Consultative group for Zambia (Paris, December 8-9, 1994) : chairperson's report of proceedings

 67908 CONSULTATIVEGROUP FOR ZAMBIA Paris, December8-9,1994 CHAIRPERSON'S REPORT OF PROCEEDINGS 1. The Consultative Group for Zambia met in Paris December 8 and 9, 1994. Delegations from Canada,Denmark,Finland,France,Germany,Ireland,Italy, Japan,the Netherlands, Norway, Sweden,United Kingdom,United States,the AfricanDevelopment Bank,the Arab Bank for Economic Development Africa, the EuropeanCommission, EuropeanInvestment in the Bank, the InternationalFund for AgriculturalDevelopment, InternationalMonetaryFund, the the Organizationfor EconomicCo-operation Development, SaudiFund for Development, and the the United Nation's Children'sFund, andthe UnitedNations Development Programmeattended the meeting. The HonorableRonaldPenza,Ministerof Finance,led the Zambiandelegation whichincludedthe HonorableSimonZukas,Ministerof Agriculture,Food and Fisheries;the HonorableDipakPatel, Ministerof Commerce,Tradeand Industry;the HonorablePaul Tembo, DeputyMinisterof the NationalCommissionfor Development Planning,and other senior Governmentofficials. 2. The Zambiandelegationgave a comprehensive assessmentof the country's progressin stabilizingthe macroeconomy.Relativeto 1993,the broad economicaggregateshad greatly improved. Inflationand interestrates declinedsharply;the exchangerate remainedstable;the budget was under control;and externalaccountsimproved. The passage of two Land Bills, the Mining Tax Act and the Ethics Act strengthened legal environmentrequiredfor full the economic recovery. Althoughoutput had gone down in 1994,businessand consumerconfidence were rising, and there were signsthat privateinvestmentwas returningto boost the economy. 3. that On the privatizationfront, the Zambiandelegationinformedparticipants the Governmentwas addressingkey structuralissuesthat were holdingback this aspect of their program. The Govermment's recent actionsrepresenteda significantbreak-through.The Govermment announcedthe liquidationof ZambianAirwaysand the phasing-outof the had ZambiaIndustrialManufacturing Corporation (ZIMCO),the parastatalholdingcompany,by March 31, 1995. The processfor the privatization ZarnbiaConsolidated of CopperMines (ZCCM)was underway. In connectionwith the latter,the delegationstated that the Government would announcethe privatizationtimetableafteran internalreport outliningthe optionswas completedby end-January1995. The preparationfor the privatization more than one hundred of other companieswas in progress,andtwelveparastatals, includingseverallargeones, had been sold. 4. Lookingahead to 1995,the Zambiandelegationstressedthe Government'scommitment to promotegrowthwith stability. It statedthat the Governmentwill continueto give priority to prudentfiscal and monetarypolicies,to implementvigorouslythe remainingstructuralreforms, to undertakespecific measuresto alleviatepoverty,and to reducethe externaldebt burden. Zambiawill reducethe burdenof its externaldebt by completingthe rightsaccumulation programmewith the IMF andby refinancing outstandingobligationto the Fund with an the _. t I _  -2- Paris Club to enhanced structural adjustment facility. In 1995, Zambia will also approach the obtain a significant reduction in its Paris Club debt. the 5. The delegation stated that in 1995, to effectively mobilize domestic resources, system through the Government will proceed along two lines. The first is to deepen the financial prevented removal of regulations inhibiting the expansion of financial services; these have The individuals and firms from using their financial resources as productively as possible. revenue second is to proceed with the privatization program and to improve public sector the cash performance. To improve its revenue performance, the Government will maintain budget system, strengthen the Zambia Revenue Authority and introduce a value added tax. These will provide a supply of public savings to finance public investments. of the 6. The Zambian delegation reported that the stage is set for a major rationalization is to rebuild an public sector as civil service reform continues in 1995. The underlying objective services, that is efficient public sector, oriented to the provision of infrastructure and vital social will be transparent and accountable. To achieve this objective,the provision of many services decentralized. 7. Within the Consultative Group, there was a remarkable consensus on both Zambia's for its achievements and the remaining challenges. Participants congratulatedthe Government had gone success in macroeconomic management and stabilization during the past year. Inflation past several down to an annual rate of 20 percent in the past six months, from triple digits in the years. Interest rates had fallen even more dramatically. A strong fiscal performance underscored these achievements. social 8. In particular, the Consultative Group commendedthe Government for protecting critical to sectors' expenditures in the face of overall cuts in public expenditure. In two sectors and the multi- alleviate poverty, health and agriculture, the Government, the bilateral donors, sector lateral donors, including the World Bank, had cooperated to put into place a common extending policy framework and investment program. The Consultative Group recommended this approach to other sectors. direction of 9. Participants concluded that the Government had reaffirmed its leadership and that the decision to the reform program with the liquidation of Zambian Airways. They realized Participants sent liquidate the airline was a difficult one, but nevertheless it was a necessary step. achieved to date a strong message that to stop the reform process now would put at risk the gains Zambia. They felt and endanger the emerging investor confidence in the longer term potential of success that the time was now appropriate for the Government to build on its macroeconomic and create the conditions for substantial growth. had 10. In response, the Zambian delegation highlighted the difficulties the Government a broader symbolic faced in proceeding with the reform program, because the steps required had been easy or and political importance. Consequently, the implementation of the reform had not example. Since straightforward. The recent debate over Zambia Airways was highlighted as an a democratic the Government of the Movement for Multi-Party Democracy was committed to Airways was and accountable Government, the process by which it decided to liquidate Zambian lengthy as all options were studied. The Government realized that perhaps it took too long, but given Zambia's multi-party system of democracy, the pace of the reform program was not solely controlled by the Government. 11. As always, during the meeting most attention focused on the remaining challenges facing Zambia. The main points fell under four headings: (i) the privatization program; (ii) public sector reform; (iii) goverance; and (iv) the longer-term development agenda. The donors emphasized that concrete action in these areas during the first months of 1995 would be an important signal that the Government was advancing steadily with its economic program. The dominant issue was the pace of privatization. Almost all donors urged the Governmentto increase the pace in order to reduce the budgetary drain of loss-making public enterprises. This would enhance domestic resource mobilization and increase efficiency and growth. 12. Privatization discussions centered on ZIMCO and ZCCM. Participants highlighted the negative consequences of ZIMCO's interventionsin parastatal management and its lack of financial accountability. They asked for clear confirmation that ZIMCO would be phased out, as announced last year. Participants welcomed Minister Penza's statement that the Government plans to replace ZIMCO with an agency with limited and transparent powers by the end of March 1995 and that the British Government was providing technical assistance to phase out ZIMCO. They emphasized the need for continued dialogue on this subject as the details of the Government's plan develop. 13. Participants also called for a faster pace on the privatization of ZCCM, although recognizing that it would be a very complex task. They asked for a timetable of actions and a better sense of how the Government intends to proceed. There was a widespread feeling that only privatization could cure the production shortfalls and high costs that have characterizedZCCM's operations. Participants were informed that this topic was being taken up in the context of the Bank's next adjustment operation. The Zambian delegation informed the meeting that the Government had agreed to hold regular briefings for donors on privatization and other economic management issues in Lusaka. 14. The second challenge facing Zambia, and discussed during the meeting, was public sector reform. Most delegates commented on the need for civil service reform, beginning with a clear idea of the functions, size, and salary structure of a reformed civil service and how to get there within affordable limits. Affordability should apply to retrenchment schemes, as much as to the overall size and structure of the public sector. The Consultative Group recognized that public sector reform is complicated because it requires redefining the role of Government and ensuring that public servants have the appropriate incentives and working conditions. Solutions tend to be expensive in the short term, but improving the public sector requires more than retrenching too numerous civil servants. Solutions need to be crafted taking into account the macroeconomic framework. The donors were invited to work with the Government on this difficult set of issues. 15. Given the dwindling resources available for development aid, participants stressed the importance their respective citizens place on an open and transparent government. As a consequence, governance issues again figured prominently in the discussions. Numerous proposals were considered. The proposal for more regular and visible reports on actual spending was an example. The overall tone of the discussions and outcome were constructive. Participants  -4 - recognized initiatives Government taken in establishing HumanRights the the had the Commission, Constitutional the and ReviewCommission the enactment a Code of Conduct. of Theyparticularly welcomedthe Government's decisionto establisha formalmechanismthat,in cooperationwith the donorcommunity,would monitorimplementation initiativesin this area. of 16. Giventhe considerable progresson stabilization, groupagreedthat the Consultative the Groupmeetingsshouldshiftits focusfrom shortterm issuesto the longerterm objectivesof economicgrowth, sustainabilityand povertyalleviation. A centralconcernwas how to make the most effectiveuse of the ConsultativeGrouppartnership. The Chairpersonwelcomed suggestionson the formatof the ConsultativeGroupmeeting,includingmechanismsto improve communication to have less formalmeetingsto ensurecooperationand focus on key issues. and 17. To begin to shift the focustowardsthe core developmentagenda,data and analysisfrom the recent PovertyAssessmentin Zambiawere presented. The datarevealedthe grave situation facingthe poor in Zambia. Indicatorsof humandevelopmentin Zambiahad declined considerablyover the past decade. Infant and under-fivemortalitywere high and rising. Adult life expectancyhad droppedby 10 years since 1985. One third of Zambia's adultswere illiterate, and two-thirdsof these were women. Some70 percentof Zambianswere poor, 55 percent were unableto affordan adequatediet and most of the povertywas concentratedin isolatedrural areas,among female headedhouseholds. HIV/AIDSrates were high and rising. 18. Participantsstressedthat Zambia's economicrecoverystrategiesmust take into account these realities. Pro-poorpoliciesand programsneed to be developed. Nationalcommitment to human resourcedevelopmentneededto be demonstrated increasingthe real value of social by sectorbudgets. Education,primaryhealthcare, safe waterand sanitationwere consideredto be priorities. Severalspeakersstressedthe role of education, the need to applythe lessonsof the and recenthealthreformsin education.To help ensurethat this importantcornerstone development of does not continueto deteriorate, WorldBankmadea commitment make educationa central the to focus overthe next year. 19. The Zambiandelegationexpressedthe country's great appreciationfor the extraordinary assistanceit has receivedfrom the international community,and it appealedfor continued supportto promotegrowthwith stabilityand equity. The externalfinancinggap for 1995was presentedat over US$2billion. If the IMF paymentarrearsand the offsettingresourcesfrom the new IMF operationare excluded,the gap wouldbe US$978million (approximately sameas the 1994). After estimatingdebt relief from existingagreementsof US$154million,project and commodityassistanceof US$347millionand otherresourcesof US$36 million (mostlynet short term capitalmovements),the need for balanceof payments'assistancewas approximately$441 million. Carryoverassistancefrom existingcommitments, includingIDA, was about US$285 million. 20. After reviewingpledges,and indicationsof likelypledges,Zambia's remainingexternal financingrequirementsfor 1995were fully met. The donorsemphasizedthat this supportwould be contingentupon the maintenance the momentumof policy reforms and progressin creating of a more transparentand accountablegovernment. 1 ~~~~1  -5 - ZAMBIA'S EXTERNALFINANCING (Millionsof US Dollars) Financing Requirements 1994 1995 CurrentAccountDeficit* 115 419 Debt Service 682 1678 ReserveIncrease 111 50 Total FinancingRequired 907 2146 Estimated Financing Available Debt Relief 260 154** Projectand Commodity Assistance 300 347 IMF Purchases 0 1168 Balanceof PaymentAssistance 263 441 Other*** 85 36 Total FinancingAvailable 907 2146 Financing Gap 0 0 Excludesgrantsand interest. -* * Includes only existing Paris agreement. *** Includesshort-termcreditsand estimatedeffectsof new rescheduling debt reduction and agreements. 21. The Consultative Group agreed to hold the next formal Consultative Group meeting in Paris in about one year's time. I I______  TABLE OF ANNEXES ANNEXES PagNo. Annex I Agenda ................................ 