News Brief: IMF Completes Review Under Zambia's PRGF Arrangement and Approves US$64 Million Disbursement
November 8, 2001
The Executive Board of the International Monetary Fund (IMF) completed the third annual review of Zambia's performance under the program supported by a Poverty Reduction and Growth Facility (PRGF)1. As a result, Zambia will be able to draw up to SDR 50 million (about US$64 million) immediately.
Zambia's three-year program was originally supported under the Enhanced Structural Adjustment Facility (ESAF) approved on March 26, 1999 (see Press Release 99/10), for SDR 254.45 million (about US$326 million). So far, Zambia has drawn SDR 55 million (about US$70 million).
After the Executive Board's discussion on Zambia, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, stated:
"Zambia's economic performance continued to improve in 2001, and most program targets and performance criteria have been observed. For the second consecutive year per capita income is expected to increase, which, together with the recent acceleration in the implementation of programs financed under the Enhanced Initiative for Heavily Indebted Poor Countries, should strengthen the basis for continued poverty reduction. Firm control on public wages and recurrent departmental charges will be essential to provide more room to increase priority social sector expenditures.
"Monetary policy has helped to bring down inflation and to reduce instability in the foreign exchange market. Lowering inflation further is a high priority and calls for an appropriately tight monetary policy. Given the continuing concerns about the financial situation of the state-owned Zambia National Commercial Bank (ZNCB), its privatization needs to proceed as rapidly as possible. Progress in this regard is welcome. Pending privatization, the Bank of Zambia will closely monitor the ZNCB's operations to ensure prudent financial management.
"The structural reforms and governance measures for the remainder of 2001 are aimed at improving public financial management, restoring investors' confidence, and removing major bottlenecks to growth. It is important that Zambia strengthen its expenditure management as well as control and reduce the stock of domestic payments arrears. To enhance transparency and accountability in the management of public resources, the authorities will finalize the government accounts for 2000, as envisaged under Zambian laws. Rapid implementation of reforms in the oil sector is another priority. The government remains committed to publishing the final report on cobalt sales.
"The authorities have made notable progress in preparing a poverty reduction strategy paper (PRSP) in the context of a wide-ranging participatory process. A draft of the PRSP was discussed in a National Stakeholders Summit held in mid-October. The completed full PRSP, with clear priorities for poverty reduction and costings of programs, will facilitate designing and implementing policies for sustained poverty reduction in the medium term," Mr. Sugisaki said.
1 On November 22, 1999, the IMF's facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. For Zambia, the draft full PRSP will provide useful guidance for setting out the priorities for poverty reduction in framing the 2002 budget. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½ grace period on principal payments.