The International Monetary Fund (IMF) yesterday announced the disbursement of US$ 126.3 million after it had accomplished a generally positive review of the economic performance in Zambia. According to Acting IMF Chair Takatoshi Kato, "Zambia's economic performance continued to strengthen in 2004."

This performance is particularly encouraging against the backdrop of the economic decline in the preceding two decades, added Mr Kato. "However, Zambia still faces significant challenges. Growth is still not strong enough to make large inroads into widespread poverty, and inflation is too high, even though progress was made in this area in 2004."

The IMF and Zambia have a turbulent history regarding the Fund's demands for less government expenses and Zambian budget deficits exceeding agreements with the IMF. This year, however, Mr Kato made a positive assessment of the Zambian government's policies, in particular the "sharp reduction in government's domestic borrowing."

The 2005 budget framework is broadly appropriate, given the need to reduce domestic borrowing while allowing for increased spending on priority sectors, said Mr Kato. "In particular, the framework reflects the authorities' commitment to hiring additional frontline staff in the health and education sectors." The IMF had earlier been strngly criticised for hindering Zambian employments in these sectors.

Earlier this week, the World Bank approved a loan of US$ 40 million "to support Zambia's structural reform programme and the implementation of the country's poverty reduction strategy." The loan in particular is to support policy and institutional reforms in Zambia.

The project will provide a positive signal to international institutions and bilateral donors regarding the government's commitment to reform and transition towards a full-fledged market economy, said Jos Verbeek, the World Bank's responsible for the project. He added that "the operation will help improve the business environment in Zambia by further strengthening the government's commitment for its role in private sector and private-sector led growth."

Since 1999, the economy of Zambia has been experiencing a modest recovery with positive per capita GDP increases of 1.4 percent annually. Poverty reduction, however, remains a challenge "due to a heavy debt burden, weak institutional capacity, and ineffective spending," according to the World Bank.

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