6 Annex II Opening Statement by Chairperson Ms. Katherine Marshall, Director, Southern Africa Department World Bank. 7 Annex III Opening Statement by the Minister of Finance Honorable Ronald Penza Government of the Zambia .15 Annex IV Opening Statement by the IMF Staff Representative Mr. G.G. Johnson, Assistant Director Africa Department .20 Annex V Statement by United Nations Development Programme Mr. Onder Yucer, Resident Coordinator United Nations .26 Annex VI Statment by the Deputy Minister on Financing Requirements Honorable Paul Tembo Government of Zambia .29 Annex VII Statement by the IMF Staff on Financing Requirements Mr. M.A. Tareen, Senior Economist Policy Development and Review Department .32 Annex VIII Closing Remarks by the Minister of Finance Honorable Ronald Penza Government of Zambia .37 Annex IX Chairperson's Closing Statement, Katherine Marshall, Director Southern Africa Department, World Bank ............................. 40 Annex X Press Release............................. 45 Annex XI List of Participants ............................. 49  -6 - ANNEX 1 ZAMBIA - CONSULTATIVE GROUP MEETING PARIS, DECEMBER 8-9,1994 Agenda Thursday, December 8,1994 08:00 - 09:00 Registration and Coffee/Tea 09:00 - 10:30 Opening Statements Chairperson's Opening Statement Statement by the Government of Zambia (Economic Recovery Program) Statement by the IMF 10:30 - 11:00 Coffee/Tea Break 11:00 - 12:30 Economic Recovery Program Discussion by Donors 12:30 - 14:00 Buffet Luncheon for all Delegates at the World Bank Office 14:00 - 15:00 Economic Recovery Program Discussion 15:00 - 16:15 Poverty Assessment Report Presentation by the Bank Comments by UNDP Discussion 16:15- 16:30 Coffee/TeaBreak 16:30 - 18:00 Financing the Economic Recovery Program Statement by the IMF Statement by the Bank Statement by the Government of Zambia Statements by donors Discussion Friday, December 9,1994 09:00 - 10:30 Financing the Economic Recovery Program Summary of Financing Status by the Bank Discussion 10:30 - 11:30 Coffee/Tea Break/Working Discussions 11:30 - 12:30 Closing Statements Consideration of the Press Release Statement by Government of Zambia Statement by the Chairperson 12:30 Adjournment  -7- ANNEX II Page 1 of 8 ZAMBIA Consultative Group Meeting, December 8-9, 1994 Chairperson's Opening Statement Katherine Marshall, Director, Southern Africa Department, World Bank I am delightedto welcomeall of you to this meetingof the Consultative Group for Zambia. I extenda particularlywarm welcome the Zambiandelegationled by Minister to Penza. As I approachthe specialchallengeof leadership the Zambia Consultative of Group,I look with particularhopeto the long-standing traditionsof cooperationand franknessthat my colleagueSteveDenninghas told me to expectfrom this uniquepartnership. This spirit will haveparticular importance this meeting,as Zambia is standingat an importantcrossroads. for Zambiahas madeimportantstridesfonvardin recentmonths,and indeed.in recentdays. The nation faces. nonetheless, major challenges for the future. This partnershiphas playeda crucial role in bringingus to wherewe stand todayand will havestill greaterimportancein the years ahead. I lookforvard to our discussionsof both the achievements the challenges. and Let me firstnote someof Zambia's importantachievements.Sincethis Group last met, Zambiahas madeconsiderable progressin the vital taskof securingand consolidating the essentialrock foundationof macroeconomic stability. As we haveagreedeach time we have met, this stabilityis the prerequisitefor the resumption growlth for concertedeffortsto of and combatpoverty. The Government sustainedits effortsto controlinflationand to lower has interestratesthrough tightcontrolof monetaryand fiscalpolicy. Inflation.whichwas over 100%in each of the previousfour years. fell to an annualrate of 50% in the first half of the year and to below20% in the secondhalf. Nominalinterestrates havenow fallento the 20% range from over 200% as recentlyas April. The importance combatinginflation high of and interestrates was noted by nearlyeveryspeakerat the last CG meetingin March,and Zambia can be justifiablyproud of its achievements.The lowerinflation lowver and interestrates should increaseinvestnents and economic activity. This supplyresponsein turn willhelp lowerinflation furtherboostbusinessconfidence, and leadingto lowerinterestrates, and so on. It leadsus into a cycle of hope. The experience the first monthsof 1994illustratesboth the demandsand fragilityof of the macroeconomic programand the Government's strongercapacityto managethe economy. Revenueperformancein the first few monthsof the vear was disappointing, we saw real and risksthat the fiscalbalancewoulddeteriorateas it did early in 1993.bringing another yet  Page 2 of 8 with acteddecisively, resurgenceof inflation. This did not happenbecausethe Government in sharp cuts in public spendingand decisivemeasureswhichbroughtdramaticimprovements revenue. The latter formedpart of concerted Government front to effortson the institutional better Customsadmninistration to introducethe ZambiaRevenueAuthority. Zambia's and successthis year also owesmuchto ZCCM's improvedabilityto pay its debts to the becauseof relativelymorefavorablecopperprices. Government I am particularlygratifiedto highlightthat despitethe cuts in publicspending,critical expenditures the socialsectors wereprotected. In fact, the share of these sectors in actual in budgetreleaseshas beengreaterthan their share in the original 1994budget. As a result, in Zambiansare beginning seetangible improvemnents the despiteoverallbudgetstringency, to deliveryof social services. For example.schoolsare beingrehabilitated recordnumbersand in management beingbroughtdownto the district level,muchcloser to the fanilies being is served. Progresshas beenso encouragingunderthe SocialRecoveryProgram,-vhichfinances across Zambia,that we have communityinfrastructure morethan 500 communities in advancedplannedIDA supportfor a secondphase programfrom 1997to 1995. satisfactionimportantfonvard steps in areas that are critical for We can notewvith Zambia's mediumand long term development.In both healthand agriculture,two critical sectorsfor povertvreduction, Governnenthas established coherentand comprehensive the a program;this has madepossiblemost commonsectorpolicyframeworkand investment promisingcooperative donors,including amongZambia's bilateraland multi-lateral agreements themselves continuing, the World Bank,to support the programsoverall.and to commnit to that activecooperationin implementation.This is a very positiveachievement should increasethe efficiency publiclyfinancedactivitiesin thosesectors and their significantly of abilityto reachthe poor. We are encouraged the Government initiatedwork along that has similar linesin two other critical sectors,educationand transportation. has We can alsorecognizeimportantinitiatives Government takenover the last the year on issues turningaroundgovernance, area of particularconcernto many of you. an the Initiativesincludethe establishmnent the HumanRightsCommission, Constitutional of and Codeof Conduct ReviewConmnission the enactment the Parliamentary Ministerial and of Act. The Government also stated its intention engagein a structuredand systematic has to to dialoguewith the donor community reviewprogresson governance.The detailsof these  -9 - A[NNEXTII Page 3 of 8 are initiatives describedin the Govemment's document was distributedas background that for this meeting. Finally, we cometo the matterof ZambiaAirways- a subjectof muchdiscussion and concemover the last few years - and over the last fewdays. It is worthwhileto reiterate herethat our collective concem in this area has neverbeen whther or not Zambia Airways shouldcontinueor be closed. Our primaryconcemhas beenwiththe use of scarce public funds whenthere are so manyother pressingpriorities. As most of you alreadyknow, last weekendthe Govemment reacheda difficultdecisionandannouncedthe immediateliquidation of the airline. This was certainlya very courageousactionfor whichthe Government shouldbe commended.We may, in this forum,devotesomeeffortto takingstock of what wemight learn from this experience. It has highlighted importance seeingand presentingclearly,within the of and the Government to the public,the realitiesof the problemsfacingZambia and the real need for boldaction. In this test of leadership commitment Government had the and the has opportunity reaffirmownership directionof the reformprogram. to and In sum, as we look backover the periodsincethe last formalmeeting the of Consultative Group in March, 1994,we can note a rangeof importantachievements in carryingforwardthe structuralreformson whichthe Government embarked,and important has progressin strengthening partnershipamongZambia's externalsupporters. This is the mianifested many areas, including in throughsubstantialfinancialsupport,mobilizedand managedin increasingly effective ways, with clearerlinkagesbetween basic objectivesof the achievingresultsand benefitingpeopleand the many financialand technicalsupport ins_trunts that we employ. This meetingwillafford an importantopportunity take stock to on wherewe stand in shiftingthe focusof the Zambia Consultative Group partnershiptowards the mediumterm development challenges Zambia. for Lookingto the period ling imuneditelyahead, wecan highlightseveralcritical challenges. To securethe gains alreadymade. Government neednowto tackle firmlythe will array of issues surroundingparastatalmanagemt and public sector reform. Let me mention brieflyfour aspects- privatzation. ZIMCO,ZCCM,and civil servicereform. * the On privatization, issue is less oneof direction- the Government's commitment to the objectives privatization clear - andmore the needto forge internal of is  -10 - ANNEX II Page 4 of 8 consensus deal with implementation to problemsas they ariseand to increasethe pace of privatization. With respectto ZIMCO, we look forwardto hearingfrom the Government details of how it intendsto implement plans to closeZIMCO its and replaceit withan agencywith less autonomyover publicfunds and with a more limitedregulatory and monitoringrole. Concreteaction in this area during the first monthsof 1995 will be an importantsignalthat this Government advancing is steadilywith its economic program. * In the miningsector.Zambiafaces the complex task of mobilizingprivate sector financing management and support,both from existingand potentialpartners.All of us, includingthe Government, hopedwve had wouldbe furtheralong withthis issueby this time. On ZCCM.we are aware of the sensitive nature of this subject and the needto conductnegotiations major international Avith miningcompanies wvith discretion.However.in the near future. ve hopeto observe more clearlvthe directionof the Government's policy. In 1995.agreeingon the mainelementsof this direction.as well as a timetable,will be essential. Theseare underactive discussionin conjunction with preparatorywork for the next stage of the structural adjustment programthat the World Bankwvould support. * On publicsectormanagement civilservicereform, the and challengeis howv to achievea strearnlined. moreefficientpublic sector. This issue is complicated in pan becausesolutionstend to be expensivein the short term. Improvedpublic sectormanagement requiresmore than retrenching numerouscivilservants. too It also calls for a broad redefinition the role of government of and ensuringthat public servantshavethe appropriateincentives working and conditions. The Govemrnment madesomeprogressin thinkingabout has these issues, and indeed resultsin movingahead in some sectors,notablyhealth administration the local at level, is an encouraging harbinger. Nonetheless, remainsa criticalarea where this analysisand actionare vitallyneeded in 1995. We have agreedto work with the Government this difficultset of issuesand inviteyou on to join these efforts.  - 11 - ANNFX LI Page 5 of 8 Let me summarizebrieflywhereIDA stands todayin its countrystrategyand Credit(ESAC),I operationsfor Zarnbia. With respectto the Economic SocialAdjustment and am pleasedto reportthat nearlyall outstandingconditions releaseof the SecondTrancheof for USS75millionhavebeenmet, including increased the fundingfor the socialsectors. With the recentdevelopments Zambia Airways,we expectto be able to recommend releaseof the on the SecondTrancheto the Bank's ExecutiveDirectorssbortly. The samne true with respectto is the SecondTranchereleaseof US$30millionforthe SecondPrivatization Industrial and Reform Credit(PIRC 11). We expectall of the relevantconditions be fulfilledthis month. to Providedthat this occurs, wewill subsequentlyrecommendapproval of the tranche releaseto our ExecutiveDirectors. We are alsomakingprogresson the designof the nextphaseof the structural adjustmentprogramthat we plan to support. This operationwill focuson investment promotionand growththroughthe supportof selectedreformsin trade,taxation,social security,and the financialand miningsectors. Our currentplans includean appraisalin Januarv,with approval by the Bank'sExecutiveDirectorsin April or May 1995. The WorldBank's countrystrategvaimsfundamentally shift the emphasistowards to the challenges longterm development. willentail a continuingfocuson translatingthe of This on and terms, and a focus throughout institutional povertyreductionstrategyintooperational activities,set withinthe capacity issues. We see ahead a steadyincreasein investment framework Government sector programs. This wvill for concertedattentionto of led call issuesand to removing constraintsto actionand progressthat arise. We implementation the havetaken particularsatisfactionfrom the designand launching the HealthSectoroperation, of and planto sign the creditfor this importantoperationthis afternoon; inviteyou to we participate,as this is very much a joint effort,an illustrationof the nature of the Zambia development with the Government partnership. And nextweekwe will be negotiating the AgriculturalSectorInvestment Program- ASIP- anotherexampleof the integratedsector approvalto the Bank's ExecutiveDirectorsof an urban approach. We expectto recommend development water supply projectand a secondoperation and supportingthe Social Recovery Programduringthe first half of 1995. In a numberof other sectors,includingeducation, transport,environment. power,we are discussingwith the Government and actionplans to improveimplementation increaseeffortsin those vital sectors. and  -12 - ANNEX II Page 6 of 8 The WorldBank programcontinuesto entaila full agendaof economic sector and work, whichweaim to gear increasingly the Government's to prioritiesandto supportfor the Grouppartnership. An example this cooperationis the Public Zambia Consultative of ExpenditureReview, wherethe draft was for the first timecompletedby the Government,and where, in our view,we saw effective joint effortswith many of you. It shouldbe completedin will the first half of 1995. Lookingahead,the preparationof the new PolicyFrameworkPaper offer an