IMF Staff Completes Mission to Zambia
IMF News, October 17, 2024
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- Published: October 17, 2024
Mission details
- IMF team visited Lusaka from October 2-15 to discuss recent economic and financial developments and policies underpinning the Fourth Review of the IMF Extended Credit Facility (ECF).
- Mission led by Ms. Mercedes Vera Martin.
- IMF staff 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; other senior government officials; representatives of the private sector; and development partners.
- End-of-mission statement issued October 17, 2024.
Economic impact and outlook
- The economic impact of the drought has been greater than anticipated due to the intense electricity shortages (prolonged power outages and load shedding), notably hindering growth in the non-mining sector.
- Growth projections:
- Growth in 2024 is projected at 1.2 percent, from 2.3 percent previously.
- Inflation outlook:
- Inflation is expected to continue increasing due to past kwacha depreciation, increasing food and fuel prices, and hikes in administrative prices.
- External sector and reserves:
- Subdued import demand has helped reduce volatility in the kwacha and support reserve accumulation.
- Fiscal performance:
- Fiscal performance has been stronger than initially envisaged due to lower domestic financing and proactive spending reprioritization.
Policy discussions and recommendations
- Discussions focused on:
- Assessing the economic impact of the drought.
- Updating the economic outlook.
- Assessing policies and reform efforts to support growth and the Fourth Review under the ECF.
- Mission emphasis on policy priorities:
- Prioritize progressive revenue measures to strengthen fiscal buffers and support debt sustainability.
- Key initiatives highlighted:
- Improved tax administration.
- Streamlined tax exemptions.
- Enhanced tax compliance.
- Advance energy and governance reforms.
- Continue efforts to level the playing field to promote private sector-led growth that will generate jobs.
- Agile monetary policy to help bring inflation down while supporting the economic recovery in 2025.
Social measures and program implementation
- Authorities have scaled up social measures in response to the drought and shocks:
- Scaled up social cash transfers.
- Implemented a cash-for-work program.
- Expanded free school lunch programs.
- Despite challenging conditions, the Zambian authorities have made progress in implementing reforms under the Fund-supported program.
Next steps and engagement
- 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 IMF remains a committed partner to Zambia and will continue working with the authorities to develop strategies to tackle the country's current economic challenges.
Statement by IMF staff at the end of the mission; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.