Washington — The Executive Board of the International Monetary Fund (IMF) completed today the third review of Zambia's 38-month Extended Credit Facility (ECF) Arrangement and approved an augmentation of SDR 293.46 million (about US$385.7 million). Completion of the review allows for an immediate disbursement of SDR 433.34 million (about US$569.6 million), bringing Zambia's total disbursement so far under the ECF-supported program to SDR 852.98 million (about US$1.1 billion).
Zambia's ECF Arrangement was approved on August 31, 2022, for SDR 978.2 million (100 percent of quota, or about US$1.3 billion). The augmentation approved today increases access to SDR 1271.66 million (130 percent of quota, about US$1.7 billion,). The program supports Zambia's home-grown Eighth National Development Plan that seeks to entrench macroeconomic stability, attain debt and fiscal sustainability, enhance public governance, and foster inclusive growth to improve the livelihood of the Zambian people, especially the vulnerable.
Program performance has been satisfactory despite a challenging domestic and global environment. All quantitative performance criteria targets and all but one of the indicative targets for the end of 2023 were met. The authorities have also made progress in their structural reform agenda, with all continuous and end-December 2023 structural benchmarks, and all but one end-March 2024 structural benchmark being completed on time.
Zambia is grappling with a severe drought that has significantly impacted agriculture and electricity generation, affecting a substantial share of the population. Consequently, growth projections for 2024 have been revised down to 2.3 percent, from 4.7 percent, and the 2024 budget has been revised to accommodate the drought's impact. Despite these challenges, the authorities remain committed to supporting macroeconomic stability, restoring fiscal and debt sustainability, clearing arrears, and addressing Zambia's humanitarian needs. The authorities are also taking steps to improve governance and advance structural reforms to foster growth.
Zambia is working on implementing the October 2023 Memorandum of Understanding reflecting the debt restructuring agreement with the Official Creditor Committee (OCC) through bilateral agreements, marking a critical step in the restructuring process. Furthermore, Zambia reached a restructuring agreement with Eurobond holders on March 25, 2024, which is in line with IMF program parameters, and the OCC confirmed comparability of treatment among creditors. Following the consent solicitation launched on May 13, the bond exchange was settled on June 11, 2024. Zambia continues to engage in good faith negotiations with other commercial private creditors, aiming for an agreement by year-end.
Following the Executive Board discussion on Zambia, Ms. Antoinette Sayeh, Deputy Managing Director, and acting chair, issued the following statement:
"The authorities' satisfactory performance under the ECF-supported arrangement and continued focus on economic stabilization and reforms have resulted in stronger-than-envisaged fiscal and economic outcomes, and progress on structural reforms. Nonetheless, the drought has affected a substantial share of the population, and the authorities should continue their commendable efforts to address the humanitarian needs. Going ahead, coordinated macroeconomic policies, continued efforts to restore fiscal and debt sustainability, and consistent reform implementation would be key to addressing the impact of the drought, preserving macroeconomic stability, and bolstering growth.
"Adhering to the committed fiscal consolidation over the program period remains critical to ensure fiscal sustainability. Given the significant spending reprioritization in 2024, focus should be put on revenue mobilization, including enhancing tax administration and broadening the tax base. The envisaged public financial management reforms will enhance spending controls, budget execution, and fiscal accountability. Greater progress in budgetary arrears clearance will be important.
"The implementation of the Eurobond exchange, consistent with program parameters and comparability of treatment as set by the Official Creditor Committee (OCC), and steps toward implementing the memorandum of understanding with all OCC members are welcome. Reaching a timely agreement on a debt treatment with the remaining private creditors on comparable terms and in line with program parameters would make Zambia's debt sustainable on a forward-looking basis.
"A tight monetary stance until inflation declines toward the Bank of Zambia's target range would help anchor inflation expectations. Reserve accumulation and sustained exchange rate flexibility remain critical to address external shocks. Financial sector reforms are important to foster financial stability and inclusion.
"Governance and structural reforms remain key to promoting private sector activity and economic diversification. Implementing the Access-to-Information Act, reviewing the Anti-Corruption Act in a timely manner, and enhancing transparency and governance in the energy and mining sectors will help reduce policy uncertainty, improve the business climate, and attract greater investments. The drafting of the Climate Change Bill is welcome; continued efforts for climate adaptation, and the use of climate-resilient energy sources would help support sustainable growth. "
Zambia: Selected Economic Indicators, 2022-26
Population (millions, 2022):
20.0
Per capita GDP ($, 2022):
1,455
Quota (SDR millions):
978.2
Poverty rate (2022):
60
Main products and exports:
Copper
Key export markets:
China
2021
2022
2023
2024
2025
2026
Est.
Proj.
Proj.
Proj.
Output
Real GDP growth (%)
6.2
5.2
5.4
2.3
6.6
5.9
Prices
Inflation annual average (%)
22.0
11.0
10.9
14.6
12.1
7.0
Inflation end-of-year (%)
16.4
9.9
13.1
15.0
7.9
7.0
Central government finances
Revenue (% GDP)
22.4
20.4
21.5
21.4
21.8
21.8
Expenditure (% GDP)
30.5
28.2
27.9
27.5
24.6
25.1
Fiscal balance (cash basis, % GDP)
-8.1
-7.8
-6.5
-6.1
-2.8
-3.4
Fiscal balance (commitment basis, % GDP)
-13.9
-5.4
-5.6
-2.5
-1.6
-2.3
Public debt (% GDP)
112.1
110.9
133.4
107.5
88.5
79.2
Money and Credit
Broad money (% change)
3.7
24.5
24.6
10.5
13.2
10.4
Credit to private sector (% change)
-7.8
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34.2
41.3
23.6
29.0
15.6
3-month Treasury bill interest rate (%)
12.8
9.6
...
...
...
...
Balance of payments
Current account (% GDP)
11.9
3.8
-1.9
-0.2
6.9
5.7
FDI (% GDP)
3.1
0.6
-0.1
3.8
3.8
4.5
Reserves (in months of imports)
3.3
3.4
3.6
4.3
5.0
5.2
Exchange rate
REER (% change)
5.0
30.3
-7.3
...
...
...
Sources: Zambian authorities, and IMF Staff estimates and projections.