importantvehiclefor establishingthe policyreformagendafor the nextthree years. at Our economicwork in 1995will focuson mediumterm growthissues,lookingparticularly the agriculturaland industrialsectors,as a follow-up the CountryEconomic to Memorandum we completed year. Finally,we havejust completed PovertyAssessment Zambia. last a for The main reportwas distributedas a backgrounddocument this meeting,and I am pleased for that we have includeda sessionon the report in this afternoon'sagenda. It marksthe beginning a wvelcome in focustowards the medium-term of shift developmentagendain Zambia, and offers the chanceto focusspecificallv howthe majorityof Zambianscan on benefitfrom the nation'seffortsto relauncheconomic development. An issueon our agendahere is howto makethe mosteffectiveuse, in the vears ahead, Group partnership. Our hopeis that wewill, increasingly, able to of our Consultative be devotethese ConsultativeGroupmeetingsto discussingthe longerterm issuesassociatedwith economic growth,sustainability povertyalleviation.We will,of course,also needto and discussexternalfinancingrequirements, we willdo so this afternoon. In addition,I and including Group meetings, welcomeyour suggestions the formatfor the Consultative on continuingmechanisms communication less formalmeetingsto ensurecontinuing for and cooperation focus on key issues. and task of ensuringclarityon Returningto this meeting,and specifically the important to we might resourcesavailableto supportZambia'sprogram,I want to commentbrieflyon how proceed. First, I recognize someof you may not be in a positionto makea specific that or commitment this neetingbecauseof the time neededto analyzerecentdevelopments at becauseof somne the still outstanding of given the importantprogress policy issues. However, long being madeon the macroeconomic social fronts,and the recentdevelopments some and on standingissuessuch as ZambiaAirways,in our viewit will be vital to clealy signalour continuingsupportfor the programand our recognition the ZambianGovemrnment's of accomplishments I hopethat the Consultative Group can reiterateits intention continue to its collectivesupportfor the program. I lookforwardto hearingyour views onthis. I r-  - 13 - ANNfX-II Page 7 of 8 Second,in terms of the overalllevelof financialsupportrequired,it is becoming apparentthat we needto begin to think in terms of morethan oneyear. This is particularly true for 1995where sometemporaryfeatures,including possiblecontinuation the of relatively high copperearnings,coupledwith a largecarryoverof previouspledges,may result in a sharp fall in the needfor new assistance,only to be followedby increasing needsonceagainin 1996 and 1997. Becauseof this and becauseof the uncertainty always accompanies that our estimates,if in 1995,the Government receiptsbeyondthoseexpectedto be needed has for imports,debt servicing,and other obligations, buildingup of foreignexchangereserveswill be important. Let me nowturn to the administrative arrangements our meetingtoday and for tomorrow. Immediately after my statemenit. wvill uponthe leaderof the Zambian I call delegation, MinisterPenza.to presenthis statementon the economic recoveryprogramn, followedbv a statementfromMr. Johnsonof the IMF. After coffee.wve havegeneraldiscussion. will whichcan includestatements policy of and/orquestionsto Government. Bank. or Fund staff. This willtake us to lunchtimescheduled for 12:30p.m. All delegatesare invitedto a buffet luncheon be servedjust outside to this conferenceroom. As is our usual practice,themetables will be arrangedto allowinterested partiesto pursue certaintopicsin more depthand with moregiveand take. We have provisionallyestablishedthernetables for privatization, mining,public sectormanagement, the integratedsectorapproach.and issuesfor regionalintegration SouthernAfrica. We in welcomesuggestions additionalthemesduringour morningdiscussion. Unlabeled for tables willbe availablefor thoseof a more eclectictemperament. The plenarywill resumeat 2:00 p.m. (after the signingof the Health SectorOperation at 1:45),to continuethe generaldiscussionof the Government's program. At 3:00 p.m., Mr. Jorgeasen from the Bank willmakea briefpresentationon the Zambia PovertyAssessment, copiesof whichwere distributedas backgrounddocuments this meeting. This for will be followedby conmments UNDP,and discussionof that topicthat will take us to our by coffee break 4:15 p.m. At 4:30 p.m.. wew ill begindiscussing at externalfinancingrequirements and donorassistanceprograms. Tomorrow, willresumeour discussionof externalfinancing we requirements 9:00 am with remaining at donor statements a preliminary and summaryby Bank and Fund staff. Followxing coffee breakat 10:30.we will discussthe draft press the releaseand  ANNEX II Page 8 of 8 makeclosingstatementswiththe objective bringingthe meetingto a closearound 12:30p.m. of A press conference scheduledfor 1:00 p.m. is If these arrangements satisfactory vou, I nowcall on MinisterPenza. are to  - 15 - ANNEX II Page 1 of 5 Revised 14:30 OPENING STATEMENT BY THE HONOURABLE RONALD PENZA,M.P. MINISTER OF FINANCE GOVERNMENT OF THE REPUBLIC OF ZAMBIA TO THE CORSULTATIVE GROUP MEETING, PARIS, FRANCE STE AND 9TH DECEMBER, 1994 MADAM CHAIRPERSON, HONOURABLE MINISTERS, YOUR EXCELLENCIES, DISTINGUISHED GUESTS, LADIES AND GENTLEMEN. REPORTED THAT THE 1. AT OUR MEETING HERE IN MARCH 1994, I ZAMBIA WERE BEING PURSUED BY THE GOVERNMENT OF POLICIES STRUCTURAL THE ECONOMY AND ACHIEVING SIGNIFICANT STABILISING WE HAVE CHANGES AS WELL. I AM PLEASED TO NOTE THAT, SINCE MARCH, IN FACT, THERE IS NOW AMPLE EVIDENCE THAT MADE FURTHER PROGRESS. KEY SECTORS OF THE ECONOMY ARE GROWING STRONGLY. IN PROMOTING ECONOMIC 2. THE TASK FACED BY THE GOVERNMENT OUR BURDEN, BEEN EASY. RECOVERY OVER THE LAST THREE YEARS HAS NOT BY HOWEVER, HAS BEEN GREATLY EASED BY THE GENEROUS SUPPORT PROVIDED FOR WHICH ALL ZAMBIANS ARE THE DONOR COMMUNITY. YOUR ASSISTANCE, THE EXTREMELY GRATEFUL, HAS PLAYED A KEY ROLE IN HELPING TO PRODUCE POSITIVE CHANGES WHICH WE ARE NOW OBSERVING. AND WEAKNESSES 3. MY REMARKS TODAY WILL DEAL WITH THE STRENGTHS I WILL CONCLUDE WITH OF OUR EFFORTS TO PROMOTE ECONOMIC REFORM. YOUR CONTINUED SUPPORT, SOME SUGGESTIONS ON HOW ZAMBIA MAY, WITH SO AS TO ACHIEVE OUR MOVE MORE RAPIDLY TO ACCELERATE THE RECOVERY OBJECTIVES OF LONG TERM SUSTAINABLE ECONOMIC GROWTH AND THE ALLEVIATION OF POVERTY. MONTHS HAS BEEN TO 4. OUR MAIN ACHIEVEMENT OVER THE LAST SEVERAL FULLY STABILISE THE MACRO-ECONOMY. WE HAVE ALSO MADE SOME MODEST, BUT SIGNIFICANT, STRUCTURAL REFORMS. I WILL EXAMINE EACH OF THESE IN TURN. IS EVIDENT IN THE 5. OUR SUCCESS IN STABILISING THE MACRO-ECONOMY BROAD ECONOMIC AGGREGATES. RELATIVE TO 1993, THERE HAS BEEN SHARP THE EXCHANGE RATE HAS DECLINES IN INFLATION AND INTEREST RATES; AND OUR EXTERNAL ACCOUNTS BEEN STABLE; THE BUDGET IS UNDER CONTROL; EFFECT HAVE IMPROVED. THESE CHANGES, IN TURN, HAVE HAD A POSITIVE ON THE REAL ECONOMY. FOR EXAMPLE, THERE HAVE BEEN SIGNIFICANT IN CONSTRUCTION, TOURISM, PRIVATE SECTOR TRANSPORT, INCREASES  - 16 - ANNEX III Page 2 of 5 SMALL-SCALE MANUFACTURING AND RETAILING, AND FINANCIAL AND BUSINESS SERVICES. BUSINESS AND CONSUMER CONFIDENCE HAS RISEN AND, FOR THE FIRST TIME IN YEARS, PRIVATE INVESTMENT IS HELPING TO BOOST THE ECONOMY. 6. STEADY PROGRESS IS BEING MADE IN THE MOST AREAS OF STRUCTURAL REFORM. THE BASIC PLANS FOR REORGANISING THE CIVIL SERVICE UNDER THE PUBLIC SECTOR REFORM PROGRAMME (PSRP) ARE NEARING COMPLETION. THIS PROCESS HAS TAKEN SOMEWHAT LONGER THAN ANTICIPATED, BUT THE STAGE IS SET FOR A MAJOR RATIONALISATION OF THE PUBLIC SERVICE IN 1995. PREPARATIONS FOR THE PRIVATISATION OF MORE THAN 100 COMPANIES ARE WELL-ADVANCED. WE EXPECT THAT WITH THE RECENT REORGANISATION OF THE ZAMBIA PRIVATISATION AGENCY (ZPA), THIS PROGRAMME WILL ACCELERATE IN 1995 AS WELL. 7. AS YOU ARE AWARE, PARASTATAL REFORM IN ZAMBIA HAS BEEN A HIGHLY CONTENTIOUS ISSUE. HOWEVER, THE GOVERNMENT'S RECENT ACTIONS REPRESENT A SIGNIFICANT BREAK-THROUGH. ZAMBIA AIRWAYS IS BEING LIQUIDATED; ZIMCO IS BEING PHASED OUT BY 31ST MARCH 1995; AND THE PROCESS OF PRIVATISING ZCCM IS UNDER WAY. THE GOVERNMENT CONTINUES TO IMPROVE ITS CAPACITY FOR EFFECTIVE MANAGEMENT OF THE FISCAL AND MONETARY SYSTEM. REVENUE PERFORMANCE IS IMPROVING AND THE PASSAGE OF THE LAND BILL, THE ETHICS ACT, AND THE MINING TAX ACT HAVE HELPED STRENGTHEN THE ENVIRONMENT NEEDED FOR FULL ECONOMIC RECOVERY. 8. YOUR EXCELLENCIES WILL APPRECIATE THAT THE TASK OF RESTRUCTURING THE ECONOMY, WHICH HAD BEEN SO BADLY MIS-MANAGED FOR SO LONG, INVOLVES MANY POLICY CHANGES. SOME OF THESE CHANGES HAVE BEEN RELATIVELY EASY TO MAKE BECAUSE THEY ARE WIDELY SEEN AS HAVING AN IMMEDIATE, POSITIVE EFFECT ON ECONOMIC RECOVERY. ONE SUCH EXAMPLE IS DECONTROL OF THE FINANCIAL SYSTEM. OTHER POLICY CHANGES, HOWEVER, HAVE HAD BROADER SYMBOLIC AND POLITICAL IMPORTANCE. THEIR IMPLEMENTATION HAS NOT BEEN EASY, OR STRAIGHT-FORWARD. THE RECENT DEBATE ABOUT THE OPTIONS FOR DEALING WITH ZAMBIA AIRWAYS IS AN EXAMPLE. 9. THAT DEBATE ALSO REFLECTED THE NATURE OF THE POLICY REFORM PROCESS ITSELF WHICH HAS EMERGED UNDER THE MMD GOVERNMENT. WE HAVE BEEN EXCEEDINGLY OPEN AND FORTHRIGHT IN OUR APPROACH TO ECONOMIC REFORM. OUR COMMITMENT TO DEMOCRATIC, ACCOUNTABLE GOVERNANCE, REQUIRES THAT ALL OPTIONS BE CONSIDERED IN DETAIL BEFORE WE PROCEED. BECAUSE THERE WAS SUCH A SIGNIFICANT DIVERGENCE OF VIEWS ABOUT THE FUTURE OF ZAMBIA AIRWAYS, THAT PROCESS COULD NOT BE RUSHED. INDEED, BECAUSE THE GOVERNMENT DID NOT FORCE A DECISION, THERE IS NOW A BROAD CONSENSUS THAT LIQUIDATION OF THE AIRLINE WAS THE ONLY FEASIBLE OPTION. 10. I AM AWARE THAT SOME IMPATIENCE HAS BEEN EXPRESSED AT THE LENGTH OF TIME IT TOOK FOR US TO REACH A DECISION ON ZAMBIA AIRWAYS. PERHAPS WE TOOK TOO LONG. BUT, GIVEN THAT OUR MULTI- PARTY SYSTEM OF DEMOCRACY IS RELATIVELY NEW, THERE IS MUCH WE ALL  - 17 - ANNEX III Page 3 of 5 HAVE TO LEARN AS WE GO ALONG. NONE OF US IN GOVERNMENT DOUBTS THE NEED FOR FUNDAMENTAL ECONOMIC REFORM. NEVERTHELESS, GENUINE DIFFERENCES OF OPINION DO EXIST ABOUT THE PACE OF REFORM AND THE CONSEQUENCES OF PARTICULAR REFORMS. THE DEBATE ON ZAMBIA AIRWAYS REFLECTED THOSE DIFFERENCES. IT WOULD BE UNFORTUNATE, AND UNFAIR, IF IT WERE SEEN IN ANY OTHER TERMS. 11. FOR THE FUTURE, THE GOVERNMENT'S OBJECTIVE IS TO PROMOTE GROWTH WITH STABILITY. FOR THIS TO MATERIALISE, WE WILL NEED TO MAINTAIN PRUDENT FISCAL AND MONETARY POLICIES; VIGOROUSLY IMPLEMENT THE REMAINING STRUCTURAL REFORMS; MOBILISE MORE RESOURCES DOMESTICALLY; ACHIEVE MAJOR REDUCTIONS IN OUR EXTERNAL DEBT BURDEN; AND TAKE SPECIFIC MEASURES TO ALLEVIATE POVERTY. 12. OUR PRIORITY IN THE AREA OF FISCAL AND MONETARY POLICY IS TO CONTINUE STRENGTHENING THE RELEVANT INSTITUTIONS AND PROCEDURES. THE GOVERNMENT WILL MAINTAIN THE CASH BUDGET. REVENUE PERFORMANCE WILL BE FURTHER ENHANCED BY THE INTRODUCTION OF A VALUE-ADDED TAX IN JULY 1995. AND, THE OPERATION OF MONETARY POLICY IS BEING STRENGTHENED BY THE DEEPENING OF KEY FINANCIAL MARKETS AND IMPROVED FINANCIAL SUPERVISION. 13. KEY STRUCTURAL ISSUES WHICH ARE HOLDING BACK ECONOMIC RECOVERY WILL BE ADDRESSED. THIS WILL INVOLVE A MAJOR EFFORT TO COMPLETE THE PUBLIC SECTOR REFORM PROGRAMME IN 1995. AS NOTED ABOVE, ZAMBIA AIRWAYS IS BEING LIQUIDATED. THE PHASE-OUT OF ZIMCO HAS ALREADY BEGUN. WE EXPECT IT TO BE COMPLETED BY 31ST MARCH, 1995. IN THIS RESPECT, I WOULD LIKE TO THANK THE GOVERNMENT OF THE UNITED KINGDOM FOR ITS OFFER OF TECHNICAL ASSISTANCE TO COMPLETE THE PHASE-OUT AND TO ENABLE THE GOVERNMENT TO TRANSFER ZIMCO'S FUNCTIONS TO THE NEW PARASTATAL MONITORING UNIT IN THE MINISTRY OF FINANCE. 14. THE GOVERNMENT IS PRESSING AHEAD WITH THE PRIVATISATION OF ZCCM. CHAMBISHI AND KASANSHI HAVE ALREADY BEEN ADVERTISED FOR SALE. THE GOVERNMENT HAS RECENTLY INTRODUCED A GREEN-FIELD MINING POLICY WHICH OPENS THE MINING INDUSTRY IN ZAMBIA TO ALL INTERESTED PARTIES. THE INTERNAL REPORT ON PRIVATISATION OPTIONS OF ZCCM IS BEING COMPLETED AND SHOULD BE RECEIVED BY THE END OF JANUARY 1995. A TIMETABLE FOR PRIVATISATION WILL BE ANNOUNCED SOON THEREAFTER. 15. TO MORE EFFECTIVELY MOBILISE DOMESTIC RESOURCES, THE GOVERNMENT IS PROCEEDING ALONG TWO LINES. THE FIRST IS TO FURTHER DEEPEN THE FINANCIAL SYSTEM THROUGH THE REMOVAL OF REGULATIONS WHICH INHIBIT THE EXPANSION OF FINANCIAL SERVICES AND PREVENT INDIVIDUALS AND FIRMS FROM USING THEIR FINANCIAL RESOURCES AS PRODUCTIVELY AS POSSIBLE. THE SECOND IS TO CONTINUE TO IMPROVE THE PUBLIC SECTOR'S REVENUE PERFORMANCE. THIS WILL PROVIDE A GROWING SUPPLY OF PUBLIC SECTOR SAVINGS TO FINANCE PUBLIC SECTOR INVESTMENT. IN THIS WAY, THE GOVERNMENT WILL BEGIN CLOSING THE GAP BETWEEN DOMESTIC SAVINGS AND DOMESTIC INVESTMENT THEREBY DIRECTLY REDUCING OUR EXTERNAL FINANCING GAP.  -18- ANNEX III Page 4 of 5 16. ZAMBIA WILL REDUCE THE BURDEN OF ITS EXTERNAL DEBT IN SEVERAL WAYS. BY COMPLETING THE RIGHTS ACCUMULATION PROGRAMME WITH THE INTERNATIONAL MONETARY FUND, WE CAN RE-FINANCE OUR OUTSTANDING OBLIGATIONS TO THE FUND WITH AN ENHANCED STRUCTURAL ADJUSTMENT FACILITY. THIS WILL SAVE MANY MILLIONS OF DOLLARS PER YEAR IN INTEREST CHARGES. WE WILL ALSO BE APPROACHING THE PARIS CLUB IN 1995 WITH A VIEW TO OBTAINING A VERY SIGNIFICANT REDUCTION IN ZAMBIA'S PARIS CLUB DEBT. FURTHERMORE, SO AS TO MINIMISE ZAMBIA'S FUTURE DEBT BURDEN, THE MINISTRY OF FINANCE IS ESTABLISHING A SPECIAL UNIT TO ENSURE THAT ALL FOREIGN RESOURCES MADE AVAILABLE TO GOVERNMENT ARE USED EFFICIENTLY. 17. SINCE TAKING OFFICE, THE MMD GOVERNMENT HAS PAID PARTICULAR ATTENTION TO MEASURES WHICH DIRECTLY ALLEVIATE POVERTY. BEGINNING WITH STEPS TAKEN TO REHABILITATE THE SOCIAL SECTOR INFRASTRUCTURE AND OVERCOME THE EFFECTS OF THE 1991/92 DROUGHT, THE GOVERNMENT NOW HAS IN PLACE SEVERAL SUCCESSFUL PROGRAMMES FOR POVERTY ALLEVIATION. THESE ARE BEING SUPPORTED BY HIGHER ALLOCATIONS FROM THE BUDGET AND SPECIAL EFFORTS TO ENGAGE NON-GOVERNMENT ORGANISATIONS AND LOCAL COMMUNITY-BASED ENTERPRISES IN THE PROCESS. THE INTEGRATED POLICY APPROACH BEING TAKEN IN BOTH HEALTH AND AGRICULTURE PROVIDE FURTHER DIRECT OPPORTUNITIES TO REDUCE POVERTY. WE ANTICIPATE THAT A SIMILAR PROGRAMME IN EDUCATION WILL BE DEVELOPED OVER THE COMING YEAR. 18. THE GOVERNMENT SHARES THE DONOR'S CONCERNS ABOUT GOVERNANCE. THE SPECIAL SECTION WHICH HAS BEEN INCLUDED IN OUR SUBMISSION TO THIS MEETING HIGHLIGHTS SEVERAL INITIATIVES THAT ARE STRENGTHENING GOVERNANCE IN ZAMBIA. WE HAVE ALSO TAKEN NOTE OF THE PROPOSAL TO ESTABLISH A FORMAL MECHANISM WHICH, IN COOPERATION WITH THE DONOR COMMUNITY, WOULD MONITOR THE IMPLEMENTATION OF THESE INITIATIVES. 