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IMF Country Report - Zambia January 2010

IMF Country Report - Zambia January 2010

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Published by Flava Radio Limited
Zambia: 2009 Article IV Consultation, Third Review Under the Three-Year Arrangement Under the Poverty and Reduction and Growth Facility, and Request for Modification of Performance Criteria—Staff Report; Staff Supplement: Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Zambia
Zambia: 2009 Article IV Consultation, Third Review Under the Three-Year Arrangement Under the Poverty and Reduction and Growth Facility, and Request for Modification of Performance Criteria—Staff Report; Staff Supplement: Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Zambia

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Published by: Flava Radio Limited on Jan 25, 2010
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\u00a9 2010 International Monetary Fund
January 2010
IMF Country Report No. 10/17

Zambia: 2009 Article IV Consultation, Third Review Under the Three-Year Arrangement
Under the Poverty and Reduction and Growth Facility, and Request for Modification of
Performance Criteria\u2014Staff Report; Staff Supplement: Public Information Notice and
Press Release on the Executive Board Discussion; and Statement by the Executive Director
for Zambia

Under Article IV of the IMF\u2019s Articles of Agreement, the IMF holds bilateral discussions with members,
usually every year. In the context of a combined discussion of the 2009 Article IV consultation with
Zambia and the Third Review Under the Three-Year Arrangement Under the Poverty and Reduction and
Growth Facility, and Request for Modification of Performance Criteria, the following documents have
been released and are included in this package:

\u2022

The staff report for the combined 2009 Article IV Consultation, the Third Review Under the
Three-Year Arrangement Under the Poverty and Reduction and Growth Facility, and Request for
Modification of Performance Criteria , prepared by a staff team of the IMF, following discussions
that ended on October 28, 2009, with the officials of Zambia on economic developments and
policies. Based on information available at the time of these discussions, the staff report was
completed on December 3, 2009. The views expressed in the staff report are those of the staff
team and do not necessarily reflect the views of the Executive Board of the IMF.

\u2022
A Staff Supplement
\u2022

A Public Information Notice (PIN) and Press Release, summarizing the views of the Executive Board as expressed during its December 14, 2009, discussion of the staff report on issues related to the Article IV consultation and the IMF arrangement, respectively.

\u2022
A statement by the Executive Director for Zambia.
\u2022
The documents listed below have been or will be separately released.

Letter of Intent sent to the IMF by the authorities of Zambia*
Memorandum of Economic and Financial Policies by the authorities of Zambia*
Technical Memorandum of Understanding*
*Also included in Staff Report

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive
information.
Copies of this report are available to the public from

International Monetary Fund\u2022 Publication Services
700 19th Street, N.W.\u2022 Washington, D.C. 20431
Telephone: (202) 623-7430\u2022 Telefax: (202) 623-7201
E-mail:publicat ions@imf . org\u2022 Internet: http://www.imf.org

International Monetary Fund
Washington, D.C.
INTERNATIONAL MONETARY FUND
ZAMBIA

Staff Report for the 2009 Article IV Consultation, Third Review Under the Three-
Year Arrangement Under the Poverty Reduction and Growth Facility, and Request
for Modification of Performance Criteria

Prepared by the African Department

(In consultation with other departments)
Approved by Se\u00e1n Nolan and Dhaneshwar Ghura
December 3, 2009

Discussions for the 2009 Article IV consultation and the third review under the PRGF
arrangement were held in Lusaka during October 15\u201328, 2009. The staff team consisted of
George Tsibouris (head), Alfredo Baldini, Mame Astou Diouf, Jean Noah Ndela (all AFR),
Birgir Arnason (Resident Representative), Ding Ding (FAD), and Axel Palmason (SPR).

The mission met with the Minister of Finance and National Planning, Dr. Musokotwane; the Governor of the Bank of Zambia, Dr. Fundanga; other senior officials; and representatives of the business community, labor unions, civil society, and Zambia\u2019s development partners.

Fund relations \u2014 Zambia joined the Fund on September 23, 1965, and has accepted the
obligations of Article VIII, Sections 2, 3, and 4. It maintains a floating exchange rate regime.
The 2007 Article IV consultation with Zambia was concluded in December 2007. Zambia\u2019s
current three-year PRGF arrangement was approved in June 2008 with access of
SDR 48.9 million (10 percent of quota). On the occasion of the first and second reviews of
the arrangement in May 2009, access was increased to SDR 220.1 million (45 percent of
quota). Zambia was allocated a total of SDR 400.8 million through the general and special
allocations in August and September 2009.

In the attached letter of intent (LoI) and Memorandum of Economic and Financial Policies (MEFP), the authorities review program implementation and outline their policies for the remainder of 2009 and for 2010.

2
Contents

Page Executive Summary...................................................................................................................4 I. Background.............................................................................................................................5 II. Recent Developments............................................................................................................5 III. Program Performance..........................................................................................................6 IV. Economic Program For 2010...............................................................................................7

A. Fiscal Policy..............................................................................................................7 B. Monetary Policy........................................................................................................8 C. Structural Policies.....................................................................................................9 D. Program Monitoring................................................................................................11

V. Sustaining Growth Through Diversification.......................................................................11 A. Medium-Term Macroeconomic Outlook................................................................11 B. Increasing Fiscal Space...........................................................................................11 C. Reform of the Monetary Policy Framework...........................................................13 D. Debt Sustainability..................................................................................................13 E. Exchange Rate Assessment.....................................................................................14 F. Other Issues.............................................................................................................14

VI. Economic Statistics............................................................................................................14
VII. Staff Appraisal..................................................................................................................16

Tables
1. Selected Economic Indicators..............................................................................................23
2. Fiscal Operations of the Central Government.....................................................................24
3. Fiscal Operations of the Central Government (Percent)......................................................25
5. Balance of Payments............................................................................................................27
6. Financial Soundness Indicators............................................................................................28
7. Indicators of Capacity to Repay the Fund............................................................................29
8. Schedule of Disbursements Under the PRGF Arrangement................................................30
9. Millennium Development Goals, 1990\u20132007......................................................................31

Figures
1. Selected Economic Indicators..............................................................................................19
2. Cross Country Comparison, 2006\u201309..................................................................................20
3. Selected Financial Market Indicators, 2004\u201309...................................................................21
4. External Developments........................................................................................................22

Boxes
1. Exchange Rate Volatility in Zambia......................................................................................8
2. Increasing Fiscal Space........................................................................................................12

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