The International Monetary Fund (IMF) Executive Board has completed the fourth review of Zambia's Extended Credit Facility (ECF) arrangement, leading to an immediate disbursement of approximately $184 million. This raises the total disbursement under the program to about $1.3 billion. The ECF arrangement, which began in August 2022, supports Zambia’s efforts for macroeconomic stability and sustainable growth.
Despite facing domestic and international challenges, Zambia has met most performance criteria and targets set for June and September 2024. However, some structural benchmarks were not achieved on time. The nation faces a decline in growth due to a significant drought affecting agriculture and electricity production, with projections falling from 2.3% to 1.2% for 2024.
Inflation has risen as food prices increase alongside currency depreciation. Authorities remain focused on maintaining economic stability while supporting vulnerable households and pursuing governance improvements and structural reforms in sectors like energy.
Zambia's public debt is deemed sustainable but remains at high risk of distress in the short term due to breaches of Debt Sustainability Analysis thresholds. Over the medium term, however, it is expected to achieve a moderate risk level thanks to restructuring agreements with creditors.
Nigel Clarke, Deputy Managing Director of IMF and Acting Chair during the board discussion on Zambia, stated: “Program performance remains satisfactory, as the authorities remain committed to economic stabilization and advancing structural and governance reforms.”
Clarke emphasized that fiscal consolidation will be crucial in 2025 for restoring sustainability: “Fiscal consolidation...will support restoring fiscal and debt sustainability.” He also highlighted ongoing risks related to post-drought recovery necessitating contingency measures.
The Bank of Zambia maintains a data-dependent monetary policy approach vital for its inflation targeting framework: "Reserve accumulation and sustained exchange rate flexibility remain critical."
The statement also noted that governance reforms are essential for economic diversification: “Governance...will improve the business climate and support sustainable...growth.”