IMF and Zambia Reach Staff-Level Agreement on Fourth Review of Extended Credit Facility
The International Monetary Fund (IMF) has announced a staff-level agreement with Zambian authorities following the fourth review of Zambia’s 38-month Extended Credit Facility (ECF). This arrangement aims to support Zambia’s economic stability and reform efforts amid drought-induced challenges and a slowdown in economic growth.
The IMF team, led by Mercedes Vera Martin, concluded talks with Zambian officials after discussions in Lusaka from October 2-15, with follow-up meetings during the IMF/World Bank Annual Meetings in Washington, D.C. The agreement now awaits approval from IMF management and the Executive Board, expected by mid-December. Upon approval, Zambia could access $185.5 million in financing (SDR 139.9 million).
The drought’s impact has led to substantial agricultural and electricity shortfalls, with Zambia’s GDP growth forecast revised down to 1.2% for 2024. Despite these setbacks, the Zambian government has maintained its fiscal discipline and directed emergency relief to the most vulnerable. Additionally, Zambia’s inflation rate has climbed to 15.7% in October 2024, largely due to rising food prices and previous currency depreciation.
The IMF’s statement outlined four reform pillars aimed at restoring stability and fostering growth: maintaining fiscal discipline in the 2025 Budget while prioritizing social spending, strengthening fiscal buffers against economic shocks, enhancing monetary policy to control inflation, and advancing structural reforms to support private sector growth.
The medium-term outlook remains cautiously optimistic, with 2025 growth projected at 6.2%, contingent on agricultural and mining recovery and a gradual resolution of Zambia’s debt challenges. Key reforms under the agreement include broadening the tax base, improving public financial management, ensuring the Bank of Zambia’s active role in managing inflation, and implementing business environment reforms to stimulate diversification and transparency.
The IMF praised Zambia’s commitment to prudent policies and constructive engagement, underscoring the critical role of ongoing reforms in securing Zambia’s economic future.
