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The International Monetary Fund (IMF) has downgraded Zambia’s growth prospects to 4.5 percent, citing domestic challenges and heightened global economic uncertainty.
An IMF staff team led by Edward Gemayel visited Zambia from February 26 to March 4, 2026, as part of the Fund’s regular engagement with the Zambian authorities and other stakeholders.
At the conclusion of the visit on Thursday evening, Gemayel said economic growth for 2025 had been revised downward to 4.5 percent, reflecting weaker-than-expected performance in the mining sector, softer wholesale trade, and continued energy-related constraints affecting non-mining activities.
He added that growth for 2026 was projected at 5.5 percent, reflecting a normalization of agricultural output following last year’s bumper harvest.
Gemayel further warned that rising global oil prices and elevated geopolitical tensions could place renewed pressure on inflation and the exchange rate.
Should these conditions persist, he said appropriate domestic price adjustments to higher international oil prices would help mitigate potential losses in fuel tax revenues.
“Against this backdrop, building buffers and preserving policy discipline will be essential,” he said.
The IMF team held discussions with Zambian authorities on recent macroeconomic developments, the economic outlook and policy priorities for the period ahead.
Gemayel noted that Zambia had made substantial progress in restoring macroeconomic stability under the recently completed IMF-supported programme.
“Public external debt has been largely restructured, international reserves have strengthened, growth has picked up, and inflation has continued to decline—recently reaching the Bank of Zambia’s target band,” Gemayel said.
“These outcomes reflect sustained reform efforts and have helped reinforce Zambia’s credibility with creditors and market participants,” he added.
The mission also discussed emerging fiscal pressures.
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While the 2026 budget framework targets a strong primary surplus, Gemayel said early signs of slippage had begun to emerge due to spending pressures related to the wage bill, government support to the agricultural sector and election-related expenditures.
He noted that the scale and financing of operations by the Food Reserve Agency (FRA) would require careful management to avoid the re-emergence of quasi-fiscal risks.
“Absent corrective measures, the 2026 primary surplus is projected to fall by about one percentage point of GDP relative to the 3.8 percent of GDP envisaged at the last review under the recently completed ECF-supported program,” he said.
IMF staff also emphasised the need to transparently integrate all spending pressures into the fiscal framework, supported by appropriate contingency measures, while preserving the gains achieved under the programme.
Gemayel said fiscal structural reforms should remain focused on strengthening revenue and customs administration in order to broaden the tax base and support a more progressive, equitable and less complex tax system.
“The authorities reiterated their interest in a successor arrangement. Staff emphasized that the next phase of engagement should focus on further strengthening macroeconomic stability and advancing reforms to improve the business climate and support private sector-led growth,” he said.
He added that initial discussions on a potential new arrangement could begin as early as late April, but in light of the electoral calendar, substantive talks would likely resume only after the general elections later this year and once a new government is in place.
During the visit, the IMF team met with Hakainde Hichilema, Finance Minister Situmbeko Musokotwane, Denny Kalyalya, Governor of the Bank of Zambia, as well as senior government officials, civil society organisations and development partners.
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