Statement by the IMF Staff Mission at the Conclusion of a Visit to Zambia

Press Release No. 12/77
March 13, 2012

An International Monetary Fund (IMF) mission visited Lusaka February 29–March 13, 2012 to conduct discussions for the Article IV consultation.1 The mission had fruitful discussions with Hon. Alexander Chikwanda, Minister of Finance and National Planning; Dr. Michael Gondwe, Governor of the Bank of Zambia, and other senior officials as well as representatives from the private sector, civil society and labor unions.

At the conclusion of the visit in Lusaka today, Mr. Trevor Alleyne, mission chief for Zambia, released the following statement:

“Macroeconomic performance in 2011 was positive and is expected to remain robust this year. Real GDP growth is estimated at 6½ percent in 2011 and is projected at 7.7 percent this year, reflecting strong growth in copper production and non-maize agriculture, and an expansionary fiscal policy. Inflation declined to 7.2 percent at end-2011, broadly in line with the authorities’ target, and is projected to end this year close to its February 2012 level of 6.0 percent. The 2012 budget targets a widening of the fiscal deficit to 4.1 percent of GDP driven by a significant ramp up of investment. Despite copper prices rising to record highs, the external current account surplus narrowed substantially last year, mainly reflecting a strong expansion in imports and a decline in grants. For 2012, the current account surplus is projected to remain broadly unchanged, while gross international reserves are expected to continue to grow, reaching the equivalent of 3.3 months of prospective imports.

There are near-term downside risks arising from the uncertain prospects for the global economy and from domestic policies. Although the crisis in Europe has had little spillover to the Zambian economy to date, a further deterioration in global economic conditions could squeeze trade credit lines; reduce demand for Zambian exports; and lower copper prices. On the domestic front, policy measures will be needed to ensure that fiscal targets are met; and careful implementation of the planned financial sector reforms will be necessary to safeguard financial sector stability. On the other hand, Zambia’s solid macroeconomic management, the large investments in the copper sector, and recent strong growth in non-maize agriculture all auger well for the country’s ability to withstand global shocks and sustain the growth momentum into the future.

“Maintaining a positive investment climate for current and potential investors should be an important component of Zambia’s growth strategy. As traditional concessional financing phases out and Zambia relies increasingly on international markets and foreign direct investment, it will be important for the government to implement and communicate clearly a consistent set of policies related to foreign investment. This will enhance Zambia’s international reputation as a destination for investment flows by reducing uncertainty.

“Despite the favorable macroeconomic results, there is an urgent need to re-orient policies to ensure that economic growth and macroeconomic stability are accompanied by strong employment growth and poverty reduction. Looking forward, it will be important for the Government to implement policies to diversify the economy and ensure that growth is more inclusive. Key areas will include: (1) tax policy, tax administration, and public financial management to create fiscal space for increased infrastructure spending and improve technical capacity to efficiently administer a larger capital budget; (2) maize marketing and pricing policies and the development of a broad-based reform strategy for the agricultural sector; (3) increasing access to financial services by small and medium enterprises without jeopardizing financial sector stability; and (4) removing the incentives for the proliferation of informal business and employment arrangements.”

The 2012 Article IV discussion by the IMF’s Executive Board is expected to take place in May, 2012.


1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.



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