The International Monetary Fund (IMF) has told Zambia it will delay debt relief of around $1bn (£633m) if the country fails to privatise its state-owned commercial bank.

The IMF resident representative in Zambia, Mark Ellyne, said that if the government did not sell the Zambia National Commercial Bank, it would not receive the debt relief.

Trade unions in Zambia had joined together to oppose the sale of the bank, causing President Levy Mwanawasa to publicly announce the privatisation was not going ahead.

Trade unions often oppose privatisations, fearing hefty jobs losses will ensue.

Resolution hopes

The Zambian deputy Finance Minister, Patrick Kalifungwa told the BBC that the announcement was "terrible" for Zambia.

But he said he would be meeting with IMF officials for urgent talks on the issue to try and resolve the dispute.

Zambia has external debts of more than $6.5bn but is hoping to win relief under the IMF's initiative to cancel debts to the world's poorest countries.

But in order to win debt relief under the so-called Heavily Indebted Poor Countries initiative, Zambia must first satisfy a number of IMF requirements.