ZAMBIA, IMF TALKS HIT PROBLEMS OVER FOOD SUBSIDIES
  Zambia's talks with the World Bank and
  International 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.
  

