THE REPUBLIC OF ZAMBIA

                                   CHAIRMAN'S SUMMING UP

  PovertyReduction StrategyPaper Second AnnualProgress Report andJoint IDA-IMF Staff
                                          Advisory Note, and
                  Completion Point Document for the Enhanced HIPCInitiative

                           Meetingof Board of Executive Directorsof IDA

                                              April 6,2005


       The Executive Directors considered the Poverty Reduction Strategy Paper SecondAnnual
Progress Report (PRSP-PR).preparedby the Government of Zambia, the Joint IDA-IMF Staff Advisory
Note of the Second Report, and the President's Memorandum and RecommendationandCompletion
Point Document for the EnhancedHeavily Indebted PoorCountries(HIPC) Initiative.

                 Poverty Reduction Strategy Paper Second Annual Progress Report

       Directors agreed that Zambia   has      established a track record ofcommitmentPRSP
                                                                                       to
implementation and poverty reduction. At the same time, they also noted that political andeconomic
risks remained high. They commended the authorities on the maintenance of fiscal discipline to restore
macroeconomic stability and noted the progress made in strengtheningthe public sector expenditureand
financial management. However,some        Directors wouldliketo    encourage more emphasis on anti-
corruption efforts. Directors also welcomed the'Government'splans to update the strategyin conjunction
with its National Development Plan(NDP) which would increase further local ownership. Directors
agreed that further progress with regard to monitoringand evaluationis needed to underpina sustainable
developmentstrategy for the country.

       Directors expressed satisfaction at the progress made toward reaching PRSP goals, and ,stressed
the need to broaden growth to ensure sustained progress in achieving PRSP and MDG outcomes.
Directors emphasizedthe importance of sound financial management atall levels of Government and the
needtoanalyze the distributional impact of policies as an essential input for sound decision-making.
Directors urged the Governmentto pursue and strengthen its efforts of economic diversification,thereby
allowing for more resilience to future shocks. They also welcomed the focus on exportpromotion. Some
Directors were concerned about the country's procedures to deal with the possible emerging drought.
They underscored the importance of rural infrastructure in development.Directors stressed that a strong
results measurement framework will be vital to aid effectiveness, and highlighted the need to translate
intermediate indicators into specific actions and measurable outputs with detailed timelines. They
advised the authorities to continue working closely with the Bankto address the poverty and social
impact of key measures contemplatedin the strategy. The need to paycloser attention to HIV/AIDSwas
also stressed.Directors alsonoted the donor coordinationeffortsby the authorities.

       Directors agreed that the GovernmentZambia made
                                                of     has important                  progress in the
implementationof its poverty reduction strategy and that, based on this Second AnnualProgress Report;
Zambia's poverty reduction strategy continues to provide a credible framework for IDA assistance and
for reaching the completionpoint under the EnhancedHIPC Initiative.

        Completion Pointof the Enhanced Highly Indebted Poor Countries (HIPC) Initiative

       The Executive Directors endorsed the staff assessment contained in the HIPC Completion Point
Document concerning Zambia's fulfillment of the floating CompletionPoint          conditions under the
Enhanced HIPC Initiative, and that relief on debt owed by Zambia to IDA be provided unconditionally,
subject to the outcome of the IMF'sBoard discussion.

       Directors agreed to the waivers imposed of the three conditions. They concurred with the staffs
recommendationthat Zambia has madesignificantprogress towards achievinga sustainable externaldebt
position. They also agreed that there has been no fundamentalchangein Zambia's circumstances to
justify additional assistance above the amountcommitted at the decision point. Directors felt that
sufficient assurances have been given byZambia'sother creditorsto commitassistance on an irrevocable
basis. They welcomed the improved public expenditure managementmechanismto provide assurance
that assistance provided under the enhanced HIPC Initiative and other sources will further the efforts of
poverty-reduction. Directors.alsostressed that adequateattention should continueto be paid to the issues
of accountabilityand fiscal transparency.

      Directors highlighted the need to maintain adequatepolitical consensus on the reform process and
a growth-conducive macroeconomic environment after HIPC completion.              Some Directors were
concerned about the level of public domestic debt and stressed the importance of keeping debt
developments under close review. In this context, they noted the importance of preserving fiscal
discipline, continued progress on strengthening of government institutions and establishing the requisite
regulatory framework and debt management capacity. One Director objected to the inclusion of
voluntary bilateral debt relief beyond HIPC when calculating relevant NPV of debt ratios to consider if
additional debt relief at completionpoint (topping-up)is warranted.