19. MADAM CHAIRPERSON, YOUR EXCELLENCIES, THE GOVERNMENT IS SENSITIVE TO THE ISSUES WHICH YOU HAVE RAISED IN OUR VARIOUS CONSULTATIONS. I BELIEVE THAT, WITHIN THE CONTEXT OF THE ZAMBIA'S DEMOCRATIC FRAMEWORK, THE RESPONSES BY GOVERNMENT TO YOUR CONCERNS HAVE BEEN DECISIVE, POSITIVE, AND CONSTRUCTIVE. WE ARE VERY MUCH AWARE OF, AND HIGHLY VALUE, OUR PARTNERSHIP WITH THE DONOR COMMUNITY IN PROMOTING ECONOMIC RECOVERY IN ZAMBIA. 20. NONE OF US WISHES TO COMPROMISE THE PROCESS OF ECONOMIC REFORM. YOU WILL APPRECIATE THAT A MAJOR DRAWBACK ON OUR SIDE IS THAT OUR BASIC INSTITUTIONS ARE EXCEEDINGLY WEAK. IN THIS RESPECT, THE GOVERNMENT FACES A DOUBLE-BIND: PROMOTING REFORM REQUIRES STRONG INSTITUTIONS; BUT, WITHOUT REFORM, OUR INSTITUTIONS REMAIN WEAK. WHEN VIEWED IN THIS WAY, THE PROGRESS WHICH THE GOVERNMENT HAS MADE IN TAKING ZAMBIA FROM THE BRINK OF COLLAPSE TO THE THRESHOLD OF SUSTAINED ECONOMIC GROWTH, IS A MONUMENTAL ACHIEVEMENT. WHILE THIS GIVES US THE COURAGE AND THE CONFIDENCE TO PRESS AHEAD TO COMPLETE THE REFORMS, IT WOULD BE A MISTAKE TO DOWN-PLAY THE DIFFICULTIES WE HAVE HAD TO OVERCOME, OR TO MINIMISE  - 19 - ANNEX III Page 5 of 5 THE PROBLEMS WHICH REMAIN AHEAD. 21. MADAM CHAIRPERSON, YOUR EXCELLENCIES, FOR THE FIRST TIME IN TWO DECADES, ZAMBIA NOW HAS THE PROSPECT OF SUSTAINED ECONOMIC GROWTH WITH IMPROVING LEVELS OF WELFARE FOR ZAMBIA'S POPULATION. THIS IS AN ACHIEVEMENT OF WHICH BOTH THE GOVERNMENT AND THE DONOR COMMUNITY CAN BE PROUD. THE GOVERNMENT IS DETERMINED TO TAKE THE NECESSARY MEASURES TO FURTHER IMPROVE THE ECONOMY'S PERFORMANCE. WITH YOUR CONTINUED SUPPORT, I AM CONFIDENT THAT GROWTH WITH STABILITY WILL BECOME A REALITY IN ZAMBIA. I CAN THINK OF NO BETTER WAY IN WHICH OUR JOINT EFFORTS CAN BENEFIT ALL ZAMBIANS, WHO HAVE WAITED FAR TOO LONG TO ENJOY THE FRUITS OF ECONOMIC DEVELOPMENT. MADAM CHAIRPERSON, YOUR EXCELLENCIES, LADIES AND GENTLEMEN THANK YOU VERY MUCH. MINISTRY OF FINANCE 8TH DECEMBER, 1994  - 20 - ANNEXIV Page 1 of 6 Meeting of the Consultative Group for Zambia Paris, December 8-9, 1994 Oveninq Statement by the IMF Staff Representative In the course of 1994, the Zambian authorities have complemented their previous-progress on economic liberalization with considerable success in macroeconomic stabilization. In the second half of 1994, inflation has been running at an annual rate of 16 percent, which may be compared with 5 per- cent in the first half and well over 100 percent last year and for some years previously. The compound annual interest rate on treasury bills had been over 200 percent for most of the year following the sharp tightening of monetary policy in June of 1993, and was still at that level in April of this year; interest rates have now declined to around 20 percent. The exchange rate, which went through severe fluctuations in the period up to March of this year, has remained within a narrow range since then. With a poor agricultural crop earlier this year, reflecting the early termination of the rains last February, and with low production of copper, a strong economic recovery has yet to emerge; but private sector activity is beginning to pick up, particularly in the construction industry. The key to the progress on stabilization in the second half of 1994 has been fiscal restraint. Monetary restraint had previously slowed inflation, but in the early part of 1994 the fiscal deficit remained large because of transitional revenue problems pending establishment of the Zambia Revenue Authority, high expenditure in February on agricultural marketing as promissory notes issued last year were redeemed, and an unexpectedly high l~ l  ANNFX TV - 21 - Page 2 of 6 interestburden. With the ZRA firmly establishedin April, and the marketing of this year's crop carried out with little recourse to government finance, fiscal pressures eased. This easing acceleratedthe decline in interestrates that was already occurringas confidencein the progress on stabilizationgrew. There was an increasein governmentwages that went beyond the budgeted amount, but indirecttaxes were raised to finance the excess. For the quarter ending September,financingof the budget was within program limits, and at this time fiscal policy appears to be broadly on track. (The severe compressionof budgetaryfundingsappears to have resultedin domestic arrears on the part of many ministries,an issue that next year's program will need to address.) High copper prices have eased the financialposition of ZCCM, the large mining parastatal,and repayments of domesticarrears by that company have contributedboth to the good fiscal outcome and to a general easing of the financial strains in the economy. The high prices have also strengthened the country'sexternalaccounts, and Zambia'sforeign exchangereserves have risen to close to three months of imports. In part the increasehas been a matter of deliberatepolicy,, since it was known that there was a risk of a shortfall in donor support towards the end of the year. (Thathas now materialized,and reserves are expectedto fall between now and December 31.) But the increase also reflectedlow imports resulting from the weakness of the economy and, apparently,an inflow of private capital. These resulted in market forces placing upward pressureson the kwacha; in its policy of leaning against an appreciation--a policy which we support-- the Bank of Zambia further added to its reserves.  ANNEX IV -22- Page 3 of 6 Administrative problems have continued to result in occasional arrears on external debt service payments. The authorities are developing new administrative arrangements to correct these problems. Most commercial arrears have been eliminated through the externally financed buyback, and, the authorities are in the process of communicating with their non-Paris Club bilateral,creditors to negotiate settlement of those arrears. Once the rights accumulation program is completed, and a successor program developed--we hope early next year--IMF arrears can be cleared and Zambia will be close to completing the process of normalizing relations with external creditors, albeit with a continuing need for exceptional financing on appropriate terms, including concessional Paris Club rescheduling. The year 1994 has also witnessed the first significant steps towards reform of the public sector. Because of the direct implications of such reform for the status of public sector employees, this is a particularly difficult area, and it is perhaps not surprising that progress has been halting. Two large parastatal companies have recently been privatized, however, and the Zambia Privatization Agency has stepped up its work on preparing for privatization of other parastatals, in part through new approaches such as management buyouts. Nonetheless it is important that progress on privatization and other aspects of public sector reform be accelerated. A staff mission recently visited Zambia to review progress to date and to begin discussions towards a new program to succeed the current rights accumulation program. Just as the mission arrived the Government announced  - ANNEXIV Page 4 of 6 a preliminarydecision to restructureZambia airways, in part through foreign short-termborrowing. After careful consideration of the impli- cations of such a decision, however, and after realizing that a restruc- turing would be much more costly than had originally been anticipated,the authoritieshave now decided to proceed with liquidationof the airline. We applaud this decision, since the alternative of restructuringwould have posed a serious financial burden, and would have damaged the confidenceof the private sector as well as of the external donors and creditors that have been supportingZambia's adjustmenteffort. The mission also discussedwith the authorities their plans for the 1995 budget that will be presented to Parliament at the end of January. They aim to achieve a balanced budget next year, and with interest costs sharply down they should be able to accomplish that without the severe compressionof capital and recurrentdepartmental expendituresthat has occurred in the last two years. As always, the question of the government wage bill will require close attention,and we have urged the Governmentto link any significantwage increaseto progress on civil service reform, for which lowering the costs of retrenchment will be critical. As has been the case in 1994, any excess of balance of payments financingover external debt service would go to reducing the Government's need for banking system credit, thus releasing financial resourcesto the private sector. Other aspects of the 1995 program will be discussed by a mission which is expected to visit Lusaka in the early part of February. Besides further consolidationof progress on stabilization, the authoritieswill be  - 24 - ANNFX TV Page 5 of 6 strengthening prudential regulation of the banking system and will also be working towards introducing a value-added tax. The Government will need to move vigorously in areas such as reformulating the role of ZIMCO, the parastatal holding company, preparing for private sector development of the large copper deposit at Konkola Deep, and privatization of ZCCM itself. Progress on civil service reform will also be important. The current timetable for accumulation of rights provides for the last accumulation to take place on February 15, 1995. If that takes place on schedule (which will depend on reaching satisfactory understandings with respect to issues such as strengthened management of debt service payments), and if understandings on a new three-year program to be supported by the Fund's enhanced structural adjustment facility are reached, the aim would be for Zambia to clear its arrears through a bridging operation and for the new arrangement under the ESAF to go into effect as soon as possible after that date, likely around the end of March. To conclude, over the last three years Zambia has made major progress in economic liberalization under its program of structural adjustment, and that aspect of its program is now virtually complete. More recently it has also made major progress in macroeconomic stabilization, and if it is able to consolidate these gains it will be well on its way to creating an economic environment conducive to private-sector-led growth. The first signs of such growth are beginning to emerge, but private investors will tend to take a wait-and-see posture until it is clear that the authorities are prepared to move vigorously to reduce the burden placed on the economy I I -_ _  ANNEX IV - 25- Page 6 of 6 by a large and inefficient public sector. The recent delay in resolving the Zambia Airways issue created uncertainty that has been reflected in some increase in interest rates (for the first time since last April) and increased demand for foreign exchange, but with the issue now resolved, and with continuing fiscal and monetary restraint, the confidence that had been so painfully won should soon be restored. This episode once again demonstrates the fragility of Zambia's situation, and it will be important that at this meeting donors reaffirm their support for Zambia's program and their recognition of the significance of the recent decision on Zambia Airways.  -26 - ANNEX V Page 1 of 3 CONSULTATIVEGROUP FOR ZAMBIA Paris, December8-9 December1994 STATEMENTBY Mr. Onder Yucer, Resident Coordinator, United Nations System & I ResidentRepresentative of UnitedNations Development Programme(UNDP) MadamChairperson,HonourableMinisters,DistinguishedDelegates,Ladies and Gentlemen, We welcome Government's consistencyand disciplinein adhering to tough macroeconomic reforms. There are clear indicatorsof soundperformanceand progress since the March meeting. As already pointed out, there are strong signals that the economy is now set to move from stabilisationto dealingwith the challengesof sustainedeconomicgrowth. In this respect, we welcomethe fact that current policiesare projectedto yield further real growth in Gross DomesticProduct (GDP) in 1995. Despitethe shortfall in crop production in 1993/94 growing season, this will provide three consecutive years of positive growthin average real per capita GDP, thus rwmlyreversingthe negativetrends of the 1980s. Such an improvementin average wealthis commendable,given Zambia's continuedvulnerabilityto world market prices for its copper. Systemic changeswithinGovermnentare neededto maximise of Zambia'sresources to the benefit all of longer erm development - as outlined in the Government's document "Consolidating Maaoeconomic Stabilityand promotingEconomicand SocialDevelopment The Challengefor the - N'extThree Years' presented at this meeting. There is now greater need than ever to ensure a professional, independentand committedpublic service which acts as an efficient instrument for implementing nation'slongerterm development the goalsand strategies. Buildingnationalcapacity both in govermment in civil society and is thereforevital. But that capacityalso needs to be retainedand fully utilised. Progressunder the PublicServiceReformProgrammeis a promisingstart to movingtowardsa civil servicewhichis based on the twin pillars of decentralisation meritocracy. Weurge Government and to consolidatethis progress and to move firmly forward during 1995 in redefining the role of the public servicein partnershipwith other nationalactors; in establishingits comparativeadvantagein providing selectedservices to the nation; and in redirectingits resources to fulfil these functions efficientlyand effectively. MadamChahiperson, Public ServiceReformProgrammein Zambiarepresentsone of the the bestexamplesof a systematic,participatory fully rationalised and reformprocessesbut it needs to be Impemented By the end of this monthtwelve or more Governmentcentral establishments wi ave completedtheir auditing, strategysettingand restructuringstudies. They will be ready to start their transformationinto new structureswith clearly defined tasks and appropriatelevels of professionaland supportpersonnel. implementation the PublicServiceReformProgramme,there Withoutthe full scaleand immediate of  -27 - ANNEX V Page 2 of 3 is a risk that the substantialefforts of the last two years will bear little fruit. We urge Government to share with this meetingdetails of its timetable and action plan for implementing the Public Service ReformProgramme. Changinggear from short-termfinancialcrisis managementto longer term developmentrequires rigorouslongterm policyanalysis,strategicscenario-building a broadparticipatoryprocess. We and notethat Government embarkedon a NationalLong TermPerspectiveStudy (NLTPS). We fully has endorsethis process whichwill provideGovernmentwith a fonun for debatingcritical development issues facing Zambia and for building a platform of consensuswith the various actors of civil society.We urge