IMF Staff Concludes Visit to Zambia

IMF News, May 14, 2026

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Inflation returned to the Bank of Zambia’s target band by end‑April 2026.
Gross international reserves increased to USD 6.4 billion, equivalent to 4.4 months of prospective imports of goods and services.
Inflation declined to 6.8 percent in April 2026, within the Bank of Zambia's 6-8 percent target band, supported by kwacha appreciation and moderating food prices.
The primary fiscal balance recorded a surplus of 3.1 percent of GDP in 2025.
Debt restructuring agreements now cover approximately 94 percent of the restructuring perimeter.

Growth revised down to 4.3 percent in 2026, reflecting:
- weaker mining output,
- a normalization of agricultural production following the exceptional 2025 harvest,
- softer trade activity,
- energy constraints,
- spillovers from the war in the Middle East.
Inflation is projected to reach 8.5 percent at end-2026, as higher fuel prices are expected to partially offset disinflationary effects of the kwacha appreciation.
The current account is projected to shift to a surplus of 1.5 percent of GDP.
Downside risks highlighted: rising global oil prices and geopolitical tensions that could exert renewed pressure on inflation and the exchange rate.

Fiscal pressures intensified in 2026 due to:
- impact of the war in the Middle East,
- pre‑election spending pressures,
- expenditure overruns at the Food Reserve Agency.
The primary surplus is projected to decline to 1.1 percent of GDP in 2026 (compared to 3.8 percent at the time of the Sixth Review of the completed ECF program).
The deterioration reflects:
- weaker tax collection, including from the suspension of fuel VAT and excise duties,
- spending pressures in the runup to the elections,
- a civil service wage adjustment,
- agricultural subsidy overruns of about 1.3 percent of GDP.
Significant fiscal risks stemming from the Food Reserve Agency will require decisive mitigating measures.
Domestic VAT revenue collection continues to underperform due to structural and administrative weaknesses at the Zambia Revenue Authority; the accumulation of VAT refund backlog is weighing on taxpayer compliance.
Advancing fiscal structural reforms is emphasized to:
- generate durable revenue gains,
- broaden the tax base,
- support a more progressive, equitable, and less complex tax system.
Tangible revenue gains are urgently needed to reduce the domestic interest burden and bring debt to a moderate risk of distress.

The recent policy rate cut reflects the Bank of Zambia’s improved inflation outlook; careful calibration of the interest rate path is recommended, guided by forward‑looking inflation forecasts and alert to upside risks.
Strong coordination among fiscal and monetary policies is critical to anchoring inflation expectations.
Maintaining external reserves at a comfortable level, of around five months of prospective imports, will further strengthen macroeconomic resilience.
In response to the conflict in the Middle East, the authorities suspended the TAZAMA open‑access framework. Prior to its suspension, the framework had reduced fuel import premium by approximately 50 percent, underscoring the role of competition in lowering supply costs.
Mission recommendations on fuel import arrangements:
- restore the TAZAMA open access framework,
- publish the terms of emergency procurement arrangements,
- ensure that transparent monthly fuel import auctions become operational as soon as conditions allow.

Authorities reaffirmed commitment to a Fund‑supported program following the August 2026 elections, anchored in sound macroeconomic policies and fiscal consolidation while protecting social and other priority spending.
Priorities identified under a successor ECF arrangement include:
- consolidate macroeconomic stability,
- shift toward more inclusive and private sector‑led growth,
- advance economic diversification and raise productivity through non‑distortive industrial policies.
Sectoral priorities to support domestic value addition and jobs:
- enhancing copper value addition,
- alleviating energy supply constraints,
- improving attractiveness of agri-business, tourism, and textiles.
Stronger governance and greater transparency are central to attracting private investment at lower cost.
Given Zambia's acute vulnerability to droughts and energy shocks, advancing climate adaptation and mitigation policies is a priority to protect growth, safeguard food security, and strengthen fiscal resilience.
The authorities and IMF staff advanced discussions on a successor IMF‑supported arrangement, with negotiations expected to resume with the incoming government following the August 2026 elections.

An IMF staff team, led by Edward Gemayel, visited Lusaka from April 30 to May 13, 2026.
At the conclusion of the visit, Mr. Gemayel issued a statement summarizing findings and recommendations.
The team met with Finance Minister Musokotwane, Bank of Zambia Governor Kalyalya, senior government officials, and representatives of CSOs and development partners.
The IMF team thanked the Zambian authorities and stakeholders for open and constructive engagement and reaffirmed the Fund’s commitment to supporting Zambia’s reform efforts.

IMF Staff Concludes Visit to Zambia — Press Release No. 26/150 (May 14, 2026).