monetary policy ; • introduction of government securities auctions ; • establishment of an inter - bank money market ; • modernisation of the national payments system ; • strengthening of the legal framework ; and • establishment of a stock exchange. ladies and gentlemen after a new government came to power in 1991, its priorities were to restore economic growth through market - based stabilisation policies and promotion of the private sector as a prime - mover of the economy. consequently, the economy was liberalised, giving market forces a greater role in the allocation of resources. prices were decontrolled, while subsidies on all consumer items were removed. in addition, the government embarked on a privatisation programme, whose objectives were to : ( a ) improve efficiency and service delivery in the economy ; ( b ) inject fresh capital and entrepreneurial skills given the ailing nature of the state owned enterprises ( soes ) ; ( c ) secure, on a sustainable basis, employment in the privatized companies ; ( d ) enhance the companies ’ revenue contribution to the government budget ; and ( e ) overall, increase the private sector ’ s contribution to economic growth and, ultimately, poverty reduction. in the financial sector, the government undertook further reforms that included the use of marketbased monetary instruments in the conduct of monetary policy. as a result of monetary tightening, inflation fell from 197 percent in december 1992 to about 40 percent in 1995 ; 18. 7 percent in 2001 and 17. 5 percent in december 2004. similarly, the government took fiscal reforms in 1993, such as the cash - budget to curtail the monetisation of fiscal deficits. consequently, since 1993 we have seen the government take measures to strengthen fiscal performance through limiting domestic borrowing as a ratio of gdp to levels below 5 per cent. this should be commended. ladies and gentlemen having outlined a brief history of our economic management since 1964, allow me at this juncture to summarise the lessons learnt. from the foregoing, several macroeconomic management lessons can be drawn. these include : ( i ) attaining lower rates of inflation, as in the 1960s and early 1970s, continues to be elusive. however, lower rates of inflation could be attained if the government maintained fiscal discipline by sticking to the budget and minimising its borrowing from the central bank and the financial sector, as a whole. this would contribute to the achievement of price stability, which in turn would facilitate sustainable economic growth and poverty reduction. ( ii ) lowering of interest rates

resources for the sake of assisting these liberation movements to gain their independence, and in some instances, zambia had to borrow to finance this expenditure. ( iii ) as a result of the liberation wars in the neighbouring countries, zambia had to arm herself, militarily, against possible foreign aggression by procuring weapons and other military hardware from friendly countries such as russia, china, etc. this again explains why zambia today has a huge debt with russia. military expenditure was unavoidable as the colonial regimes used to attack zambia directly. in this regard, one can mention the bombing of lusaka as well as the destruction of luangwa bridge. ladies and gentlemen i have endeavoured to include these seemingly simple but critical factors so that we understand the historical context of some of the policies implemented during the last 40 years and their impact on national development. therefore, to contain the deteriorating macroeconomic situation, the government introduced a myriad of economic policies including price controls because the economic shocks were considered transitory and, thus, the government would easily balance its budget. this never happened! hence, during the 1980s, policymakers realised that economic reforms were needed as a lasting solution to zambia ’ s economic woes. for instance, between 1985 and 1987, zambia undertook an imf / world bank - sponsored adjustment programme. this led to a partial decontrol of interest rates and the introduction of a dutch foreign exchange system as a way of allocating scarce foreign exchange through a quasi - market system. it also entailed the removal of some subsidies as a remedy to the persistent fiscal deficits. the reforms proved to be highly unpopular and culminated in public protests and abandonment of the imf supported reform programme in may 1987. instead, the government pursued an indigenous programme called ‘ new economic recovery programme ’ ( nerp ) whose theme was “ growth from own resources ”. although this programme was successful in some respects, it suffered major setbacks, such as the overvaluation of the kwacha, soaring inflation, lack of external financing, among others, that made the programme unsustainable, thus prompting the government to go back to the imf and agreed on a new imf supported programme in 1989. the main policy measures under the programme included the following : • privatisation ; • decontrol of prices ; • decontrol of interest rates ; • abolition of exchange controls and a movement to a market - determined exchange rate regime ; • a shift to the use of indirect instruments of