## Press Release: IMF Staff Concludes Visit to Zambia

_IMF News, March 18, 2016_

## Source details

**Canonical URL:** [Press Release: IMF Staff Concludes Visit to Zambia](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr16120)

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## Bibliographic details
- Published: March 18, 2016

---

### Mission overview
- Mission period: March 9-18.
- Statement date: March 18, 2016.
- Team leader: Tsidi Tsikata.
- Purpose: to review recent macroeconomic developments and discuss with the authorities how best to address the current economic challenges facing the country.
- Note: The views expressed are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

### Macroeconomic assessment and key findings
- The Zambian economy is "under intense pressure."
- Contributing factors: lower copper prices, electricity shortages, and poor rainfall have dampened the pace of economic activity.
- Inflation has increased; expenditure pressures have risen; financing conditions have tightened substantially.
- The mission estimated that economic growth declined to about 3 percent in 2015.
- The mission is confident that Zambia’s current economic challenges can be overcome with resolute policy action, allowing a resumption of growth in line with the country’s abundant potential.
- Warning: Delays in implementing corrective measures "will only worsen the situation, increase the adjustment cost and postpone the recovery."

### Fiscal pressures and debt concerns
- Government finances are "under immense stress."
- Primary contributors to higher-than-budgeted expenditure: fuel subsidies and contracted emergency electricity imports.
- Estimated cost of fuel subsidies and contracted emergency electricity imports: US$660 million a year at the current pace (equivalent to 3.2 percent of GDP).
- Domestic and external financing options have become more limited along with rising interest rates.
- Mounting domestic arrears are adding to concerns about debt sustainability.

### Monetary policy and market conditions
- Tightening of monetary policy has been effective in stabilizing the exchange rate.
- Tight liquidity conditions have contributed to persistent under-subscription of treasury bills and bonds.
- There is "little scope to loosen monetary policy as long as fiscal imbalances are not addressed."
- Key challenge: normalize activity in the interbank foreign exchange market while avoiding a return of last year’s extreme volatility in the exchange rate.

### Authorities’ commitments and policy direction
- Authorities stressed that, notwithstanding the upcoming general elections, they are committed to:
  - addressing the budgetary pressures,
  - moving to cost-reflective energy pricing,
  - scaling back on discretionary spending,
  - safeguarding social protection programs.
- Authorities indicated that strong near-term measures are being evaluated.
- At the IMF/World Bank Spring Meetings in mid-April, authorities would provide further guidance on:
  - the policy direction and reforms,
  - their plans for an IMF-supported program.
- The mission emphasized that a package of measures demonstrating that fiscal pressures are being tackled would boost market confidence and pave the way for increased investment and growth.

### Engagements and stakeholders consulted
- The team met with:
  - Finance Minister Alexander Chikwanda,
  - Bank of Zambia (BoZ) Governor Denny Kalyalya,
  - other senior government and BoZ officials,
  - members of parliament,
  - leaders of political parties,
  - representatives of the private sector, labor unions, civil society organizations, and Zambia’s development partners.
- The mission thanked the authorities and stakeholders for their openness and constructive spirit.

*Press Release No. 16/120, March 18, 2016 — IMF Communications Department*

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## References

- [Zambia and the IMF](http://www.imf.org/external/country/ZMB/index.htm)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr16120_