Economic reforms on track - govt

Zambian officials were optimistic on Thursday that recent efforts to trim government spending would curry favour with donors and place the country in line for substantial debt relief in 2004.

Earlier this year the International Monetary Fund (IMF) suspended a US $100 million poverty-reduction credit after an unexplained $125 million budget deficit. The World Bank and the European Union also called for increased fiscal discipline and withheld budgetary support to Zambia.

In an effort to gain IMF approval for its Poverty Reduction and Growth Facility (PRGF), and regain donor confidence, the government proposed an interim staff monitoring system (SMP). The new programme does not vary significantly from the PRGF, except that the Fund now measures and assesses economic performance each month.

"We are on the right track. By December we should have reached all of the benchmarks and parameters we have set for ourselves. This will hopefully signal to the IMF that we are serious about budget control. So far there has been two assessments and the feedback has been promising," director of planning and economic management in the finance ministry, James Mulungushi, told IRIN.

The SMP was implemented in July and is expected to continue until December 2003.

An official at the IMF in Lusaka told IRIN: "Should Zambia strictly adhere to the provisions of the SMP, there should be no reason why the IMF would not reconsider its support of the poverty reduction strategy."

Meanwhile, the World Bank last week announced that the country will continue receiving limited debt relief, despite not having reached the Highly Indebted Poor Countries (HIPC) initiative completion point.

Zambia was due to reach completion by the end of December 2003 but was derailed by the budget deficit when the government decided to pay new salary increases and housing allowances to civil servants, contrary to the agreements with the IMF under the PRGF.