IMF team concludes Zambia’s third review under Extended Credit Facility, notes key economic developments

The International Monetary Fund (IMF) has announced that its mission team, led by Vera Martin, has completed a two-week mission in Zambia.

According to an IMF statement, the visit to Lusaka took place from April 24 to May 7, 2024, to discuss economic and financial policies crucial for the approval of the Third Review under the Extended Credit Facility (ECF) arrangement.

Martin stated on Thursday that Zambian authorities and IMF staff made significant progress in their technical work during discussions for the Third Review under the ECF.

The focus was on analyzing recent economic developments and assessing the impact of the drought in Zambia, which had resulted in power cuts and anticipated food shortages.

“In 2024, growth is projected at 2.3 percent, with persistent inflation pressures driven by external supply factors and exchange rate depreciation,” Martin noted.

She stated that the agreement between IMF staff and Zambian authorities focused on the importance of sustaining macroeconomic stability and restoring fiscal and debt sustainability within programme parameters.

Given the ongoing uncertainty, Martin highlighted the necessity of agile policymaking to address the drought’s impact while maintaining external buffers.

Martin commended the Zambian authorities for their progress in implementing crucial reforms under the Fund-supported programme, including significant fiscal efforts in 2023 despite lower mining revenues.

“Despite consolidation, authorities have maintained social spending to support the most vulnerable and continue to provide free primary education,” she observed.

Martin recommended that near-term reform priorities should focus on permanent revenue measures and improved cash and liability management to reduce financing needs crucial for restoring fiscal space and debt sustainability.

Additionally, she suggested strengthening tax administration, removing tax exemptions, and actively combating tax evasion to boost revenues and enhance governance.

She urged Zambia to continue enhancing transparency and advancing governance reforms, especially within the energy sector.

Martin said: “Discussions will continue virtually in the coming weeks toward the completion of the Third ECF review.

“The team would like to thank the Zambian authorities for their cooperation, hospitality, and constructive discussions.”

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