An International Monetary Fund (IMF) staff team, led by Mercedes Vera Martin, has reached a staff-level agreement with Zambian authorities on the fourth review of the Extended Credit Facility (ECF). The discussions took place in Lusaka from October 2-15 and continued during the IMF/World Bank Annual Meetings in Washington. This agreement awaits approval from IMF Management and consideration by the Executive Board. If approved, Zambia will gain access to approximately $185.5 million in financing.
Mercedes Vera Martin stated, "We are pleased to announce that the Zambian authorities and the IMF team have reached a staff-level agreement on economic policies and reforms for the fourth review of Zambia’s ECF arrangement."
The economic outlook for Zambia in 2024 has worsened, with real GDP growth now projected at 1.2 percent, down from an earlier projection of 2.3 percent due to significant electricity shortages affecting economic activities. There were contractions in agriculture by 20.6 percent year-on-year and electricity by 9.6 percent year-on-year, alongside a slowdown in non-mining non-agriculture activity amid power shortages. Inflation rose to 15.7 percent in October 2024 due to food prices and past kwacha depreciation.
Fiscal performance this year showed constrained domestic financing and spending compression but resulted in a primary surplus reaching 3.4 percent of GDP by end-June, surpassing program targets. The primary balance is expected to show a surplus of 0.9 percent of GDP for the year.
Looking ahead, growth is anticipated at 6.2 percent for 2025 despite electricity output not fully recovering yet supported by recovery in agricultural and mining production along with debt restructuring completion.
The Zambian authorities remain committed to prudent macroeconomic policies aimed at sustaining stability and boosting medium-term growth through various key pillars including fiscal consolidation while preserving social spending; building buffers against shocks; maintaining agile monetary policy; and advancing structural reforms particularly enhancing transparency within sectors like energy.
The IMF expressed gratitude towards Zambian authorities for their cooperation during these discussions with a Board meeting expected by mid-December.