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 Denny Kalyalya said yesterday.

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," 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 IMF in March after both sides agreed the budget deficit was unsustainable.

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

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

Inflation slowed to 21.8% in April from 22.2% 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," Kalyalya said.

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