.7; 1997: 8.4; 1998: 355.4; 1999: -19.6; 2000: -22.3; 2001: -33.7 - Claims on nongovernment (percent change): 1996: 40.4; 1997: 20.2; 1998: 13.7; 1999: 9.8 - Broad money (percent change): 1996: 34.4; 1997: 24.0; 1998: 22.6; 1999: 20.3; 2000: 12.9; 2001: 9.7 - Velocity1: 1996: 6.3; 1997: 6.4 - Official bank rate (in percent; end of period): 1996: 69.5; 1997: 23.5; 1998: 43.6 - Treasury bill rate (in percent; end of period): 1996: 57.7; 1997: 34.0 - Central government budget (percent changes) - Revenue (excluding grants) (percent change): 1996: 37.0; 1997: 25.2; 1998: 29.1; 1999: 19.0; 2000: 14.5; 2001: (blank) - Grants (percent change): 1996: -12.0; 1997: 52.8; 1998: 80.3; 1999: -42.1; 2000: 10.7; 2001: (blank) - Expenditure and net lending (percent change): 1996: 9.6; 1997: 33.4; 1998: 39.3 - Current expenditure (percent change): 1996: 3.2; 1997: 23.0; 1998: 15.6; 1999: 20.4; 2000: 10.5 - Capital expenditure (percent change): 1996: 28.1; 1997: 13.0; 1998: 74.7; 1999: 22.8; 2000: 15.8 - (In percent of GDP) - Gross national savings2: 1996: 11.0; 1997: 7.5 - Gross domestic investment: 1996: 14.8; 1997: 13.6; 1998: 17.6; 1999: 20.0 - Of which: public investment: 1996: 7.7; 1997: 8.5; 1998: 7.4; 1999: 7.9 - Revenue and grants (percent of GDP): 1996: 24.8; 1997: 27.8; 1998: 23.6; 1999: 24.2; 2000: 6.1; 2001: 9.1; (additional figure) 4.6 - Expenditures (excluding interest)3: 1996: 20.9; 1997: 28.4; 1998: 23.9; 1999: 24.6 - Interest due4: 1996: 4.8; 1997: 4.1; 1998: 2.3; 1999: 2.6 - Overall balance, cash basis: 1996: -2.6; 1997: -1.9; 1998: -4.3; 1999: -3.2; 2000: -1.3 - Overall balance, cash basis, excluding grants: 1996: -7.0; 1997: -10.7; 1998: -12.3; 1999: -7.5; 2000: -7.3 - Current account balance5 (percent of exports of goods and services): 1996: -3.7; 1997: -6.2; 1998: -8.8; 1999: -8.3 - External debt and reserves - External debt service before rescheduling6: 1996: 40.7; 1997: 28.8; 1998: 33.2; 1999: 36.7; 2000: 49.0 - Net present value of total debt6: 1996: 430.4; 1997: 374.6; 1998: 509.7; 1999: 467.3; 2000: 431.3; 2001: 390.7 - External program assistance: 1996: 12.7; 1997: 0.0; 1998: … - Selected dollar figures (in millions of U.S. dollars) - Current account balance: 1996: -122; 1997: -239; 1998: -269; 1999: -281; 2000: -362; 2001: -302 - Overall balance of payments: 1996: -105; 1997: -127; 1998: -249; 1999: -111; 2000: -294; 2001: -209 - Gross official reserves (end of period): 1996: 186; 1997: 213; 1998: 44; 1999: 165; 2000: 306; 2001: 403 - In months of imports of goods and services: 1996: 1.7; 1997: 0.4; 1998: 1.4; 1999: 2.8 *Sources: Zambian authorities; and IMF staff estimates and projections.* --- ## References - [Zambia and the IMF](http://www.imf.org/external/country/ZMB/index.htm) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9910_