Announcement of Agricultural Sector Investment Program in Zambia on April 3, 1995

The World Bank 1818 H Street, N.W., Washington, D.C. 20433, USA IDA News Release No. 95/49/AFR Contacts: Eric Chinje (202) 473-4467 Sheela Reddi (202) 473-5091 AGRICULTURAL SECTOR INVESTMENT PROGRAM IN ZAMBIA WASHINGTON, April 3, 1995-The International Development Association (IDA) last week approved a credit of SDR 41.2 million (US$60.0 million equivalent)' to Zambia that aims to improve food security and reduce poverty among rural households by promoting improved agricultural practices and introducing new technologies. It will also raise the incomes of women farmers, who are the main providers for their families, through increased crop production and diversification. Since early 1992, Zambia's overall policy reform agenda has remained on course, making steady progress. The pace of liberalization and decontrol has been good. The country's macroeconomic performance in terms of fiscal balance and money supply growth has been strong. As a result, inflation declined from an average annual rate of over 100 percent in the previous four years to an annual rate of 22 percent in the second half of 1994. Interest rates have also declined (from over 200 percent in April 1994 to about 25 percent in December 1994), and this has strengthened the Government's ability to maintain budget discipline and control the deficit. The Government has decontrolled prices of all agricultural products and inputs, eliminated exchange rate restrictions, and liberalized export and import trade, and it completed several major privatizations in 1994. Agriculture figures prominently in Zambia's economy and is expected to play a critical role in its growth and restructuring. With improved agriculture sector policies, Zambia could greatly expand agricultural production. Although agriculture accounts for only 18 percent of gross domestic product (GDP), this small share belies the extent to which Zambia depends on the sector. About 60 percent of the population depends on agriculture for a living. Agriculture employs about 67 percent of the labor force and remains the main source of income and employment for rural women. The increase in income for rural women will result in reduced poverty for the rural population as a whole. The sector will also continue to provide most new jobs for at least the next decade, even with higher industrial growth rates, because of the country's small industrial base and declining mineral resources. Agriculture is expected to become an increasingly important source of foreign exchange. 1 ID.4 (World Bank's concessionary lending affiliate) credits are denominated in SDRs (Special Drvwing Rights), which are valued on the basis ofa "basket" ofcurrencies. The U.S. dollar equivalent of the SDR amount of the 1DA credit reflects the exchange rates at the time of the negotiations of the credit. Archives/Records Center, H Bl-001 ( 1) Zambia's agricultural sector has great potential to respond rapidly to the economic program supported by the Bank and the IMF. It is vital sector for the Government's economic growth and poverty reduction strategy. It is also important in economic adjustment by providing the initial supply response needed to stimulate economic activity, and can support economic growth in the long run by providing sustainable export earnings. For the expected growth to materialize, the private investments must be promoted and public support must be made more efficient. In addition, donor support should be better coordinated to ensure maximum impact. The Government and donors work in partnership in their support for the agricultural program. The Government is responsible for identifying and preparing the priority activities within the program and will work with donors to improve the program's efficiency and sustainability without sacrificing ownership. The coordinated policy reform and investment planning coupled with coordinated donor support would be much more difficult without the leadership and involvement of the IDA. The Agricultural Sector Investment Program would be implemented over a four- year period and has four components: * policy and institutional improvements; * public investment; * private sector development; and * pilot investment schemes. The credit is extended at the standard IDA terms for a period of 40 years, including 10 years of grace; it carries no interest but has an annual service charge of 0.75 percent on the disbursed balance and a variable charge of up to 0.5 percent (currently 0 percent) on the disbursed balance.