From March 22 to April 5, 2023, an International Monetary Fund (IMF) staff team led by Ms. Allison Holland, Mission Chief for Zambia, met in Lusaka to discuss progress on reforms and the authorities’ policy priorities in the context of the first review of Zambia’s 38-month program supported by the Extended Credit Facility (ECF). The agreement was authorized by the IMF Executive Board on August 31, 2022, for a total of SDR 978 million (US$1.3 billion). In addition, the team performed the 2023 Article IV consultation.
The Zambian government and the IMF staff team established an agreement at the staff level on the first review of Zambia’s economic program under the ECF structure. After the required finance assurances have been acquired, the staff-level agreement is subject to IMF Management approval and Executive Board deliberation.
A debt treatment arrangement with official creditors in accordance with program specifications would offer the necessary funding assurances.
After the Executive Board assessment, Zambia would have access to SDR 140 million (about US$188 million), increasing the total IMF financial assistance provided under the arrangement to SDR 280 million (approximately US$376 million).
“In light of Zambia’s strong performance under the Fund-supported program, the critical next step is to secure an agreement with official creditors on a debt treatment consistent with the IMF Executive Board-approved program parameters and debt targets.
We urge official creditors to move forward and agree on an appropriate debt treatment in line with the financing assurances they provided in July 2022. Further delays risk a worsening outlook for Zambia, delaying its return to sustainable growth, and reducing its capacity to repay,” a statement issued by Ms. Holland reads in part.
Notwithstanding problems in the mining and agriculture sectors, the Zambian economy remains reasonably durable against an increasingly tough global economic environment, with solid growth of 4.7 percent in 2022. Since May 2022, inflation has stayed in the single digits, although it is under growing pressure due to the persistent devaluation of the currency. The Bank of Zambia’s tightening of monetary conditions in February was an acceptable policy reaction.
Additionally, the statement issued reads, “There are significant uncertainties going forward. Delays in debt restructuring, weather-related shocks, and copper prices remain the dominant sources of risk.
Globally, an abrupt growth slowdown would reduce copper prices, while an escalation of Russia’s war in Ukraine would increase fertilizer and food prices, increasing inflation and spending on agricultural inputs.”