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The Zambian authorities and the International Monetary Fund (IMF) have reached a staff-level agreement on economic policies and reforms under the Fifth Review of Zambia’s Extended Credit Facility (ECF) arrangement.
The agreement, which is subject to approval by IMF management and its Executive Board in the coming weeks, will unlock access to approximately US$194 million in financing, according to Mercedes Vera-Martin, IMF Mission Chief for Zambia.
In a statement following meetings with President Hakainde Hichilema and senior government officials, Vera-Martin noted that Zambia’s economy showed resilience in 2024 despite a severe drought and global economic headwinds.
Real GDP growth is now estimated at 4 percent for 2024—up significantly from the 1.2 percent projected during the Fourth Review.
Growth has been driven by stronger-than-expected performance in both mining and non-mining sectors, particularly ICT, financial services, and construction, alongside a less severe agricultural contraction.
Fiscal performance in 2024 was tighter than anticipated, with a primary surplus of 2.9 percent of GDP.
This was largely the result of constrained spending due to limited financing options. Social protection measures also helped mitigate the impact of drought and inflation on vulnerable populations.
“Growth momentum is expected to continue into 2025, with real GDP projected to grow by 5.8 percent,” said Vera-Martin, citing a rebound in agriculture, increased copper production, and a gradual recovery in electricity generation.
However, she warned that power shortages and reliance on energy imports were likely to persist.
Inflation averaged 15 percent year-on-year in 2024, peaking at 16.8 percent in February, driven by higher food prices and depreciation of the kwacha.
Vera-Martin noted signs of easing inflationary pressure since then, following a policy rate increase to 14.5 percent in February 2025.
The current account deficit narrowed in 2024, and gross international reserves rose to $4.7 billion by mid-May 2025—equivalent to 4.1 months of projected imports.
While the medium-term outlook remains broadly positive, Vera-Martin cautioned that downside risks dominate amid global uncertainty.
She emphasized that advancing external debt restructuring will be critical to lowering risk premiums and catalyzing investment.
“The overall fiscal deficit is projected to widen to 5.3 percent of GDP in 2025, with the primary balance (on a cash basis, under the program target) expected at 1.1 percent,” she said. Fiscal pressures are being exacerbated by higher-than-anticipated debt service costs and new social spending requirements,”
Vera-Martin said.
To safeguard fiscal and debt sustainability, the IMF recommends continued revenue mobilization and tighter expenditure controls.
Key measures include strengthening tax administration, broadening the tax base, improving spending efficiency, and closely monitoring fiscal risks.
“While inflation is projected to decline gradually in 2025 as food and fuel prices ease, continued vigilance is necessary amid elevated uncertainty and persistent price pressures,” said Vera-Martin.
To address these challenges, the Zambian government has committed to revising the 2025 budget to include new revenue measures and reprioritize expenditures to accommodate emerging spending needs.
The IMF mission held discussions with President Hichilema, Minister of Finance and National Planning Dr. Situmbeko Musokotwane, Bank of Zambia Governor Dr. Denny Kalyalya, Secretary to the Treasury Felix Nkulukusa, and other senior officials. The team also engaged with representatives from the private sector, civil society, and development partners.
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