Statement by the IMF Staff Mission at the Conclusion of a Visit to ZambiaPress Release No. 10/411
November 3, 2010
An International Monetary Fund (IMF) mission visited Lusaka October 28-November 3, 2010 to continue discussions for the fifth 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; and other senior officials.
At the conclusion of the mission in Lusaka today, Mr. George Tsibouris, mission chief for Zambia, released the following statement:
"I am pleased to say that the Government of Zambia and the IMF team have reached agreement on a set of macroeconomic policies and structural measures for the remainder of 2010 and for 2011 that would pave the way for the completion of the fifth review of the ECF, subject to approval by the IMF’s Executive Board.
"As also noted at the conclusion of the mission’s visit in September 2010, the performance of the Zambian economy has been good. Real GDP growth is projected at 6.6 percent in 2010, boosted by the record maize harvest, a rebound in tourism, and a continued increase in copper and construction output. This year’s bumper maize harvest and the strengthening of the kwacha have helped bring inflation down towards the authorities’ end-2010 target of 8 percent and the Bank of Zambia is targeting a further reduction in inflation to 7 percent by end-2011. International reserves have strengthened and now stand at US$1.9 billion.
"The government is to be commended for its handling of economic policy so far in 2010. Fiscal performance in 2010 has been broadly in line with expectations, though there has been the need to finance the purchase of the maize surplus. The Bank of Zambia has managed monetary policy well with a view to reducing inflation, while at the same time maintaining conditions to facilitate economic growth.
"Economic prospects for 2011 are favorable. Growth is projected to remain strong in 2011 (at 6.4 percent) and over the medium term. The 2011 budget is consistent with the maintenance of sound macroeconomic policies. The envisaged revenue enhancement is appropriately ambitious and stems from new tax policy measures, administrative improvements, and payments of tax arrears. The expenditure mix shifts clearly towards capital and social spending, though there is some residual upward pressure on wages despite tight limits on new hiring. With a projected reduction in external budget support, an increased proportion of infrastructure spending (particularly in the electricity and road sectors) is to be financed nonconcessionally, consistent with preserving debt sustainability.
"The IMF’s Executive Board is expected to consider the completion of the 5th review of Zambia’s ECF in mid-December 2010."