Washington, DC:
An International Monetary Fund (IMF) staff team, led by Ms. Allison
Holland, Mission Chief for Zambia, held meetings in Lusaka from March 22 to
April 5, 2023, to discuss progress on reforms and the authorities’ policy
priorities in the context of the first review of Zambia’s 38-month program
under the Extended Credit Facility (ECF)-supported program. The arrangement
was approved
by the IMF Executive Board
for a total amount of SDR 978 million (US$1.3 billion) on August 31, 2022.
The team also conducted the 2023 Article IV consultation.
At the conclusion of the visit, Ms. Holland issued the following statement:
“The Zambian authorities and IMF staff team have reached a staff-level
agreement on the first review of Zambia’s economic program under the ECF
arrangement. The staff-level agreement is subject to IMF Management
approval and Executive Board consideration once the necessary financing
assurances have been received. An agreement with official creditors on a
debt treatment in line with program parameters would provide the needed
financing assurances. Upon completion of the Executive Board review, Zambia
would have access to SDR 140 million (about US$188 million), bringing the
total IMF financial support disbursed under the arrangement to SDR 280
million (about US$376 million).
“Against an increasingly challenging global economic backdrop, the Zambian
economy remains relatively resilient, with robust growth of 4.7 percent in
2022 despite weaknesses in the mining and agriculture sectors. Inflation
has remained in single digits since May 2022 but is under increasing
pressure with the sustained depreciation of the exchange rate. The
tightening of monetary conditions in February by the Bank of Zambia was an
appropriate policy response.
“While growth is expected to moderate to 3.6 percent in 2023, assuming a
timely agreement with official creditors on an appropriate debt treatment,
it is projected to accelerate over the medium term. This pick-up in growth
will reflect the anticipated pay-off from the government’s economic
transformation agenda, including a recovery in mining production driven by
new and ongoing investment.
“In line with the government’s commitments under the Fund-supported
program, fiscal performance has been very strong. Spending has remained
within budget limits and, importantly, social spending has increased in
line with government targets. On the revenue side, while revenues from the
mining sector were lower than expected due to production challenges and a
drop in copper prices, they were more than offset by higher revenue
collection from other sectors of the economy. Ambitious structural fiscal
reforms are contributing to raising domestic revenues, strengthening public
financial management and debt management, and transparency. This rebuilding
of budget credibility is critical for restoring fiscal and debt
sustainability in the medium-term. Continued efforts to ensure value for
money by following public procurement regulations and providing
transparency will also contribute towards fighting corruption.
“Reforms are being undertaken to attract private investment and improve the
business environment. The introduction of cost-reflective tariffs in the
electricity sector, and reforms in the fuel sector are critical in this
regard. An important aspect of the government’s reform efforts is to push
forward on the governance and anticorruption agenda in line with the
recommendations of the
IMF’s Diagnostic Report on Governance and Corruption
, published in December 2022.
“There are significant uncertainties going forward. Delays in the debt
restructuring, weather-related shocks, and copper prices remain the
dominant sources of risk. Globally, an abrupt growth slowdown would reduce
copper prices, while an escalation of Russia’s war in Ukraine would
increase fertilizer and food prices, increasing inflation and spending on
agricultural inputs.
“In light of Zambia’s strong performance under the Fund-supported program,
the critical next step is to secure an agreement with official creditors on
a debt treatment consistent with the IMF Executive Board-approved program
parameters and debt targets. We urge official creditors to move forward and
agree an appropriate debt treatment in line with the financing assurances
they provided in July 2022. Further delays risk a worsening outlook for
Zambia, delaying its return to sustainable growth, and reducing its
capacity to repay.”
“The IMF staff team met with Minister of Finance and National Planning
Situmbeko Musokotwane, Governor Denny Kalyala, Secretary to the Cabinet
Patrick Kangwa, Secretary to the Treasury Felix Nkulukusa, Deputy Governor
Francis Chipimo, other senior government officials, representatives of the
private sector, civil society organizations and development partners. The
team would like to thank the Zambian authorities for their cooperation,
hospitality, and constructive discussions.”
