Zambia Unlocks Access to Additional IMF Loans
Zambia has unlocked an additional loan from the International Monetary Fund (IMF), said in a statement following discussions for the 2025 Article IV Consultation and the Fifth Review under the Extended Credit Facility (ECF) with a team led by Ms. Mercedes Vera Martin, IMF Mission Chief for Zambia.
The Zambian authorities and the IMF team have reached a staff-level agreement on the economic policies and reforms needed to conclude the Fifth Review under the 38-month Extended Credit Facility (ECF) arrangement.
The IMF stated that Zambia’s economy proved resilient to the drought, and growth is projected at 5.8 percent in 2025. Rising fiscal pressures and external headwinds call for decisive domestic revenue mobilization and steadfast fiscal discipline to preserve fiscal and debt sustainability.
Sustaining reform momentum will consolidate gains of Zambia’s homegrown reform agenda to achieving higher and more inclusive growth, promoting job creation and building resilience amid a challenging external environment and declining official support.
At the end of the discussions, Ms. Vera Martin said, “The Zambian authorities and the IMF team reached a staff-level agreement on economic policies and reforms for the Fifth Review under the ECF arrangement.
“The agreement is subject to approval by IMF management and the Executive Board in the coming weeks. Once approved by the Executive Board, Zambia will gain access to SDR 139.9 million or about US$194 million) in financing”.
“The Zambian economy demonstrated resilience in 2024, despite a severe drought and global headwinds. Real GDP growth is estimated at 4 percent in 2024—up from 1.2 percent projected at the time of the Fourth Review—driven by stronger-than-projected mining and non-mining activity, especially in ICT, financial services and construction, as well as a less severe contraction in agriculture than initially envisaged.
“Fiscal performance in 2024 was tighter than initially planned, with a primary surplus of 2.9 percent of GDP, driven primarily by spending compression amid tight financing conditions. Social protection spending helped cushion the impact of the drought and rising prices on vulnerable households.
“Growth momentum is expected to continue in 2025, with real GDP growth projected at 5.8 percent. Economic activity would be supported by a rebound in agricultural output, increased copper production, and a gradual recovery in electricity generation, although electricity shortages and reliance on energy imports are expected to persist.
“Driven by higher food prices and kwacha depreciation, inflation averaged 15 percent y/y in 2024 and peaked at 16.8 percent y/y in February. Inflationary pressures have started to show signs of easing since then, partly reflecting hikes in the policy rate, at 14.5 percent since February 2025.
“The current account deficit narrowed in 2024, while gross international reserves have continued to increase, to $4.7 billion by mid-May 2025 (4.1 months of prospective imports). The medium-term outlook remains favorable, but downside risks to the outlook dominate given increasing global uncertainty. Advancing the external debt restructuring would help lower risk premia and catalyze investment.
“The overall fiscal balance is expected to widen to 5.3 percent of GDP, with the primary balance (cash basis, program target) projected at 1.1 percent in 2025. Higher-than-initially projected debt service and new social spending needs are adding fiscal pressures.
“To this end, the authorities have committed to revising the 2025 Budget, to include additional revenue measures and reprioritize expenditures to partly accommodate additional spending needs.
“Going forward, sustained revenue mobilization and stronger expenditure controls will be critical to safeguarding priority spending and supporting fiscal and debt sustainability.
“Continued efforts to strengthen tax administration and expenditure efficiency, broaden the tax base, and monitoring fiscal risks will help improve fiscal policy implementation.
“While inflation is projected to gradually decline in 2025 as food and fuel prices ease, continued vigilance is needed given elevated uncertainty and persistent inflationary pressures.
“Preserving a data-driven and forward-looking monetary policy stance will be essential to steer inflation toward the target band and support macroeconomic stability. Enhancing the monetary transmission will help develop interbank money markets.
“Strengthening the financial legal and regulatory framework in line with international best practices, including for bank resolution, and developing an effective deposit protection scheme, will support financial stability.
“Accelerating reform implementation is needed to lay the foundations for higher and more inclusive growth. Continued efforts to improve the business environment and strengthen governance are critical to boosting investor confidence, reducing the state footprint, particularly in agriculture, and fostering a level-playing field for private sector-led growth.
“These reforms are key to unlocking investment and creating job opportunities needed for Zambia’s rapidly growing youth population. While the open access regime in the fuel sector is being somewhat implemented, renewed efforts to enhance enforcement and transparency in fuel supply will further promote fair competition”. #Zambia Unlocks Access to Additional IMF Loans#
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