- The IMF Executive Board concluded the 2025 Article IV consultation and completed the fifth review under the 38-month Extended Credit Facility (ECF) Arrangement, providing immediate access to about US$184 million.
- Program performance has remained broadly satisfactory. All end-December 2024 quantitative performance criteria and most indicative targets for end-March 2025 were met. Six out of fourteen structural benchmarks were met for this review, and four were completed with delays.
- The authorities remain committed to maintaining macroeconomic stability, sustaining social spending, and restoring fiscal and debt sustainability, while advancing structural and governance reforms to foster growth.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation and fifth review of Zambia's 38-month Extended Credit Facility (ECF) Arrangement, approved on August 31, 2022, and financing assurances review for Zambia. [1] The completion of this review allows for an immediate disbursement of SDR 139.88 million (about US$184 million), bringing Zambia's total disbursement under the ECF-supported program to SDR 1132.74 million (about US$1.55 billion). The ECF Arrangement seeks to entrench macroeconomic stability, restore debt and fiscal sustainability, enhance public governance, and foster inclusive growth to improve the livelihood of the Zambian people.
Program performance has been broadly satisfactory, with all end-December 2024 quantitative targets and most end-March 2025 indicative targets met. Three end-March 2025 indicative targets—on non-mining tax revenues, arrears clearance, and reserve accumulation—were missed. Six out of fourteen structural benchmarks (SBs) for this review were met, four were completed with delays, and the remainder four SBs on debt office procedures, along with financial sector and governance reforms, were proposed to be reset to the next review. The recent adoption of an amended 2025 budget in line with the program commitments satisfies the prior action set for this review. The Executive Board also granted a waiver for nonobservance of the continuous performance criterion on contracting non-concessional external debt in the fourth quarter of 2024.
With the effects of the historic drought receding, Zambia's economic outlook remains positive. Real GDP growth is estimated at 4 percent in 2024, underpinned by stronger mining and services performance as electricity access was prioritized to productive sectors. Real GDP growth in 2025 is projected at 5.8 percent on the back of continued recovery in agricultural production in the wake of the drought and continued strong performance in mining and services. Headline inflation is expected to gradually decline, to 11 percent by end-2025. The outlook is subject to significant downside risks stemming from global uncertainty. Medium-term prospects hinge on scaling up mining investment, sustained fiscal discipline, and structural reforms to promote private sector activity, economic diversification, and more inclusive growth.
Zambia's public debt is assessed as sustainable, but the country remains at high risk of overall and external debt distress. The authorities have reached agreements in principle with most external commercial creditors, and efforts are ongoing to advance bilateral agreements with official bilateral creditors, in line with program parameters and comparability of treatment as defined by the Official Creditors Committee. Although Zambia is at a high risk of debt distress because of near-term breaches of the DSA thresholds, it is expected to reach a moderate risk of external debt distress over the medium term.
The authorities have consented to the publication of the Staff Report prepared for this consultation [2]
Following the Executive Board discussion, Ms. Gita Gopinath, First Deputy Managing Director and Chair of the Board, issued the following statement:
"Economic policies have helped stabilize Zambia's economy, which proved more resilient than initially envisaged to the impact of a historic drought in 2024. Agricultural, mining and services activity has rebounded strongly, notwithstanding the still limited supply of and access to electricity, while inflation has begun to moderate. Program performance remains broadly satisfactory, and the authorities are continuing to advance structural and governance reforms, albeit with some delays.
"Fiscal consolidation, prudent monetary policy and further reserve accumulation, exchange rate flexibility, and sound financial policies remain crucial for safeguarding macro-financial stability and building resilience against shocks.
"The fiscal path envisaged in the revised 2025 budget will support restoring fiscal and debt sustainability. To this end, progress in enhancing revenue mobilization and strengthening spending efficiency and transparency remain critical to generating much needed fiscal space and supporting the country's medium-term growth and development objectives.
"Zambia's public debt is assessed as sustainable but remains at high risk of overall and external debt distress. Agreements in principle have been reached with the vast majority of external commercial creditors, and efforts are ongoing to advance bilateral agreements with official bilateral creditors, in line with program parameters. Zambia is expected to reach a moderate risk of external debt distress over the medium term.
The Bank of Zambia should continue to act to bring inflation to a downward path, which is key to preserving the credibility of its inflation targeting framework. Reserve accumulation and sustained exchange rate flexibility would help address future external shocks.
"Governance and structural reforms remain vital for promoting private sector activity, economic diversification, and inclusive growth. Enhancing transparency in the energy sector and resource management, strengthening anti-corruption measures, continuing agriculture reform, alongside building climate resilience, will help improve the business climate and support sustainable growth."
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] Option 1: Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the https://www.imf.org/en/Countries/ZMB page.
Option 2: Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent.
Option 3: Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The authorities have requested additional time to decide on the publication of the staff report. A final decision is expected not later than 28 days from the Board consideration date.
Option 4 (opt-outs): Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The authorities have not yet communicated their decision on the publication of the staff report.
