The Zambian authorities and the International Monetary Fund (IMF) team have reached a staff-level agreement on economic policies and reforms. This agreement is a key step towards concluding the Fifth Review under Zambia’s 38-month Extended Credit Facility (ECF) arrangement. The announcement was made by Ms. Mercedes Vera Martin, IMF Mission Chief for Zambia, following discussions in Lusaka and subsequent virtual meetings.
The agreement, which is subject to approval by IMF management and the Executive Board in the coming weeks, will unlock approximately US$194 million (SDR 139.9 million) in financing for Zambia.
Despite a severe drought and global economic challenges in 2024, Zambia’s economy demonstrated resilience, with real GDP growth estimated at 4 percent. This figure surpasses the initial projection of 1.2 percent at the time of the Fourth Review, driven by stronger-than-expected performance in mining, ICT, financial services and construction sectors. Fiscal performance in 2024 also exceeded expectations, achieving a primary surplus of 2.9 percent of GDP due to expenditure compression.
Looking ahead, economic growth is projected to accelerate to 5.8 percent in 2025. This growth is anticipated to be supported by a rebound in agricultural output, increased copper production, and a gradual recovery in electricity generation. However, challenges persist, including persistent electricity shortages and reliance on energy imports.
Inflation averaged 15 percent year-on-year in 2024, peaking at 16.8 percent in February. While inflationary pressures have shown signs of easing since then, partly due to policy rate hikes, continued vigilance is deemed necessary. The current account deficit narrowed in 2024, and gross international reserves have risen to $4.7 billion by mid-May 2025, providing 4.1 months of prospective import cover.
The overall fiscal balance is projected to widen to 5.3 percent of GDP in 2025, with the primary balance projected at 1.1 percent. This is primarily due to higher debt service obligations and increased social spending needs. To address these pressures, the Zambian authorities have committed to revising the 2025 Budget to incorporate additional revenue measures and reprioritize expenditures.
The IMF emphasized the importance of sustained revenue mobilization, stronger expenditure controls, and ongoing efforts to strengthen tax administration and expenditure efficiency to safeguard fiscal and debt sustainability.
In terms of monetary policy, continued vigilance is advised to steer inflation towards the target band and support macroeconomic stability, despite projected gradual declines in inflation in 2025. Enhancing monetary transmission mechanisms and strengthening the financial legal and regulatory framework are also highlighted as crucial for financial stability.
Furthermore, the IMF stressed the need to accelerate reform implementation to foster higher and more inclusive growth. This includes improving the business environment, strengthening governance, and reducing the state’s footprint in key sectors, particularly agriculture, to promote private sector-led growth and job creation. Efforts to enhance transparency and enforcement in the fuel sector are also encouraged.
The IMF team conducted extensive meetings with Zambian officials, including President Hakainde Hichilema, Minister of Finance and National Planning Dr. Situmbeko Musokotwane, and Governor of the Bank of Zambia Dr. Denny Kalyalya, as well as representatives from the private sector, civil society, and development partners.
