Washington, DC: A staff team from the
International Monetary Fund (IMF) team, led by Ms. Vera Martin, IMF mission
chief for Zambia, visited Lusaka from October 25th to November 8th, 2023,
to discuss progress on economic and financial policies to in the context of
the second Review under the Extended Credit Facility (ECF) arrangement. The
arrangement was approved by
the IMF Executive Board on August 31th 2022,
for a total amount of SDR 978.2 million (about US$1.3 billion). The program
is based on the authorities’ homegrown economic reforms that aims to
restore macroeconomic stability and debt sustainability, and foster higher,
more resilient, and more inclusive growth.
At the end of the mission Ms. Vera Martin issued the following statement:
“I am pleased to announce that the Zambian authorities and IMF staff team
reached a staff-level agreement on the second review of Zambia’s economic
program under the ECF arrangement. The staff-level agreement is subject to
IMF Management approval and Executive Board consideration. Upon completion
of the Executive Board review, Zambia would have access to SDR 139.9
million (about US$184 million), bringing the total IMF financial support
disbursed under the arrangement to SDR 419.6 million (about US$555.7
million).
“Amidst challenging conditions, the Zambian economy has performed better
than anticipated. Growth is expected to reach 4.3 percent in 2023 as
non-mining non-agricultural growth is more than compensating for weak
mining production this year. Inflation pressures persist despite a tighter
monetary stance by the Bank of Zambia, driven by higher food and fuel
prices and a sustained depreciation of the exchange rate. The current
account balance is projected to deteriorate to a deficit of 1.8 percent of
GDP in 2023, driven by lower mining exports receipts and strong import
growth.
“The medium-term outlook remains favorable, supported by expanding mining
production and the completion of the debt treatment plan, and hinges on
proactive reform efforts. In a context of elevated global uncertainty,
external downside risks arising from a weakened global economic outlook,
commodity prices volatility and regional conflicts, prudent economic
policies are warranted. Building external buffers remains important.”
“The Zambian authorities have made progress in implementing reforms under
the Fund-supported program, including significant fiscal efforts in 2023,
which are expected to continue in 2024, to address lower mining revenues.
The primary balance (cash basis) in 2023 is projected at 0.2 percent of
GDP, in line with program parameters. Fiscal targets for end-June were met
supported by lower current spending and higher nonagricultural and
non-mining revenues. Despite the consolidation, the authorities have
upscaled social spending to support the most vulnerable and continue to
provide free primary education. Near-term reform priorities should focus on
perennial revenue measures and better cash and liability management that
would reduce the financing needs, crucial to restore fiscal space and debt
sustainability. In addition, strengthening tax administration, removing tax
exemptions, and actively combating tax evasion can also contribute to
improve revenues and governance.”
“Further tightening of monetary policy may be needed to contain
inflationary pressures, while building reserves will enhance external
resilience. The Bank of Zambia pursues reforms to enhance the effectiveness
of monetary policy transmission through strengthening the monetary policy
framework and its governance. The Bank of Zambia is also working on
strengthening the banking sector and promoting financial inclusion.”
“Improving the business climate remains key for economic diversification
and private sector-led growth and relies on continued efforts towards
improving the anti-corruption framework and battling Anti-Money Laundering
and Combating the Financing of Terrorism; enhancing transparency, including
in the energy and agricultural sector; and publishing beneficial ownership
information for awarded government contracts.”
“We welcome the agreement on the
MoU reached with official creditors
and ongoing discussions with private creditors to reach an agreement on a
debt treatment. We look forward to the authorities’ continued efforts to
reach an agreement with all creditors in line with program parameters.”
“The IMF staff team is grateful to the authorities for the open and
productive discussions. The 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.”
