Govt back on IMF lending programme

After applying a series of austerity measures, Zambia is back on the International Monetary Fund (IMF) Poverty Reduction and Growth Facility (PRGF). This week's announcement brings the aid-dependent country a step closer to reaching the Highly Indebted Poor Countries (HIPC) Completion Point by the end of this year. Zambia was suspended from the World Bank and IMF programmes after it overshot its 2003 budget by Kwacha 610 billion (about US $130 million). Since then the IMF has closely monitored the country's economic performance to ensure adherence to fiscal discipline measures agreed with the Fund. "This is a great relief for the country because it means that all of the belt-tightening measures we undertook over the last 12 months have paid off. We are committed to continuing working on improving sustainable growth, so that we do reach the HIPC completion point," finance ministry spokesman Chileshe Kandeta told IRIN. Zambia's re-entry into the IMF's PRGF is expected to improve confidence in the economy and attract international investment, according to Kandeta. Under the new three-year lending facility Zambia can access US $300 million towards tackling poverty reduction. "The IMF funds will be channelled into improving social services, especially health and education. But also, there are plans to bolster financial management practices within the government," said Kandeta. In an effort to attain the HIPC completion point and qualify for PRGF, the authorities in Zambia undertook a number of controversial steps, which included capping the salaries of civil servants and slashing government borrowing. Kandeta noted that the IMF and the World Bank were expected to make a final decision as to whether Zambia had reached the HIPC completion point in the first quarter of next year. The HIPC status, once granted, is expected to help Zambia reduce its external debt of around $6.5 billion to a sustainable level.