Governmentto nurture such consensuson critical nationalpolicies. Consistentwith this long term vision, it is critical that the Public InvestmentProgramme(PIP) is prepared in a manner that ensures that it is consistentwith both the long term growth strategy and the budgetaryresourcesallocatedby Government. Weurge Government reviewand to implement to the PIP with the same sense of accountabilityand discipline,as the recurrent budget. The Government's sustainedeconomicgrowth strategy should undoubtedlyfocus on expanding employment opportunitiesand reducingdisguisedunemployment.Zambiahas an estimatedlabour force of about 3.6 million,of whom only 494,000 (14%) are reportedto be employedin the formal sector. A most promising source of employment,as internationalexperiencehas demonstratedin other regions(e.g. Asia and Latin America)is the promotionof micro, smalland mediumsizedenterprises (SME). We urge Govemmentto ensurethat strong incentivesare introduced in order to stimulate the necessary burst in employmentand income generation activities throughout Zambia both in the formal and informal sectors of the economy. Exhaustiveand rigorous assessmentshave already been made with regard to issues such as the private sector's institutions,the financingof SMEs, the improvement technicaland businessskills of and the necessaryinfusionof improvedtechnology. We urge Governmenturgently to completeits reviewof optionsfor restructuringits supportto SMEs, for providingthe necessarytrainingand for ensuringthe requisitefinancingresources. We encourageGovernment embarkon a realistic and to wel-defined action plan for acceleratingemploymentcreation. MadamChairperson,we also hope that Government'sapproachto sustainedeconomicgrowthwill be firmly rooted in a people-centred strategy. We are encouragedto note from the agenda that a povertyassessmentwill be presentedthis afternoonby the WorldBank. We reserve our comments on this aspect of developmentfor the afternoonsession. We must also bring to the attentionof Governmentthe fact that the transformationof Zambiaas it preparesto enter the 21st centurycannotbe seen in isolation- especiallyin the subregionalcontext. Zambia's naturalresources,for instance,provideit with thepotentialto feednot only its ownnation but also oths in the region. Common goals of food security, water resource managementand environmental protection,to mention a few, couldprovidesuitablelinks between Zambia and its neighboursto cooperatesystematicaily their mutualbenefit. to Finally, any progress in achievingsustainedeconomicgrowth will go hand in hand with sound  _ 28 _ ANNEX V Page 3 of 3 governance. As noted above, we urge the Governmentto implementthe measures already identifiedto improvepublicservice management. We also believethat sound governancemust be fixed in national circumstances,history and culture; that each country must choose its own path towardsdemocraticgovernanceconsistentwith its traditionsof consultation. Although there is no single, universally applicable model there are certain minimum requirements which are the norm both internationally and nationaly. We urge Government and Its developmentpartners to demonstrate appropriate flexibility and patience in ensuring convergence on this. Madam chairperson,in the connection,we welcomethe proposal to establisha formal mechanism to take forwardthe implementation the initiatives of mentionedin the reporton governancepresented to this meetingby the Government. We look forwardto some exchangesof viewson this imnportant initiative. Thank you. r X-I  -29 - ANNEX VT REQUIREMENTS FOR 1995 Page 1 of 3 ZAMBIA'S EXTERNAL FINANCING Presentation by the Honourable Paul S. Tembo, MP Deputy Minister, Planning and Development Cooperation Office of the President Government of Zambia Madame Chairperson, Ladies and Gentlemen, that the Please allow me to mention right at the outset generous Government of Zambia is extremely grateful for the the last three support which donors have provided to Zambia over macro-economic years. This has made possible the achievement of objectives of stability and, more generally, attainment of the flexible BOP and our Economic Recovery Programme. Your generous support has eased our difficult problems of balance-of-payments' your project and external debt management. The rising levels of of critical financing has helped considerably in the completion Programme investment projects included in the Public Investment which were being delayed on account of fiscal stringency. DeveloDments in 1994. in Madame Chairperson, balance-of-payments' developmentsThe 1994 were reflective of the Government's adjustment efforts. of 1994 reduced import restrictive fiscal and monetary policiesimports. As a result, demand, particularly for OGL and oil US $100 million overall imports in 1994 are expected to be some markedly, lower than expected. Non-traditionalexports increased regime. The trade following the liberalisation of the externalmillion lower than external current account deficit was US $170 lower imports. projected, reflecting higher copper prices and lower - falling External financial support for 1994 will also be million. Since from an anticipated US $1.1 billion to US $917 US $260 million debt relief remained unchanged from the projected which level, Zambia experienced a shortfall in external asistance million. fell from a projected US $875 million to US $658 Most of the shortfall in external assistance reflected Bank and delays in the disbursement of BOP support from the World associated co-financing partners. The Government has taken steps to overcome these delays. External Assistance Requirements for 1995. Low copper production, high external debt service payments of Zambia's and rising imports will be the central realities continued to volumes balance of payments in 1995. Copper export in 1993 to 370,000 fall in 1994, from 413,000 metric tonnes to rise gradually to tonnes in 1994. Copper output is expected programme for 1995 400,000 tons during the next few years. The and an export is based on a copper price of US $0.95 per pound volume of 385,000 metric tonnes.  - 30 - ANNLEX) VI Page 2 of 3 Due to the decline in copper prices - and levels to sustain an acceleration in economic higher import growth - the current account deficit is expected to widen to US $396 million in 1995. Debt service obligations are projected to fall from US $606 million in 1994 to US $510 million in 1995. Zambia's gross external financing requirements will be US $2.1 billion 1995. Of this amount, US $154 million can be covered from in relief coming from the existing Paris Club agreement and from debt $1.168 millionn from the IMF's successor arrangement to US Rights Accumulation Programme, leaving a gap of US $824 million.the After deducting project-related assistance on the order US$320 million and commodity assistance of US $30 million, of residual financing requirement for 1995 is US$ 470 million. Thisthe can be covered through a carry-over of BOP assistance from 1994 in the amount of US $230 million. This leaves a gap of US $237 million. The Government is seeking to fill this gap through of payments support from the World Bank, from bilateralbalance donors and from the European Community, and through further debt relief, over and above debt relief already obtained under the existing Paris Club agreement. The Government proposes that the assistance level of US million be made available in 1995 in response to progress $824 made in 1994 in re-structuring the economy and to support the policy reforms and investment programmes in 1995. In combination with already obtained debt relief of US $154 million, this assistance should provide Zambia with the external resources needed in for the financing of its Economic Recovery Programme. 1995 The provision of this level of assistance, including new debt relief, would permit Zambia to move quickly beyond stabilisation and to pursue ambitious investment and growth objectives in 1995. It would especially permit an expansion in the Government's programmes for poverty alleviation, education, health water supply and sanitation, and for economic infrastructure rehabilitation. With the phasing out of OGL support, the Government is requesting donors to be flexible in providing BOP and commodity assistance in forms that can facilitate the implementationof Economic Recovery Programme. The provision of resources for the financing of debt service obligations to the multilateral the institutions would be particularly helpful. As regards project financing for 1995, the Government requests the donor community to raise the cost sharing ratio major projects and programmes so as to ease the Government's for fiscal problems in 1995. Madame Chairperson, next year the Government faces significant expenditures to implement the retrenchment programme for 1995, and it is the Government's hope that donors can ways to assist the Government in meeting these expenditures.find  -31 - ANNEX VI Page 3 of 3 External Debt Relief. In view of the large amount of debt service falling due in the 1995-1997 period, equivalent to more than one-half of export earnings, the Government embarked on a major debt relief programme to reduce Zambia's debt burden. Good progress was achieved in the Paris Club in 1992. A total of US $590 million in development cooperation debt was written off in 1993/4 and the private commercial debt was reduced by about US $590 millio. Even with this supprt, however, the burden of re-scheduled external debt service remains onerously high. Zambia's external debt of US$6.3 billion is equal to 600 percent of exports, and per capita indebtedness is over double per capita income. Zambia's external debt service payments in 1995, amounting to US $350 million after debt relief, are equivalent to 35 percent of exports. This ratio will rise to some 40 percent in 1996. Meeting these payments imposes serious financial management problems. Debt service obligations often have to be met from conditional BOP support, the disbursement of which is sometimes delayed. The Government wishes to inform the Consultative Group members that during next year's Meeting of the Paris Club we will be proposing ways by which Zambia's economic and social progress can be enhanced by the provision of exceptional relief from external debt service obligations during 1995 and beyond. 8th December, 1994 - I _ _ _ _ _ _ _ _ _ _ , __  - 32 - ANNEX VII Page 1 of5 Meeting of the ConsultativeGroup for Zambia Paris, December 8-9, 1994 Statement by the IMF Staff on Financina Reauirements At the last ConsultativeGroup meeting in March 1994, the financinggap for 1994 was closed on the basis of generousdonor pledges and measures by the Zambian authoritiesto tighten their foreign exchange cashflow. At that time, possible sources of donor support totalling US$875 million were identifiedfor 1994, of which US$590 million was in the form of balance of payments assistanceand the rest was in project and commodity aid. The donors' response at the time mainly reflected their recognitionof the progress made by Zambia in implementingits economic reform program, particularlyin bringing down inflationwhile sustainingthe liberalization measures undertakenover the past two and a half years. Much of the BOP assistancewas tied to progress on structuralreforms,particularly privatizationand issues pertainingto ZCCM, ZIMCO, and Zambia Airways. Today, I would like first to provide you with an update of Zambia's external financing requirementfor 1994, and then go on to discuss briefly and very tentatively the prospects for 1995. As background,the attached table summarizes the latest scenarios for the external current account balance, the external financing requirement, and possible sources of financing. I T  33- - ANNFX VTT Page 2 of 5 For 1994, the current account deficit, excluding interest and official transfers, is now projected at US$125 million, a considerable improvement over the 1994 program projection (US$423 million) and the revised projection made at the time of the mid-term review in August 1994 (US$229 million). The most important change is the projected higher level of metal export receipts, reflecting mainly substantially higher international prices which more than offset a decline in export volumes. The world market price of copper in 1994 is now estimated to average US$1.01 per pound, compared with the March projection of US$0.80 per pound and the August estimate of US$0.94 per pound. The depressed state of the economy has kept imports well below the levels projected earlier this year; and it appears that a significant portion of imports has been financed by inflows of private capital. Zambia has continued meeting its debt service obligations to the IMF, the World Bank, and other multilaterals. As regards the Paris Club, arrears amounting to some US$56 million at the end of 1993 were settled by mid-1994. However, small arrears have emerged on 1994 obligations to some Paris Club creditors, pending reconciliation of the amounts owed. With respect to the Fund, Zambia has paid US$20 million during 1994 to reduce its arrears to the Fund to their July 1990 level, in addition to meeting its current obligations falling due. Also, the successful conclusion of the commercial debt buyback operation during 1994 has reduced Zambia's external debt by over US$600 million. In 1995, Zambia will be intensifying to reach efforts settlements with other non-Paris Club creditors, notably with Russia and Kuwait. II I _  - 34 - ANNEXVII Page 3 of .5 Overall, and after debt relief, the external financing requirement for 1994 is estimated at US$658 million. Some US$285 million of this is expected to come from disbursements of project and commodity assistance and the balance of some US$273 million through disbursements of balance of payments assistance from the World Bank and other multilateral and bilateral donors. Preparation of the program for 1995 is at an early stage, and at this point it is possible to provide only an illustrative scenario on Zambia's financing requirement in 1995. The tentative scenario in the attached table suggests that the financing requirement may amount to about US$2 billion (after already agreed debt relief). This could be met in part by some US$229 million in BOP assistance carried over from 1994. Project and commodity assistance, short-term credit flows, Konkola-related financing, and IMF purchases could provide further US$1.5 billion, leaving a remaining financing gap of some US$200-250 million. This financing gap could possibly be filled by a combination of new pledges by the donor community and Paris Club debt relief. As indicated in our statement earlier this morning, we believe that the Government of Zambia has been making considerable progress in economic adjustment and is striving to accelerate progress on structural reform. Resolution of the question of Zambia Airways has been a particularly important development. The Government has demonstrated its determination to control inflation through tight financial policies, and we believe deserves ___ I -_____________________________________  - 35- ANNFX VTTT Paae 4 of 5 continuing support to achieve its objectives of restoring sustained economic growth and progressing toward a viable external position.  