Press Release No. 05/24

The following statement was issued in Lusaka today by an International Monetary Fund (IMF) staff mission:

"An IMF mission visited Zambia from January 30 to February 9, 2005 to conduct discussions with the Government of Zambia on the second review under the Poverty Reduction and Growth Facility (PRGF). The team thanks the Zambian authorities for their hospitality and close cooperation.

"The visit provided an opportunity for the mission to review performance against targets for end-December 2004, and discuss macroeconomic policies for 2005. Together with a parallel mission from the World Bank, IMF staff also reviewed the implementation of the Poverty Reduction Strategy Paper (PRSP) and Transitional Development Plan, and the steps necessary for Zambia to reach the Completion Point under the enhanced framework of the Heavily Indebted Poor Countries (HIPC) Initiative.

"Zambia's economic performance continued to improve during 2004. Boosted by increased production in the mining, agriculture, construction and service sectors, real GDP is estimated to have increased by 5 percent in 2004, significantly above the budget target of 3.5 percent. This was the fifth year in a row of real GDP growth averaging over 4 percent, following nearly two decades of generally declining output. Fuel prices increased sharply, but the rate of inflation was held to 17.5 percent, well below the original target of 20 percent. Despite the creditable improvement in economic performance, Zambia's social conditions remain difficult.

"Available data indicate that strong performance under the PRGF-supported program has continued through end-December. As called for in the program, government sharply reduced its domestic borrowing in 2004, helping to ease pressure on interest rates and prices. At the same time, releases for expenditures on priority poverty reduction programs were in line with the budget. All quantitative performance criteria and benchmarks for end-December were attained.

"IMF and World Bank staff have reviewed progress made in meeting the steps required for reaching the Completion Point under the HIPC Initiative. Information received indicates that all triggers relating to poverty reduction and social sectors have been met. Substantial progress has also been made in meeting conditions in other areas, including in the implementation of the PRSP/TNDP.

"IMF and World Bank staff will finalize the overall evaluation of Zambia's performance and progress towards the HIPC Completion Point in Washington. It is envisaged that, subject to IMF and World Bank Managements approval, the staffs will prepare a HIPC Completion Point document for consideration by the Executive Boards of the IMF and World Bank. The second review under the PRGF arrangement would be considered by the IMF's Executive Board at the same time."