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Zambia has received about US$189 million from the International Monetary Fund (IMF) under the Extended Credit Facility (ECF) programme.
This is after the IMF Executive Board completed the country’s first review under the 38-month ECF, bringing Zambia’s total disbursement to about US$374 million from the US$1.3 billion approved last year August.
In a statement issued in Lusaka on Thursday, it stated that the completion of the first ECF review allows for an immediate disbursement of Special Drawing Rights (SDR) 139.88 million, which is equivalent to US$189 million.
The Executive Board indicated that Zambia’s performance under the programme remained strong, stating that all quantitative performance for the first review and nine structural benchmarks have been met, with only marginal delays in the remaining two.
The statement further commended the Zambian authorities for taking bold steps to restore fiscal sustainability, raise social spending and strengthen economic governance.
It noted that the country’s ambitious reform agenda aimed to reverse the impact of past economic mismanagement and shocks, such as the Covid-19 and raise growth, create jobs and reduce poverty.
In addition, the Executive Board concluded the 2023 Article IV consultation with Zambia.
“Having weathered a number of external shocks over the past couple of years, the Zambian economy is beginning to strengthen, and its post-Covid Gross Domestic Product (GDP)-rebound is expected to continue.
“Despite some projected moderation in 2023, growth is expected to accelerate in 2024 and settle at around five percent over the medium term. Nonetheless, with poverty and inequality amongst the highest in the world and Zambia’s high exposure to climate shocks, significant challenges remain,” the Executive Board stated.
It indicated that to create a more conducive environment for private sector development and attract much needed private investment, strengthening economic governance and addressing corruption vulnerabilities should remain a central aspect of the government’s reforms.
This should include implementing the recommendations of the IMF’s Diagnostic Report on Governance and Corruption , published in December 2022.
The statement indicated that sustained efforts were also essential to maintain fiscal credibility, while also creating sufficient space for social, development, and climate spending.
Kristalina Georgieva, Managing Director, said the Zambian authorities have made commendable efforts over the past years to stabilize the economy, despite the continuation of significant external shocks.
Georgieva said it would be important for Zambia to sustain its commitment to the strong policies needed to safeguard macroeconomic stability, restore debt sustainability, and promote durable and inclusive growth.
“Performance under the ECF-supported programme has been robust, including a significant fiscal adjustment in 2022 and measures to restore ZESCO’s financial viability.
“Going forward, further fiscal adjustment focused on revenue mobilization and supported by continued fiscal reforms, including in Public Financial Management (PFM), revenue administration, and debt management, will be essential,” she said.
Georgieva said the increased level of social spending should be sustained to protect the most vulnerable, and further efforts are needed to mitigate fiscal risks, including strengthening the framework for Public-Private Partnerships.
“Zambia’s agreement with the Official Creditor Committee (OCC) under the G20 Common Framework on a debt treatment consistent with programme parameters is very welcome. Swift finalization and signature of the Memorandum of Understanding with the OCC will be important,” she said.
Georgieva said the timely implementation of this agreement, together with agreements with private creditors on comparable terms, should restore Zambia’s debt sustainability over the medium term.
“The Bank of Zambia should remain alert to inflationary pressures and continue reforms to preserve financial stability and enhance inclusion, even as the financial sector landscape evolves.
“Strengthening economic governance and addressing corruption vulnerabilities should remain a central aspect of reform, and the authorities’ commitment to implementing the recommendations of the IMF’s Diagnostic Report on Governance and Corruption, including to enhance transparency and robust implementation of public procurement regulations, is commendable,” Georgieva said.
She said these reforms, combined with the authorities’ climate-smart growth policy, will provide a more conducive environment for private sector investment and growth.”
The IMF added that the target date for submission of a revised Public-Private Partnership Bill has been reset to end-July to allow stakeholder feedback to be incorporated.
It also said the target date for implementation of the Financial Management Information System (IFMIS) commitment control module has been reset to end-August to allow sufficient time for validation.
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