IMF approves $320 million relief package to Zambia

By Reshmi Basu

New York, June 16 - The International Monetary Fund said it has approved a $320.41 million three-year loan to debt-ridden Zambia to support the government's economic program into June 2007.

The loan was made under the Poverty Reduction and Growth Facility program, which assists indebted nations in reducing domestic debt and increasing spending on poverty-reduction plans.

The IMF said that while the Southern African nation is enjoying its strongest period of growth and its lowest rate of inflation in the last two decades, the country's economy is still fragile.

"The government's program for 2004, which will be supported by the Poverty Reduction and Growth Facility (PRGF), responds to the urgent need for fiscal consolidation to limit the recent increase in domestic debt and to redirect spending to priority areas," Takatoshi Kato, deputy managing director and acting chairman of the IMF executive board, in a news release.

"Under the program, non-priority expenditures, including on wages, will be contained and plans for rightsizing and pay reform of the civil service will be expedited to support the effective delivery of public services," added Kato.

Zambia's structural reform agenda targets improvements in public expenditure management and financial accountability. The government intends to address the problems of insolvent state-owned non-bank financial institutions, as well as completing the privatization of Zambia's National Bank.

The PRGF loans carry an annual interest rate of 0.5% and are repayable over 10 years with a five and half-year grace period on principal payments.

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