IMF Staff reaches Staff-Level Agreement on the Sixth and Final Review of the Extended Credit Facility with Zambia

IMF News, December 18, 2025

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Canonical URL: IMF Staff reaches Staff-Level Agreement on the Sixth and Final Review of the Extended Credit Facility with Zambia

IMF team led by Ms. Mercedes Vera Martin visited Lusaka from October 22 to November 4, 2025, with follow-up virtual discussions from Washington D.C.
Review: sixth and final review under the 38-month Extended Credit Facility (ECF) arrangement.
Press Release No. 25/431; publication date: December 18, 2025.
Subject to IMF Executive Board approval, Zambia will receive a disbursement of SDR 138.9 million (about $190 million), bringing total disbursement to SDR 1,271.66 million (about $1.7 billion) since August 2022.

Achievements cited:
- Significant reduction in macroeconomic imbalances.
- Rebuilding of reserves and restoration of macroeconomic stability.
- Agreement reached on most of the external debt under the perimeter of the debt restructuring.
- Sustained fiscal consolidation while safeguarding social spending.
2025 performance and projections:
- Real GDP growth projected at 5.2 percent in 2025, reflecting lower-than-expected mining and wholesale and retail trade.
- Current account deficit projected to widen to about 2.1 percent of GDP in 2025, driven by broad-based import growth and lower official grants.
- Gross international reserves expected to cover 4 months of prospective imports by end-2025.
- Inflationary pressures are easing—although more gradually than envisaged—supported by a stronger kwacha, lower fuel prices, and improved food supply.
- Favorable terms of trade, including higher-than-projected international copper prices, noted.

Growth outlook:
- Growth projected to average 5.6 percent in 2026-31, underpinned by investment, robust agriculture production, and improved electricity generation.
External accounts and prices:
- Current account projected to rebound to an estimated surplus of 1.7 percent of GDP in 2026 and gradually increase to about 3.2 percent of GDP by 2030, amid expanding copper production and elevated copper prices.
Inflation:
- Inflation projected to converge gradually toward the 6-8 percent target band by 2027.
Risks:
- Risks are tilted to the downside, with heightened uncertainty around the baseline.

2025 fiscal projections and indicators:
- 2025 primary surplus projected at 2.2 percent of GDP, including repayment of fuel arrears.
- Revenues, excluding grants, projected to reach 22.6 percent of GDP despite accelerated VAT refunds to clear legacy arrears.
Policy priorities and concerns:
- Given the high risk of debt distress, maintaining fiscal discipline and containing new borrowing remain critical for debt sustainability.
- Continued efforts needed to enhance public financial management, including revamping the fiscal framework.
- Improve revenue mobilization through strengthening compliance and expanding the tax base to generate fiscal space for growing spending needs, including infrastructure.
- Ensure cost-recovery electricity pricing and strengthen SOE governance to limit fiscal risks.

Monetary stance recommendations:
- A carefully calibrated monetary policy is needed to anchor inflation expectations and preserve price stability.
- The real policy rate is expected to increase in the coming months as inflation decelerates, hinting toward a tighter monetary policy stance.
- If the inflation decline becomes more gradual than initially envisaged, there are merits in maintaining a prudent approach to further monetary policy easing.
Operational and institutional priorities:
- Efforts to improve the operational monetary framework remain critical to strengthening monetary transmission.
- While allowing for exchange rate flexibility, the Bank of Zambia (BoZ) should scale up efforts to accumulate net international reserves, especially taking advantage of supportive FX liquidity conditions.
- The IMF team welcomes legislative initiatives to revamp financial supervision and resolution, including a new deposit insurance framework.

Priority reform areas:
- Pressing ahead with structural reforms to boost inclusive and private sector-led growth.
- Improve governance, including setting up a merit-based transparent process for the selection of the Board of the Anti-Corruption Commission, to enhance accountability and facilitate private sector participation.
- Energy sector reforms continue to advance; as open access to the TAZAMA pipeline is rolled out, consistent and transparent application of guidelines anchored in private sector participation will be key.

IMF mission met with:
- Minister of Finance and National Planning Dr. Situmbeko Musokotwane; Governor of the Bank of Zambia, Dr. Denny Kalyalya; Secretary to the Treasury Mr. Felix Nkulukusa; Deputy Governor Dr. Francis Chipimo; other senior Government officials; and representatives of the private sector, civil society, and development partners.
The team expressed sincere appreciation to the Zambian authorities for their close cooperation.

IMF Communications Department — Press Release No. 25/431, December 18, 2025.