The Government of Zambia is set to secure $185.5 million funding from the International Monetary Fund (IMF). This is announced following the Staff-Level Agreement on the Fourth Review of the Extended Credit Facility the IMF reached with Zambia on Monday.
An International Monetary Fund staff team, led by Mercedes Vera Martin, engaged in discussions with the Zambian authorities in Lusaka during October 2-15, focusing on reforms and policy priorities underpinning the fourth review of the IMF-supported program under the Extended Credit Facility (ECF).
Discussions continued during the IMF/WB Annual Meetings in Washington. This staff-level agreement is subject to IMF Management approval and Executive Board consideration. Upon completion of the review, Zambia will have access to about $185.5 million in financing (SDR 139.9 million).
“The outlook for 2024 has deteriorated; Real GDP growth is now projected at 1.2 percent, from 2.3 percent projected in June, as extensive electricity shortfalls have impacted economic activity significantly. Contractions in agriculture (20.6 percent y/y) and electricity (9.6 percent y/y) and a deceleration in non-mining non-agriculture activity (from 7.7 percent y/y in 2023H1 to 3.5 percent y/y in 2024H1) amid intensifying power shortages dragged growth to 1.9 percent (y/y) in the first half of 2024. Inflation accelerated to 15.7 percent in October 2024, driven by food prices and past kwacha depreciation, drifting further from the inflation target band (6–8 percent). Subdued imports, increased grants and an anticipated increase in copper exports should shift the current account to a small surplus in 2024,” said Ms. Vera Martin of the IMF.
She also stated that fiscal performance in 2024 has been marked by constrained domestic financing and spending compression. “The end-June primary surplus reached 3.4 percent of GDP, well above the program target. The primary balance (cash basis) in 2024, is projected at a surplus of 0.9 percent of GDP, much stronger than the program deficit target of 0.7 percent. Despite the consolidation, the authorities have upscaled social spending to support the most vulnerable through the drought.”
“The medium-term outlook remains favorable, but with significant downside risks. Growth in 2025 is projected at 6.2 percent (revised from 6.6 percent) as electricity output is not expected to fully recover. This outlook is bolstered by a recovery in agricultural and mining production and the completion of the debt restructuring and is underpinned by prudent policies and ongoing reforms. Inflation is expected to converge to the target band by end-2025, given strong base effects. The external position is projected to strengthen on account of higher exports and FDI, supporting reserve accumulation,” she said.