Zambia - Economic Recovery Loan II

The second phase of Zambia Economic Recovery Loan will allow sustainable adjustment and growth by downsizing and upgrading the public service, by reforming the financial sector and restructuring the banks onto a firmer footing, and by promoting the private sector to cetre stage through an ambitious privatisation programme. The project has three other components, besides macroeconomic reform. These are public service reform; financial sector reform and bank restructuring; and privatisation. The macroecomic reforms require reduction of inflation by strict monetary management and containment of public expenditure; achievement of a domestic budgetary surplus by keeping down public expenditures and increasing revenues; strengthening of external competitiveness by managing a realistic exchange rate and promoting export diversification; and reinforcing the private sector by privatisation.The public service reforms involve the downsizing of the work force and the upgrading of its productivity and efficiency. The financial sector reform involves the restructuring of three undercapitalised banks and adoption of a policy on publicly owned banks. The privatisation component involves divestiture of the remainig packages of the unbundled ZCCM conglomerate and sale of other public enterprises.