1994-91 Table 1. Zambia: External Current Account and Financing Requirements, (In millions of U.S. dollars) Mid review Rev. eat. Illustrative 1994 Program 1994 1994 1995 1992 1993 1994 -125 -131 -396 -117 -87 -305 Current account 65 125 -178 -191 -1 -181 1064 Trade Balance 844 1049 1064 1111 949 sxports, f.o.b. 120 120 135 152 of which: nonmetal exp. 100 100 -1242 -1025 -985 -939 Imports, c.i.f. -1302 -950 -452 -504 -557 -486 (net) -529 -452 -208 Services -266 -266 -239 Interest -315 -235 -20 -21 -21 -19 factor -13 -20 -224 other -217 -270 -227 Nonfactor -201 -197- 234 380 367 230 transfers 603 365 -21 Unrequited -20 -20 -19 -33 -19 255 Priv te 400 387 250 636 384 Official Current account excluding interest and official -229 -125 -419. -425 -224 -423 transfer. -606 -606 -510 -743 -651 -606 Debt service obligations -191 -191 -142 -242 -212 -191 Multilaterals -42 -42 -30 -95 -67 -42 IMP -80 -81 -57 -79 -82 -80 World Bank -68 -68 -55 -67 -62 -68 Other multilaterals -416 -415 -368 -501 -439 -416 Nonmultilaterals -307 -306 -292 -407 -336 -307 Paris Club -109 -109 -76 -94 -103 -109 Other -76 -76 -1168 -183 -59 -76 Reduction of arrears -20 -20 -20 -1168 -80 -99 -1168 Multilaterals -20 -20 -20 -32 -67 IMF _ _ _ World Bank -39 _ -- -- -- LW -9 -32 -- __ 0' Other multilaterals 40 -56 -56 -56 Nonmultilaterala -103 -56 -- -103 40 -56 -56 Paris Club _ _ __ _ _ Other Change. in net international -30 -30 -111 -50 (increase -) -95 -38 reserves -942 -917 -2146 -1446 -971 -1135 Gross'financing requirement 260 260 154 551 359 260 Debt relief -682 -658 -1992 -895 -612 -875 Financing req. after debt relief 662 658 1754 895 612 875 Possible sources of financing 590 397 273 229 491 299 145 BOP assistance 299 173 149 World Bank 1/ 165 144 84 291 224 123 Other donors 1/ 326 155 27 26 26 26 246 90 320 Commodity assistance 274 274 274 191 234 -5 Project assistance -15 -15 a5 -32 -10 Short-term credit flows -- -- -- 16 -- -- 1168 Konkola financing -- -- IMP purchases -- -- -- CD -- 0 -237 -- -- -- Financing gap Memorandum items H 400 370 385 MT) C000 409 413 390 Copper export volume 0.94 1.01 0.9s 1.04 0.87 0.80 Copper price (US$/lb) Source:f Bank of Zambia; and staff estimates. carried over from 1994. 1/ For 1995, disbursements shown are the commitments  - 37~ -ANNEX VIII Page 1 of 3 CLOSING STATEMENT BY THE HONOURABLE RONALD PENZA,M.P. MINISTER OF FINANCE GOVERNMENT OF THE REPUBLIC OF ZAMBIA TO THE CONSULTATIVE GROUP MEETING, PARIS, FRANCE 8TH AND 9TH DECEMBER, 1994 MADAM CHAIRPERSON, YOUR EXCELLENCIES, DISTINGUISHED GUESTS, LADIES AND GENTLEMEN. 1. ON BEHALF OF THE GOVERNMENT OF ZAMBIA, I WISH TO THANK THE MEMBERS OF THE DONOR COMMUNITY FOR THEIR FRANK AND FORTHRIGHT COMMENTS ON THE PROGRESS WHICH ZAMBIA HAS MADE TOWARDS ECONOMIC REFORM. WE UNDERSTAND THAT YOUR COMMENTSAND CONCERNS ARE ENTIRELY IN THE INTERESTS OF STRENGTHENING OUR PARTNERSHIP IN THE LONG-TERM SOCIAL AND ECONOMIC DEVELOPMENT OF ZAMBIA. WE VALUE YOUR COUNSEL AND WISH TO ASSURE YOU THAT THE GOVERNMENT WILL RESPOND POSITIVELY TO THE ISSUES THAT YOU HAVE RAISED. 2. THE GOVERNMENT OF ZAMBIA APPRECIATES THE OPPORTUNITY PROVIDED BY THIS CONSULTATIVE GROUP MEETING TO MAKE ITS CASE FOR FURTHER HIGH LEVELS OF SUPPORT FOR ITS ECONOMIC RECOVERY PROGRAMME. PRELIMINARY INDICATIONS SUGGEST THAT THE RESOURCES WE REQUIRE FOR 1995 WILL BE FORTHCOMING. WE ARE MOST GRATEFUL FOR YOUR CONTINUED ASSISTANCE. YOUR RESPONSE TO ZAMBIA'S REQUESTS FOR EXTRA-ORDINARY SUPPORT OVER THE LAST THREE YEARS IS TANGIBLE PROOF OF THE DEPTH OF THE COMMITMENT TO RAISING THE STANDARD OF LIVING OF ALL ZAMBIANS. 3. YOUR GENEROSITY IMPOSES A SPECIAL BURDEN ON US TO ENSURE THAT WE STEADFASTLY PURSUE ECONOMIC REFORM. I CAN ASSURE YOU THAT OUR COMMITMENT TO THE PROMOTION OF GROWTH WITH STABILITY IS UNSHAKABLE. ACCORDINGLY, WE WILL TAKE THE MEASURES NEEDED TO MAINTAIN MACRO- ECONOMIC STABILITY. WE ALSO RECOGNISE THE URGENCY OF ACCELERATING STRUCTURAL REFORM. IN THIS RESPECT, WE HAVE GIVEN SPECIFIC ASSURANCES ON ZAMBIA AIRWAYS, THE PHASE-OUT OF ZIMCO, THE PROCESS OF PRIVATISING ZCCM, PUBLIC SECTOR REFORM, AND THE PACE OF PRIVATISATION. 4. MADAM CHAIRPERSON, YOUR EXCELLENCIES, THE QUESTION OF GOVERNANCE HAS, ONCE MORE, FEATURED PROMINENTLY IN OUR DISCUSSIONS. WE APPRECIATE THAT YOUR RESPECTIVE GOVERNMENTS AND AGENCIES HAVE TO ENSURE THAT THE SUPPORT THEY PROVIDE IS USED TO THE UTMOST ADVANTAGE. YOUR CONCERNS ALSO DERIVE FROM THE RECOGNITION THAT X~~~~ I _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _  ANINEX VTIl -38 - Page 2 of 3 SUSTAINED ECONOMIC AND SOCIAL DEVELOPMENT OVER THE LONG TERM REQUIRES RESPONSIVE, AND RESPONSIBLE, GOVERNANCE. 5. THE GOVERNMENTOF ZAMBIA SHARES YOUR CONCERNS ABOUT GOVERNANCE FOR THREE IMPORTANT REASONS. FIRST, BY DEMONSTRATING THAT WE ARE BOUND BY THE PRINCIPLES OF GOOD GOVERNANCE, WE DIRECTLY STRENGTHEN ZAMBIA'S CASE FOR CONTINUED HIGH LEVELS OF SUPPORT FROM THE INTERNATIONAL COMMUNITY. SECOND, YOUR ASSESSMENT OF OUR PERFORMANCE ON QUESTIONS OF GOVERNANCE SERVES A VALUABLE ROLE WITHIN ZAMBIA. AS YOU KNOW, THE GOVERNMENT FACES ELECTIONS WITHIN TWO YEARS. IT IS, THEREFORE, IN OUR OWN INTERESTS THAT WE CAN REASSURE OUR CONSTITUENTS THAT THE MMD GOVERNMENT'S RECORD ON GOVERNANCE IS FULLY CONSISTENT WITH THE HIGHEST INTERNATIONAL STANDARDS. 6. THE THIRD REASON FOR EXEMPLARY PERFORMANCE ON GOVERNANCE WAS BROUGHT OUT BY THE "ZAMBIA POVERTY ASSESSMENT" WHICH WE REVIEWED YESTERDAY. THAT STUDY MAKES THE POINT, IN THE STARKEST TERMS, THAT RAPID PROGRESS IN DEALING WITH POVERTY IN ZAMBIA WILL REQUIRE THE FULL COMMITMENT OF ALL AVAILABLE RESOURCES TO SOCIAL SECTOR PROGRAMMES AND THE REVIVAL OF ECONOMIC GROWTH. THAT CANNOT MATERIALISE WITHOUT ADHERENCE TO THE STRICTEST PRINCIPLES OF GOOD GOVERNANCE. 7. OUR DISCUSSIONS HAVE ALSO RAISED THE NEED FOR MORE REGULAR EXCHANGES OF VIEWS AMONG THE GOVERNMENTAND THE DONOR COMMUNITY IN LUSAKA. AS YOU KNOW, THIS WAS A REGULAR FEATURE OF OUR CONSULTATIONS DURING 1993. I THEREFORE LOOK FORWARD TO INSTITUTIONALISING OUR JOINT CONSULTATIVE PROCESS IN LINE WITH CLEARLY EXPRESSED SENTIMENTS BY THE DONORS. 8. MADAM CHAIRPERSON, YOUR EXCELLENCIES, THE SUCCESSFUL CONCLUSION OF THIS CONSULTATIVE GROUP MEETING IS ONE OF THE MANY STEPS WE ARE TAKING TOWARDS FULL ECONOMIC RECOVERY IN ZAMBIA. WE HAVE COME A LONG WAY SINCE OUR PARTNERSHIP BEGAN THREE YEARS AGO. THERE IS NOW A SOLID ECONOMIC FOUNDATION UPON WHICH TO BUILD. HOWEVER, AS THE "POVERTY ASSESSMENT" CLEARLY SHOWED, MUCH MORE HAS TO BE DONE. EXCEPTIONAL LEVELS OF SUPPORT ARE NEEDED TO ASSIST WITH POVERTY REDUCTION. THE REALLOCATION OF RESOURCES IS NOT ENOUGH. WHAT IS NEEDED IS ADDITIONAL RESOURCES FOR SPECIFIC PROGRAMMES OF POVERTY ALLEVIATION. 9. THE GOVERNMENT OF ZAMBIA IS NOT DAUNTED BY THE CHALLENGES THAT LIE AHEAD. INDEED, BASED ON OUR EXPERIENCE SO FAR, OUR BEST OPTION IS TO PRESS AHEAD WITH REFORM AS RAPIDLY AS POSSIBLE. BY DOING THIS, WE WILL EXPAND THE RANGE OF ECONOMIC OPPORTUNITIES AVAILABLE TO ALL ZAMBIANS. THIS, IN MY VIEW, IS THE SUREST WAY IN WHICH WE CAN PROMOTE SUSTAINED ECONOMIC GROWTH AND ALLEVIATE POVERTY IN ZAMBIA. 10. LET ME CONCLUDE BY CONGRATULATING MS. KATHERINE MARSHALL FOR A JOB WELL DONE AS CHAIRPERSON OF THIS MEETING. ALL OF US ON THE -T------ I  ANNEX VIII_ --39-- Page 3 of 3 ZAMBIAN TEAM LOOK FORWARD TO A HIGHLY CONSTRUCTIVE RELATIONSHIP WITH THE DONOR COMMUNITY UNDER YOUR STEWARDSHIP. MADAM CHAIRPERSON, YOUR EXCELLENCIES, LADIES AND GENTLEMEN THANK YOU VERY MUCH. PARIS, 9TH DECEMBER, 1994  -40 - ANNFX TX Page 1 of 5 ZAMBIA CONSULTATIVEGROUP MEETING Paris, December 8-9, 1994 CHAIR'S CLOSING STATEMENT MS. KATHERINEMARSHALL DIRECTOR, SOUTHERN AFRICA DEPARTMENT We have come to the end of a very full and productive set of discussions. Before I try to summarizethe key points which have emerged, I would like to express sincere thanks on behalf of all donor participants to Minister Penza and his colleagues for their open, informative, and constructivecontributions. The willingnessof the Zambian delegation to listen and respond forthrightly to the issuesand questions raised during the past two days has given us a richer appreciation of the significant achievements that have been made under Zambia's adjustmentprogram and of the challenges which remain. There was a remarkable consensus within the Consultative Group both on Zambia's achievementsand on the remaining challenges. All delegates commendedthe Government for its success in macroeconomic management and stabilization during the past year. Inflation has been brought down from triple digits in each of the past several years to an annual rate of 16% in the past six months. Interest rates have fallen even more dramatically and the exchange rate has stabilized. Underlying all of this has been a strong fiscal performance. Donors particularly commended the Government for protecting the social sectors in the face of overall cuts in public expenditure. All participants agreed that macro stabilization is a precondition for the revival of investmentand growth, and we heard that there are encouraging signs of a revival of private sector activity. Stabilizationalso underpins all attempts to combat povery. One immediate benefit is the fiscal dividend from lower interest payments on Governmentdebt. This makes room for even more social sector expenditure next year. Donors also commendedthe Government for liquidating Zambia Airways. This was recognized to be a difficult decision, but one which was necessary to clear the way for further progress on stabilizationand structural reform. As always, most attention was focused on the remaining challenges facing Zambia. Let me summarize the main points of these discussions under four headings: (i) the privatizationprogram; (ii) public sector reforn; (iii) governance; and (iv) the longer-termn developmentagenda. Perhaps the dominant issue was the pace of privatization. Almost all donors urged the Governmentto speed up privatization--toget rid of the "value-subtractors", to use Mr. Saper's phrase, in order to reduce the budgetary drain of loss-making public enterprises. This would enhance domestic resource mobilization and raise efficiency and growth. Discussion centered on ZIMCO and ZCCM. Participants highlighted the very negative consequences of ZIMCO's interference in management and lack of financial accountability, and asked for clear confirmation that ZIMCO could be phased out, as announcedlast year. They welcomed Mr. Penza's statementthat the British Governmentwas  ANNEXIX - 41- Page 2 of 5 providingtechnical assistanceto phase out ZIMCO and replace it with a Government agency with much more limited and transparent powers by the end of March, 1995. They emphasizedthe need for continued dialogue on this subject as the details of the Government's plan develop. Participantsalso called for faster movement on privatization of ZCCM, clear that this will be a very complex task. They asked for a though it is timetable of actions and a better sense of how the Government intends to proceed, and I sense that, while ZCCM was more often mentionedthan discussed in depth during the past few days, it could loom large on the agenda of future meetings. As Mr. Bartheltnoted, there is a widespread feeling that only privatizationcan cure the production shortfalls and high costs which have characterized ZCCM's operations. A second challenge facing Zambia is public sector reform. Most delegates commentedon the need for civil service reform, beginning with a clear idea of the functions, size, and salary structure which are ultimatelysought and how to get there within affordable limits. Affordability applies to retrenchment schemes as much as to the overall size and structure of the public sector which could be sustainedin the long run. More fundamentally, however, the underlying objective is to re-build an efficient public service, oriented increasinglyto provision of infrastructure and vital social services. As I noted earlier, the Bankwill be mountinga mission to review the issues, existing studies, and sector experience. We will discuss with Government and interestedparties--nearly all, if discussion here is any indication--whatcan be done to move ahead on public sector reforrn. A raft of governance issues again figured prominently in our discussions. recognizes the importance of transparency and accountability, and Everyone many discussants also stressed the need for participation in developmentof good governance. Numerous proposals were made which we will follow up individually and collectively. Many are very directly linked to the core businessof development. An example is the proposal for more regular and visible reports on actual spending as a guage linking action to policy. Discussions of governanceare inherentlysensitive--asMinister Penza said, 'Help us, don't lectureus. "--but the overall tone and outcome was constructive. Participants recognized the initiatives the Governmenthas taken in establishing the Human Rights Commission and the Constitutional Review Commissionand enactment of a Code of Conduct, and particularly welcomed the Government'sdecision to establisha formal mechanismwhich, in cooperationwith the donor community, would monitor implementationof initiatives in this area. Finally, and (to me) most encouragingly, we discussed a number of long-term development isssues over the past two days. We were all agreed that we should do our utmost to shift from the crisis-managementmode in these Paris meetings to focus on the longer term and, thanks to the considerableprogress on stabilization, we were able to begin this shift. In that regard, the meeting offered a welcome opportunity to step back and look at the whole raison d'etre of development, that is poverty reduction and human progress, as the representativefrom UNICEF so eloquentlyput it. While we were shocked by the extent of the misery, we spent most of our energies on discussing monitorable actions to reduce poverty. The meetingbroadly endorsed an action plan focused on four inter-linked areas of action: First, it was agreed that there is a need to sustain and proceed with the overall  -42 - ANNEX IX Page 3 of 5 adjustment to ensure that the non-poor cannot again usurp the benefits. The meeting endorsed the actions of the Government in this arena and encouraged a wide dissemination and debate on these issues in Zambia. Second, we agreed to focus on removing the constraints that the poor face in accessing the benefits of growth including an increased emphasison provision of basic infrastructure, improvementsin disseminationof information and a concerted effort to improve the technologies available for agricultural production, especiallyto benefit activities traditionallycarried out by women. The meeting endorsed the need to address these issues as a matter of priority in an integrated, well-coordinated approach. Third, we discussed the need for concerted efforts to improve human resource developmentin Zambia, not only as a pre-requisitefor growth but also as an essential aspect of human welfare. The role of education was stressed by several speakers, and the need to apply the lessonsof the health reforms in education. I made a commitmenton behalf of the World Bank to make education our central focus over the next year, to help ensure that this important cornerstoneof development is not allowed to continue to deteriorate. Finally, the issues of safety nets were addressed, not only as a short term issue, but as a way of enabling the poor's self-developmentand ensuring that the poorest are not left out of development totally. We agreed on the importanceof the need for increasedcommitmentfrom donors and Government to supporting the poor's own survivaland developmentstrategies. Finally we agreed to the need for continued monitoring of progress in the area of poverty reduction, just as we monitor other aspects of economic development. Let me quickly mention some of the other longer-term issues which were raised. Zambia's debt burden has long been recognizedas a major obstacle to sustainedgrowth. The coming year should see importantprogress on the debt front: Zambia seems set to bring its Rights AccumulationProgram with the IMF to a successful conclusion. This should pave the way for a Paris Club meeting to consider bilateral debt reduction and, with the help of bridging finance still to be arranged, for an IMF ESAF program. This will not eliminate Zambia's debt problem, but it is an encouraging start. Other issues touched upon included: * The importanceof regional cooperationand trade. Zambia has been a leader on these issues, and its efforts are being supported under the Cross Border Initiative sponsoredby the EU, ADB, IMF, and World Bank. * The need to plan systematically for periodic drought. Unfortunately, there is a distinct possibility that this year could bring another drought, so this assumes some urgency. * Generating a supplv resRonse. What additional reforms, policy changes, and investmentprograms are needed to move beyond stabilizationto growth? * Enhancing local capacity. How can Zambia increase and mobilize latent existing capacity? This issue received only passing attention but should be at the center of future discussions. These were the main issuesdiscussed in our meeting. I would like to take a few extra minutes, if I may to note some importantcross-cuttingthemes which also figured prominently and which have significantimplications for future discussions of this ConsultativeGroup. First, there were repeatedreferences to the way in which democracyshapes behavior and options of both Zambia and the donors. Several participants referred to the pressure of  - 43 - ANNEX IX Page 4 of 5 public opinionand Parliamentary questions in justifying aid programs. Becauseof increased fiscal pressures and more claimants on aid budgets, governance issues are emerging as an increasinglyimportant factor in aid allocation. Electorates in donor countries increasingly demand accountability in the conduct of their own public officials and, inevitably, in the allocation of aid budgets. The reality is that support for aid increasiingly depends on perceptions of governance in the prospectiverecipient country. Increased public scrutiny of aid allocation spills over into evaluation of economic policies as well. As Mr. Bjerninger noted in the discussion of privatization, it is difficult to justify balance of payments support before Parliament when millions of dollars are being used by recipient governments to support losses of public enterprises. Zambia, too, is constrained by democracyand public opinion. Minister to the constraints imposed by electorates on the pace of privatization. Patel referred concernedabout the process of privatization--transparency valuation Electorates are of and the like--andextra time is sometimes needed to gain the necessary understanding and consensusfor change. This leads to a second underlying theme: the need for better and more frequent communication. And it has implications for the workings of this ConsultativeGroup. It is important to understand that the ConsultativiveGroup is the people in this room (plus some others like us), not the formal meeting in Paris. The CG is the partnership between donors and Zambia and this meeting is only one modality. There was widespreadagreement that we need to improvethe coordinatingand informationalmodalities of the partnership. Among the suggestions which I believe commanded extensive support are the following: * 'tWeshould normally aim for only one formal meeting per year in Paris. The focus of this meeting should be long-termndevelopment issues. *' We should meet more often in Lusaka, preferably with an agreed agenda. * To help avoid the crisis management character of the Paris meeting, suggested there should be a clearer timetable of intended reforms. Mr. Ireton We will be discussing such timetables with the Governmentand the Fund in coming weeks as we negotiate a new PFP and another adjustmentoperation. * We should try to develop an integrated sector approach, under the leadership of the relevant Zambian ministry, in more sectors. This should build on experiences in health and agriculture. One additional feature of the partnership should be mentioned. At our dinner on Wednesday evening Minister Penza characterized the partnership as like that of a bus with the Government in the driver's seat and the donors helping propel the vehicle. Mr. Ireton jokingly asked if the donors were to supply the fuel or push the bus up the hill. I believe the exchange raises a serious issue, and if you will bear with me while I elaborate the metaphor, I will explain. The Governmentcertainly should be in the driver's seat. As Ms. Peasley stressed, it is the Government's program. The donors certainly ought to help supply fuel, i.e. money, so long as the driver appears competent and sober and heading in the right direction. The donors may even advise on the pros and cons of alternative roads, though the choice of route is ultimately up to the driver. But donors should definitely not be having to push the bus uphill--or, to switch the metaphor, having to cast the deciding vote in an  -44 - ANNEXIX Page 5 of 5 internalGovernment debate. Turning finally to finance, I am pleased to report that the projected financing gap is closed. This is indeed a welcome and unusual development for a December CG meeting. There are some important caveats, however. First, the gap appears to be closed in part because 1995 is likely to be an unusual year in that copper prices should be relatively high and levels of carryover assistanceunusually high. Financing requirementswill probably be higher in 1996, and it would be better to have a considerablyhigher level of support in 1995 in order to avoid turning next year's Paris meeting into one of crisis management. Second, if the rains are poor, financing needs in 1995 itself could be much larger. We need to follow developmentsclosely. In closing let me express our appreciation to the interpretationstaff for their excellent work and to the support team for facilitating the smooth administration of our meeting. I would also like to thank all participantsfor their contributionsto the exceptionallyproductive discussions of the past two days. I hope we will all leave here encouraged by Minister Penza's unequivocalrestatementof the Government'scommitmentto reform and growth with stabilityand by donor pledges of support to the Zambian program. With continued resolve and some luck with the rains, 1995 may prove to be the year of growth. World Bank E Ea,oP Ofice: 66. avenued'lena. 75116 PARS, France - Telepho (1) 40 69 30 00 -45 - ANNEX X Page 1 of 4 PRESS RELEASE For Immediate Publication Paris, December 9, 1994 - The Consultative Group for Zambia met on December 8 and 9 under the Chairmanship of Ms. Katherine Marshall, Director, Southern Africa Department of the World Bank. The Honorable Ronald Penza, Minister of Finance, led the Zambian delegation which included the Honorable Simon Zukas, Minister of Agriculture, Food and Fisheries; the Honorable Dipak Patel, Minister of Commerce, Trade and Industry; the Honorable Paul Tembo, Deputy Minister of the National Commission for Development Planning; and other senior Government officials. The Zambian delegation gave a comprehensive assessment of the progress made in the implementation of the Economic Recovery Program since the last meeting in March 1994. Inflation and interest rates fell because of rigorous control of monetary and fiscal policy. Inflation, which was over 100% in each of the previous four years, fell to an annual rate of 50% in the first half of the year, and to less than 20% in the second half. Nominal interest rates have now fallen to the 20% range from over 200% as recently as April. The donor community commended the Government on its continued successful efforts at macroeconomic stabilization. The Zambian delegation also informed the meeting about progress on a number of structural reforms. This included the recent decision to liquidate Zambia Airways, which all participants recognized as a difficult, but necessary decision. The delegation restated the Government's commitment to its privatization program, including the phasing out in the first quarter of 1995 of the Zambia Industrial and Manufacturing Corporation (ZIMCO) and the transfer of its regulatory and monitoring functions to the Ministry of Finance. It also stated the Government's intention to proceed with mining sector reform, with decisions in early 1995 regarding the direction and timing of privatization of ZCCM (Zambia Consolidated Copper Mining). The Zambian delegation reaffirmed the Govemment's commitment to good governance, including the establishment of a formal mechanism which, in cooperation with the donor community, would monitor implementation of initiatives in this area. It also outlined its plan to press ahead with improvement in public sector management, including civil service reform and greater decentralization. It noted the Government's appreciation for the extraordinary assistance it had received from the  - 46 - ANNFYX Page 2 of 4 internationalcommunity,and it appealedfor continued supportto move forward with its program to vigorously implement remaining structural reforms and to promote growth with stabilityand equity. A comprehensive assessment presented to the meeting revealed the grave situation facing Zambia's poor. The discussionsemphasizedthe vital need to halt the sharp increase in poverty which has taken place over the last fifteen years. Deepening poverty in Zambia is reflected in the deterioration in nearly every major social indicator. Nearly 70% of Zambians live in households where basic needs are not being met; chronic malnutrition affects 45% of all children;and infant mortality has increasedto 107 per thousand. The delegatesapplauded the government's efforts to increased social sector spending despite sharp budget cuts, and the group affirmed it intention to redouble its efforts in social sector and other poverty-reducing investments. This includes support of the Government's efforts to decentralize agriculturaland social services. The delegates recognized the progress made on macroeconomic reforms. They emphasized the importance of maintaining and increasing the momentum of structural reform in areas such as privatization, particularly by establishing and maintaining clear action plans and timetables with respect to ZIMCO and ZCCM. They welcomed the Government's offer to have regular exchanges on economic managementtopics. They also noted the Government's commitmentto further, more rapid action on the governanceand public sector managementagenda. The delegates especially welcomed the decision by the Government to pursue a regular dialogue with the donor community on matters related to governanceand looked forward to early Government action on this. Given uncertain rainfall patterns this year, the delegatesalso urged the Governmentto establishdrought relief contingencyplans and to keep the donor communityfully informed. Both the Zambiandelegationand the donors signaledthe importance of 1995 as a turning point and the need to focus attention on longer-termdevelopmentissues, particularlypoverty reduction. In 1995, with continued progresson reforms, Zambia could look forward to a successful conclusion of its Rights Accumulation Program with the International Monetary Fund (IMF), additional support for its structural adjustmentprogram,and a Paris Club meetingto discussbilateral debt issues. These actions could lead Zambia down a sustainablegrowth path. This path would include placing the poor at the center of Zambia's development strategy and focusing increased attention on the nation's major developmentchallengesin sectors such as education,water supply,and transport. The meeting recognizedthe importance of continuedexternal support for the Zambian reform program. Preparation of the 1995 financing program is at an early stage. However, after taking into account already agreed debt relief, the external financing requirement has been estimated at about US$ 2 billion. Most of this requirementwill be met through balanceof payments supportcarried over from 1994, project and commodity assistance, short-term credit flows, and IMF purchases. Remainingrequirementswould need to be providedthrough new balance of payments assistance from bilateral and multilateral resources and possible new debt relief.  - 47 - ANNFX X Based on the meeting's successfuloutcome, Zambia's 1995 financing Page 3 of 4 requirements have been fully met. The donors emphasized that this support will depend on maintaining the momentum with regard to the effective and expeditious implementation the reformprogram. of The meeting was attended by delegations from Canada, Denmark,Finland, France, Germany,Ireland, Italy, Japan, the Netherlands,Norway, Sweden, United Kingdom, United States, the African Development Bank, the Arab Bank for Economic Development in Africa, the European Commission, the European Investment Bank, the International Fund for Agricultural Development, the International Monetary Fund, the Organisation for Economic Co-operation and Development,the SaudiFund for Development, United Nation's Children's the Fund, and the UnitedNations Development Programme.  -48 - ANNEXX Page 4 of 4 ZAMBIA'S EXTERNAL FINANCING (Millions of US Dollars) 1994 1995 Financing Requirements Current Account Deficit* 115 419 Debt Service 682 1678 Reserve Increase 111 50 Total Financing Required 907 2146 Estimated Financing Available Debt Relief 260 154** Project and Commodity Assistance 300 347 IMF Purchases 0 1168 Balance of Payments Assistance 263 441 Other*** 85 36 Total Financing Available 907 2146 Financing Gap 0 0 * Excludes grants and interest ** Includes only existing Paris Club agreement *:k* Includes short-term credits and estimated effects of new rescheduling and debt reduction agreements  - 49 - ANNFX XT Page 1 of 14 Dec. 9. 10.30 CONSULTATIVE GROUPMEETINGFOR ZAMBIA Paris, December8-9, 1994 Chairperson Ms. Katherine Marshall Direcor, SouthAfrica Department The World Bank List of Participant CANADA Mr. Arthur M. Saper Head of Delegation Director General, SouthernAfrica Africa & the MiddleEast Branch CanadianIntemationalDevelopment Agency(CIDA) 200 Promenadedu Partage Hull (Quebec) Canada KIA OG4 Tel. 819 997 17 17 Fax 819 953 63 79 Mr. George Saibel Counsellor(Development) Head of DevelopmentCooperationPrograms in SouthernAfrica CanadianHigh Comnmission P.O. Box 1430 Harare, Zimbabwe Tel. 745129 Fax 745136 DENMARK H.E. Mr. Jrn Krogbeck Head of Delegation Ambassador Royal DanishEmbassy P.O. Box 50299, Lusaka Tel. (260) 1-254277 Fax (260) 1-254618  - 50 - ANNEX XI Page 2 of 14 ConsulativeGroupfor Zambia Paris, December8-9, 1994 DENMARK (cont'd) Mr. Birger LehmannNielsen Minister Counsellor Ministryof Foreign Affairs AsiatiskPlads 2 1448CopenhagenK Tel. (45) 33 92 00 00 Fax (45) 33 92 18 02 FRLAND Mr. Glen Lindholm Head of Delegation Director SouthernAfrica Division Finnish InternationalDevelopment Agency(FINNIDA) Ministry for Foreign Affairs Tel. (358) 0 134162 Fax (358) 13416293 Mr. Asko Luukkainen Progranmne Officer (Zambia) SouthernAfrica Division FINNIDA Tel. (358)0 134162 Fax (358) 13416293 FRANCE Mr. Nacer Meddah Head of Delegation Adjoint au Chef du BureauAfrique Subsaharienne et Ocean Indien Direction du Tresor Ministtre de l'Economie Tel. (33) 1 44 87 74 43 Telex 220962F Mr. Harold Valentin Redacteur (Afriqueaustrale) Sous-direction d'Afrique australe DEparement des Affairesafricainesa malgaches Ministere des AffairesEtangeres Tel. (33) 1 43 17 48 19 Mr. Renaud Houssaye Responsablede zone geographique Direction des RelationsEconorniques Exterieures(DREE) Ministere de l'Economie Tel. (33) 1 40 24 93 25  - 51 - ANNEX XI Page 3 of 14 Groupfor Zambia Consultative Paris, December 1994 8-9, FRANCE (cont'd) Mrs. M-P. Lenoir-Baget Conseiller Commercial Ambassadede France P.O. Box 31954, Lusaka Tel. 251688-251703 Fax 253564 Mr. de Cazotte Conseillerg6ographique (CFD) Caisse Franuaisede D6veloppement Tel. (33) 1 40 06 35 32 Fax (33) 1 42 66 32 89 GERMANY Dr. Rainer H.A. Barthelt Head of Delegation Head of SouthernAfricaDivision Federal Ministryfor EconomicCooperation and Development Tel. (49) 228 535 465 Fax (49) 228 535 202 Mrs. Maria Steinke Desk Officer, Zambia SouthernAfricaDivision Federal Ministryfor EconomicCooperation and Development Tel. (49) 228 535 453 Fax (49) 228 535 202 Mr. Jurgen Kurzhals Desk Officer SouthernAfrica Division German Foreign Office Mr. ChristianForwick Federal Ministryof Economics Tel. (49) 228 615 3825 Fax (49) 228 615 4436 Mr. WolfgangVoss Division Chief SouthernAfrica Division (KfW) Kreditanstaltfur Wiederaufbau  - 52 - ANNEX XI Page 4 of 14 Consultativefor Zambia Group Paris, December 8-9, 1994 GERMANY (cont'd) Mr. Axel Momber Section Manager: Zambia-Zimbabwe Southern Africa Division Deutsche Gesellschaft fir Technische Zusammenarbeit (GTZ) Tel. (06196) 79 15 05/06 Fax (06196) 79-6166, 79-7177 IRELAND Mr. Brendan Rogers Charg6 d'Affaires Embassy of Ireland P.O. Box 34923, Lusaka Tel. 260-1-290650 Fax 260-1-240482 JAPAN Mr. Yasuo Takase Counsellor Head of Delegation Embassy of Japan, Lusaka Tel. 260-1-251555 Fax 260-1-253488 Mr. Kenichiro Matsui Special Assistant Embassy of Japan, Paris Fax (33) 1 46225584 Mr. Akihiko Koenuma (Observer) Representative Overseas Economic Cooperation Fund (OECF) Tel. (33) 1 42 61 41 47, 42 6194 96 Fax (33) 1 47 03 32 36 THE NETHERLANDS Mr. Bernard S.M. Berendsen Director Head of Delegation Development Cooperation for Africa & the Middle East Ministry of Foreign Affairs Tel.070-3485164 Fax 070-3486607  - 53 A4NNEX A XT Page 5 of 14 Consultative Groupfor Zambia Paris. December 8-9, 1994 THE NETHERLANDS (cont'd) H.E. Mr. J.P. Dijkstra Ambassador Embassy of The Netherlands, Lusaka Tel. 260-1-253994 Fax 260-1 262356 Mr. F. van der Staaij Senior Desk Officer Southern Africa Division Ministry of Foreign Affairs Tel. 070-3486117 Fax 070-3486607 NORWAY Mr. Haakon B. Hjelde Head of Delegation Director General Bilateral Department Royal Ministry of Foreign Affairs Tel. +47 22 34 36 00 Fax +47 22 34 95 80/81 Mr. Kjell Storlokken Charg6 d'Affaires Royal Norwegian Embassy, Lusaka Tel. 260-1 252188 Fax 260-1 1253915 Ms. Eli Moen Baine Senior Executive Officer Norwegian Agency for Development Co-operation (NORAD) Royal Ministry of Foreign Affairs Tel. +47 22 31 44 00 Fax +47 22 3144 01 SWEDEN Mr. Jan Bjerninger Head of Delegation Assistant Director General Regional Department for Soutern Africa Swedish International Development Authority (SIDA) Tel. +46 8 728 51 00, dir. 728 52 56 Fax +46 8 728 53 38  -54 -ANNEX- Page 6 of 14 Consultative Group for Zambia Paris, December 8-9, 1994 SWEDEN(cont'd) Mrs. Anna-Marie Haglund-Heelas First Secretary BilateralDevelopment Departnent Ministryfor ForeignAffairs Tel. +46 8 786 66 66 Fax +46 8 723 11 76 Ms. ChristinaGamstorp Desk Officer SIDA Tel. +46 8 728 56 71 Fax +46 8 728 53 38 JNrTED KINGDOM Mr. Barrie Ireton Head of Delegation Under-Secretary Africa Division Overseas Development Administration(ODA) Tel. (44) 071 917 0468/0583 Fax (44) 071 917 0652 Mr. Patrick M. Nixon BritishHigh Commissioner BritishHigh Commission, Lusaka Tel. 260-1 251133 Fax 260-1 253798 Mr. Alan Coverdale Head, BritishDevelopment Divisionin Central Africa Lilongwe,Malawi Tel. 782 400 Fax 781 010 UNITEDSTATES Ms. Carol Peasley Head of Delegation Deputy AssistantAdministrator Bureaufor Africa, Room6934 U.S. Agencyfor International Development (USAID) Washington,D.C. 20523 Tel. (202) 647-9234 Fax (202) 647-7621  - 55 - ANNFX XT. Page 7 of 14 Consultadve Group for Zambia Paris, December 8-9, 1994 UNITED STATES (cont'd) Mr. JosephStepanek MissionDirector USAID P.O. Box 32481,Lusaka Tel. 260-1 254 303-6 Fax 260-1 254 532 Mr. JosephRichardson EconomicOfficer United StatesEmbassy P.O. Box 31617, Lusaka Tel. 260-1 250 955 Fax 260-1 252 225 AFRICAN DEVELOPMENT BANK (AfDB) Mr. CheikhI. Fall Head of Delegation Director Country Programmes Department South Region P.O. Box V 316, Abidjan Tel. (225)20 44 44, dir (225)20 40 54 Fax (225)21 65 45 Mr. Elfatih Shaaeldin PrincipalCountryEconomist CountryProgrammesDeparanent P.O. Box V 3116, Abidjan Tel. (225)20 45 08 Fax (225) 21 65 45 Mr. V.C. Ndisale SeniorCountryProgrammesOfficer SouthernAfricaDepartnent Country Programmes Departmnent P.O. Box V 316, Abidjan Tel. (225)20 53 45 Fax (225) 21 65 45 ARAB BANK FOR ECONOMIC DEVELOPMENT IN AFRICA (BADEA) Mr. MamounM. Yassin Head of Delegation Director, Projects Department Programmes& Legal Affairs Department P.O. Box 2640, Khartoum Tel. 73763 (Sudan) Telex 22739BADEASD T  - 56 - ANNEX IX Consultative Groupfor Zambia Paae 8 of 14 Paris, December 8-9, 1994 BADEA (cont'd) Mr. Mohamed El-Hadi Khalifi Head, Disbursement Division Finance Department P.O. Box 2640, Khartoum Telex 22379 BADEA SD EUROPEAN COMMISSION (EC) Mr. Giovanni Livi Head of Delegation Director East and Southern Africa Division 200 rue de la Loi B 1049 Brussels Tel. (32) 2 294 29 02 Fax (32) 2 299 28 71 Mr. B. Kelly Zambia Desk Officer Directorate General VEI-Development 200 rue de la Loi B 1049 Brussels Tel. (32) 2 299 27 65 Fax (32) 2 299 28 71 Mr. A. Mansoor Economist Structural Adjustment Division Directorate General VIII-Development 200 rue de la Loi B 1049 Brussels EUROPEAN INVESTMENT BANK (EIB) Mr. Luigi Genazzini DepartmnentDirector Economic Research in ACP and Mediterranean Countries Tel. (352) 4379-1 Fax (352) 4379270/437704  - 57 - ANNE XIT Page 9 of 14 ConsultaiveGroupfor Zambia Paris, December 1994 8-9, INTERNATIONAL FUND FOR AGRICULTURALDEVELOPMENT(IFAD) Mr. Colin Dickerson Project Controller Africa Division Project ManagementDepartnent via del Serafico, 107 00142 Rome Tel. (39) 6 54591 Fax (39) 6 5043463 Ex mail IFAD @ IFAD.ORG INTERNATIONALMONETARYFUND (EMF) Mr. G.G. Johnson Head of Delegation AssistantDirector Africa Department Washington,D.C. 20431 Tel. (202) 623 87 79 Fax (202)623 70 95 Mr. M.A. Tareen SeniorEconomist PolicyDevelopment Review Department and Tel. (202) 623 87 79 Fax (202)623 70 95 Mr. John R. Hill ResidentRepresentative, Zambia ORGANISATIONFOR ECONOMIC CO-OPERATIONAND DEVELOPMENT(OECD) Mr. RichardCarey Head of Delegation Deputy Director DevelopmentCo-operation Directorate 2, rue Andr6 Pascal 75775 Paris Cedex 16 Tel. (33) 1 45 24 76 89 Fax (33) 1 45 24 19 80 Ms. RobertaBensky Administrator ReportingSystemsDivision Development Co-operationDirectorate 2, rue Andr6Pascal 75775 Paris Cedex 16 Tel. (33) 1 45 24 80 66  - 58- ANNEX.XI Page 10 of 14 Consultative Groupfor Zambia Paris, December8-9, 1994 SAUDI FUND FOR DEVELOPMENT Mr. Mohanmuad Al-Shawi Director, East Africa Projects P.O. Box 50483, Riyadh 11523 Tel. (966) 1 464 02 92 Fax (966) 1 464 74 50 Telex 40 1744 - 40 1145 UNITED NATIONS CHILDREN'S FUND (UNICEF) Mr. Mark Stirling Resident Representative, Lusaka P.O. Box 33610, Lusaka Tel. (260) 1 25 14 70 Fax (260) 1 25 33 89 UNITED NATIONS DEVELOPMENT PROGRAMME (UNDP) Mr. Onder Yucer Head of Delegation Resident Representative P.O. Box 33661, Lusaka Tel. (260) 1 254 417 Fax (260) 1 253 389 Ms. Patricia de Mowbray Senior Economnist Southern Africa Division Regional Bureau for Africa 1 UN Plaza New York, N.Y.10017 Tel. (212) 906 50 00 Fax (212) 826 20 57 ZAMBIA Hon. Ronald D.S. Penza, MP Head of Delegation Minister of Finance P.O. Box 50062, Lusaka Tel. (260) 1 254 263a250 481 Fax (260) 1 253 494 Telex ZA 42221 Hon. Simon Zukas, MP Minister of Agriculture, Food & Fisheries P.O. Box 50197, Lusaka Tel. (260) 1 254 671 Fax (260) 1 254 661  - 59 - ANNEX'XI Page 11 of 14 Groupfor Zambia Consultative 8-9, 1994 Paris, December ZAMBIA (cont'd) Hon. DipakK.A. Patel, MP Ministerof Commerce,Trade & Industry P.O. Box 31968, Lusaka Tel. (260) 1 226 727 Fax (260) 1 226 673 Hon. Paul SimonTembo,MP Deputy Minister Office of the President Cooperation NationalCommission Planning& Development for P.O. Box 50268, Lusaka Tel. (260) 1 253 468 Fax (260) 1 253908 Telex ZA 40430 Mr. Dominic C. Mulaisho Governor Bank of Zambia P.O. Box 30080, Lusaka Tel. (260) 1 223 307 Fax (260) 1 226 844 Dr. Jacob M. Mwanza SeniorEconornic Adviser Ministryof Finance P.O. Box 50062, Lusaka Tel. (260) 1 252 107 Mr. LouisMwale SeniorEconomist EconomicAnalysis& Reports Unit Ministryof Finance P.O. Box 50062, Lusaka Tel. (260) 1 252 107, 250 481 Mrs. Irene M. Kamanga PermanentSecretary Development Cooperation Planning NationalConmnission Development for P.O. Box 50268, Lusaka Tel. (260) 1 251 867 van Mr. HendTik der Heijden Office of the President External AssistanceCoordinator P.O. Box 35410, Lusaka Tel. (260) 1 251887/261817 - -- r -____ _ _ ___ _ _ __ _ _ _ _ _  - 60 - ANNFX XT Page 12 6f 14 Consultative Group for Zambia Paris, December 8-9, 1994 ZAMBLA (cont'd) Mrs. Mutende D.Z. Mbewe Econornist Multilateral Cooperation National Conunission for Development Planning P.O. Box 50268, Lusaka Tel. (260) 1 250 866/251 346/251 365 Fax (260) 1 253908 Dr. Situmbeko Musokotwane Director Financial Markets Department Bank of Zambia P.O. Box 30080, Lusaka Tel. (260) 1 221 187 Fax (260) 1 221 705 Mr. Austin Matale Assistant Director Securities and Market Operations Bank of Zambia P.O. Box 30080, Lusaka Tel. (260) 1 225 008 Fax (260) 1 221 705 Mr. Patrick Chiumya Chairman Zambia Revenue Authority (ZRA) P.O. Box 34608, Lusaka Tel. (260) 1 223 576 Fax (260) 1 223 574 Mr. Malcolm McPherson Advisor Ministry of Finance P.O. Box 50314, Lusaka Tel. (260) 1 261 089 Fax (260) 1 292 698 Ms. Eva Jhala Chief Parliamentary Draftsman Legal Department P.O. Box 50106, Lusaka Tel. (260) 1 251 301 Fax (260) 1 250 818  - 61 - ANNEX XT Page 13 of 14 Consultative Groupfor Zambia Paris, December 1994 8-9, ZAMBIA (cont'd) Mr. Stephen Mwamba Acting Chief Executive Zambia Privatisation Agency P.O. Box 30819, Lusaka Tel. (260) 1 225 269 Fax (260) 1 225 270 Ms. Joyce Chembe Musenge Charg6 d'Affaires Embassy of Zambia avenue Moliere, 469 1060 Brussels Tel. (32) 2 343 56 49 Fax (32) 2 347 43 33 Mr. Chipili B.C. Nkonga First Secretary Embassy of Zambia avenue Moliere, 469 1060 Brussels Tel. (32) 2 323 56 49 Fax (32) 2 347 43 33 EXECUTIVE DIRECTOR Mr. Williams Ayodele Fadare Advisor to the Executive Director Tel. (202) 458 21 09/21 10 Fax (202) 477 37 81 WORLD BANK Ms. Katherine Marshall Chairperson Director Southern Africa Department 1818 H Street, N.W. Washington, D.C. 20433 Tel. (202) 473 69 23 Fax (202) 473 54 56 (department) Ms. Phyllis R. Pomerantz Country Operations Manager Zambia and Mozarnbique Southern Africa Department 1818 H Street, N.W. Washington, D.C. 20433 Tel. (202) 473 71 70 Fax (202) 522 31 58  - 62 - ANNFX XT Page 14 of 14 Consultative Group for Zambia Paris, December 8-9, 1994 WORLD BANK (cont'd) Mr. Gene Tidrick Lead Economist Southern Africa Departnent 1818 H Street, N.W. Washington, D.C. 20433 Tel. (202) 473 33 41 Mr. Gedion Nkojo Resident Representative, Lusaka Southern Africa Department P.O. Box 35410, Lusaka Tel. (260) 1 252 811, 253 219, 253 223 Fax (260) 1 254 283 Telex 44530 Mr. John Todd Principal Economist Macro Industry and Finance Division Southern Africa Departnent 1818 H Street, N.W. Washington, D.C. 20433 Tel. (202) 473 50 56 Mr. Steen Jorgensen Senior Economist Human Resources Division Southern Africa Departnent 1818 H Street, N.W. Washington, D.C. 20433 Tel. (202) 473 40 62 Ms. Isabel Emerson Operations Analyst, Zambia Southern Africa Department 1818 H Street, N.W. Washington, D.C. 20433 Tel. (202) 473 53 20 - ~~~~~~~~~~~~~~~~~~~~~~~~~I