IMF approves $33.4 mln loan disbursement to Zambia

WASHINGTON, June 10 (Reuters) - The International Monetary Fund has agreed to release a $33.4 million loan disbursement to Zambia after approving the last two performance reviews of a $320 million financing deal with the southern African country.

In May, the IMF agreed to a request by Zambia to extend the three-year program signed in 2004 to Sept. 30, 2007.

Takatoshi Kato, IMF deputy managing director, said record copper prices and debt cancellation strengthened Zambia's overall economic position and allowed it to build up international reserves.

"Going forward, the challenge for the authorities is to consolidate macroeconomic stability and implement structural reforms to raise productivity and diversify the economy," Kato said in a statement late on Friday.

He said discipline was necessary to curb the growth of government domestic debt, while monetary policy will need to remain firm to lower inflation.

"Better coordination between fiscal and monetary policy will help improve liquidity management," he added.

Kato said Zambia needed to boost its tax revenue to pay for planned increased spending on infrastructure, agriculture and social sectors under a national development plan.

He urged the authorities to strengthen its debt management to ensure that new borrowing did not push the country back into deep debt, after the debts of 19 countries were written off last year.