Needed - growth rate of 8 percent to eradicate poverty

Zambia needs a growth rate of at least eight percent to quicken the pace of poverty reduction, according to a progress report on the country's Poverty Reduction Strategy Paper (PRSP). Last year Gross Domestic Product (GDP) growth was just over five percent. Weaknesses in implementation capacity and financial management in line ministries and other implementing agencies continued to pose a risk to execution of the poverty reduction strategy, noted the report by the International Monetary Fund (IMF). It also noted that actual spending on poverty-reducing programmes in Zambia remained at about one percent of GDP - half the level budgeted in 2002 and 2003. "In particular, slow progress in executing programmes to contain the impact of the HIV/AIDS pandemic carries serious potential risks to Zambia's future," said the IMF. PRSPs are prepared by governments through a participatory process involving civil society and development partners, including the World Bank and IMF. The PRSP describes a country's macroeconomic, structural and social policies and programmes to promote growth and reduce poverty, as well as the associated external financing needs. The report observed that after more than two decades of economic decline and inflation averaging over 50 percent, growth in Zambia had averaged four percent per annum since 2000. "The 12-month inflation rate of 17.2 percent in December 2003 was the lowest in two decades", said the report. However, the 5.1 percent increase in GDP last year, supported by a recovery in the agricultural sector, high copper prices and strong growth in non-traditional exports, was still lower than the required average of eight percent. Programme implementing agencies lacked the capacity to effectively use funds provided for the poverty reduction programmes. "Slippages" in fiscal policy also affected government's ability to execute budgeted allocations for poverty-reducing programmes, noted the IMF. The report cited overruns of the wage bill in 2002 and 2003 and ad hoc extra-budgetary expenditure, financed by diversion of resources from priority items, which caused domestic debt and interest payments to rise considerably. To access the report: www.imf.org