Press Release No. 24/374

IMF Staff Completes Mission to Zambia

October 17, 2024

• An IMF team visited Lusaka from October 2-15 to discuss recent economic and financial developments as well as economic policies that could underpin the Fourth Review of the IMF Extended Credit Facility.
• The team had productive discussions with the authorities. Discussions to assess policies to support the economic recovery and the completion of the ECF review will continue in the coming weeks, including during the upcoming 2024 IMF-World Bank Annual Meetings.
• The economic impact of the drought has been greater than anticipated due to the intense electricity shortages. The authorities have advanced on their program commitments while implementing their drought response in a challenging environment.

Washington, DC: An International Monetary Fund (IMF) mission team led by Ms. Mercedes Vera Martin conducted productive discussions with the Zambian authorities from October 2^nd to October 15^th, 2024, on economic and financial policies to support the approval of the Fourth Review under the ECF-supported arrangement. The IMF staff team met with His Excellency President Hakainde Hichilema, Minister of Finance and National Planning Situmbeko Musokotwane, Governor Denny Kalyala, Secretary to the Treasury Felix Nkulukusa, Deputy Governor Francis Chipimo, and other senior government officials. The team also met with representatives of the private sector and development partners.

At the end of the mission, Ms. Vera Martin issued the following statement:

“The Zambian authorities and IMF staff advanced the technical work as part of their discussions for the Fourth Review under the Extended Credit Facility. Discussions focused on assessing the economic impact of the drought, updating the economic outlook, and assessing policies and reform efforts to support growth.

“The Zambian economy has been severely impacted by the prolonged power outages due to load shedding, which has notably hindered growth in the non-mining sector. Growth in 2024 is projected at 1.2 percent, from 2.3 percent previously. Inflation is expected to continue increasing due to past kwacha depreciation, increasing food and fuel prices, and hikes in administrative prices. Subdued import demand has helped reduce volatility in the kwacha and support reserve accumulation. Fiscal performance has been stronger than initially envisaged due to lower domestic financing and proactive spending reprioritization. To support the most vulnerable, the government has scaled up social cash transfers, implemented a cash-for-work program, and expanded free school lunch programs. Despite challenging conditions, the Zambian authorities have made progress in implementing reforms under the Fund-supported program.

Against heightened uncertainty, responsive policymaking will be paramount to sustain macroeconomic stability while building resilience to shocks. To this end, the mission emphasized the need to prioritize progressive revenue measures that will strengthen fiscal buffers and support debt sustainability. Key initiatives include improved tax administration, streamlined tax exemptions, and enhanced tax compliance. The mission also underscored the need to advance energy and governance reforms while continuing efforts to level the playing field to promote private sector-led growth that will generate jobs. Agile monetary policy will help bring inflation down while supporting the economic recovery in 2025.

Discussions with the authorities will continue in the weeks ahead, including during the upcoming IMF/World Bank Group Annual Meetings in Washington, D.C., next week.

“The IMF remains a committed partner to Zambia, working closely with the authorities to develop strategies that effectively tackle the country's current economic challenges. Staff expresses their gratitude to the authorities, private sector representatives, development partners, and other stakeholders in Zambia for their constructive engagement and support during this mission.”