Zambia's talks with the World Bank andInternational Monetary Fund (IMF) on a financial rescue package
have run into difficulties on the issue of food subsidies, an
official newspaper said.
    The Times of Zambia, which is run by the ruling United
National Independence Party (UNIP), quoted official sources as
saying the IMF and World Bank had refused to continue financing
food subsidies and were pressing the government to explain how
it proposes to pay for them.
    President Kenneth Kaunda tried to abolish maize subsidies
last December, in line with IMF recommendations, but the move
caused maize meal prices to double overnight and led to riots
in which 15 people were killed.
    The subsidies were immediately restored as part of moves to
quell the disturbances, but they are estimated to cost the
government about 500 mln kwacha per year.
    The Times of Zambia said another major issue in the
government's current talks with the IMF and World Bank was the
remodelling of Zambia's foreign exchange auction.
    The central bank's weekly auction of foreign exchange to
the private sector has been suspended since the end of January,
pending modifications to slow down the rate of devaluation and
dampen fluctuations in the exchange rate.
    The kwacha slid to around 15 per dollar under the auction
system, losing 85 pct of its value in 16 months. However, since
the end of January it has been revalued to a fixed rate of nine
per dollar.
    Banking sources said Zambia was persuaded by the World Bank
and IMF to lift its proposed ceiling of 12.50 kwacha per dollar
on the currency's devaluation once the auctions restart.
    According to the Times of Zambia, the IMF team, led by
assistant director for Africa Paul Acquah, is due to conclude
its talks with the government on schedule on March 23.
    The IMF mission arrived in Lusaka on February 26 and its
talks with the government have taken longer than expected.
 REUTER
