In Zambia Government in talks with IMF after weak copper prices hurt economy

"We already started some of the work and the process of engagement is ongoing," Denny Kalyalya told a news conference.

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Visitors are silhouetted against the logo of the International Monetary Fund at the main venue for the IMF and World Bank annual meeting in Tokyo October 10, 2012. play Visitors are silhouetted against the logo of the International Monetary Fund at the main venue for the IMF and World Bank annual meeting in Tokyo October 10, 2012. (REUTERS/Kim Kyung-Hoon)
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Zambia is in talks with the International Monetary Fund (IMF) over a possible financing deal, as it grapples with a balance of payments shortfall linked to a weaker copper price, central bank governor said on Tuesday.

The southern African nation is the continent's second-biggest copper producer but its economy has been hit by falling world demand, primarily due to a slowdown in China.

"We already started some of the work and the process of engagement is ongoing," Denny Kalyalya told a news conference.

Lusaka said last month it had agreed targets with the IMF, preparing the way for an aid programme by the fourth quarter of the year. It started talks with the Fund in March after both sides agreed the budget deficit unsustainable.

Zambia's budget deficit had averaged 4.8 percent of GDP in the last two years but is expected to fall to around 3 percent in the medium term, starting next year.

The central bank left its benchmark lending rate unchanged at a record 15.5 percent on Tuesday, and said it was focused on reining-in soaring inflation.

Inflation slowed to 21.8 percent in April from 22.2 percent year-on-year in March.

"Inflation is trending downwards and our projections are that by the fourth quarter of this year we should be in single digit inflation," central bank's governor Denny Kalyalya said.

With improved food supply, inflation was projected to average 17.7 percent in the third quarter and to decline further to an average 8.7 percent in the fourth quarter, Kalyalya said.

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