IMF Staff Completes Mission to Zambia

IMF News, May 16, 2025

Source details

Press Release No. 25/151; May 16, 2025.
IMF mission led by Ms. Vera Martin visited Lusaka from April 29 to May 13, 2025.
Purpose: advance technical work and policy discussions underpinning the Fifth Review under the IMF Extended Credit Facility (ECF) arrangement and conduct discussions under the 2025 Article IV Consultation.
Statement clarifies that end-of-mission press releases convey preliminary findings of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Zambia’s recovery is gaining pace, with growth set to strengthen in 2025.
Growth drivers identified:
- An anticipated rebound in agriculture.
- A pickup in mining activity.
Risks to the rebound:
- Slow recovery in electricity generation and electricity shortages could undermine the recovery, highlighting the need for sustained reforms in the energy sector.
- External downside risks from subdued global demand, elevated commodity price volatility, and declining official development support.
Inflation outlook:
- Inflation is projected to gradually decline over the course of the year, reflecting expected easing in food and fuel prices.
- Recommendation: The Bank of Zambia should continue to maintain a data-driven and forward-looking monetary policy stance to bring inflation on a downward trend towards the inflation band while supporting macroeconomic stability.

Fiscal performance:
- The fiscal primary balance in 2024, estimated at 2.9 percent of GDP, outperformed expectations, marked by constrained financing and spending compression.
Emerging 2025 pressures:
- Rising debt service and social spending needs are creating spending pressures in 2025.
Revenue and financing priorities:
- Mobilizing domestic revenues, in the context of constrained financing conditions, remains critical to preserving fiscal and debt sustainability and safeguarding priority social and infrastructure spending.
Public financial management and tax policy:
- Authorities committed to improving public financial management and fiscal transparency, while enhancing tax administration.
- Recommended reforms: reduce tax expenditures, make the tax regime more progressive, and improve expenditure controls to build additional fiscal resilience.

Continue discussions to reach a staff-level agreement on the Fifth Review, including addressing new spending needs and allowing Zambia to respond to emerging challenges while restoring debt sustainability.
Strengthen buffers and accelerate structural reform implementation to sustain progress in a volatile environment.
Maintain reform momentum to:
- Build resilience.
- Create fiscal space.
- Crowd in private investment.
Prioritized structural reforms to accelerate:
- Energy sector.
- Governance.
- Public procurement.
- Business environment.
Monetary policy:
- The Bank of Zambia should maintain a data-driven and forward-looking stance to reduce inflation toward the inflation band and support macroeconomic stability.

During the visit, IMF staff met with:
- His Excellency President Hakainde Hichilema;
- Minister of Finance and National Planning, Dr. Situmbeko Musokotwane;
- Governor of the Bank of Zambia, Dr. Denny Kalyalya;
- Secretary to the Treasury, Felix Nkulukusa;
- Deputy Governor, Dr. Francis Chipimo;
- Senior government officials;
- Representatives of the private sector, civil society organizations, and development partners.
Next steps:
- Discussions will continue in the coming weeks to finalize the policies and reforms underpinning the Fifth Review.
- Staff will prepare a report, subject to management approval, to be presented to the IMF's Executive Board for discussion and decision.

International Monetary Fund