Country Report Zambia April 2010

Outlook for 2010-11: Policy trends

The government's latest Medium Term Expenditure Framework (MTEF) and the 2010 budget are both based around the intention of trying to position Zambia to take best advantage of the global economic recovery. While ambitious policies are laudable, there is a strong risk that economic policy execution will, conversely, slow over the forecast period-bureaucratic capacity remains weak in Zambia, and the government will be distracted from its responsibilities by an escalation of political manoeuvring in the run-up to the elections. Furthermore, the recovery in copper prices may see the waning of the government's commitment to diversifying the economy.

Alongside the MTEF, medium-term economic policy will largely continue to be shaped by the latest three-year extended credit facility (ECF; formerly known as the poverty reduction and growth facility) with the IMF, which began in June 2008. The ECF has the same broad aims as its predecessor. These include ensuring fiscal prudence, reducing poverty and preserving macroeconomic stability and debt sustainability. The government is keen to lower the cost of doing business in order to develop the private sector, but the country's poor infrastructure will remain a hindrance. Electricity supply will continue to be tight, despite the efforts of both the government and the private sector to increase supply, as production in the power-intensive mining sector rises in response to higher copper prices. Poor transport infrastructure will continue to hinder rural development, particularly in the agricultural sector.

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