• Growth in 2024 is now projected at 2.3 percent.
• Near-term reform priorities should focus on permanent revenue measures and better cash and liability management.
• Strengthening tax administration, removing tax exemptions, and actively combating tax evasion can also boost revenues.

International Monetary Fund (IMF) has downgraded Zambia’s economic growth projection for 2024 to 2.3 percent against the 4.7 percent forecast, amid drought which has adversely affected agriculture and energy sectors.

In a statement, IMF Mission team lead to Zambia Vera Martin,  said other factors include the continued inflation pressures driven by external supply factors and the depreciation of the exchange rate.

Ms. Martin stated that during the IMF team’s visit to Lusaka, the Zambian authorities and IMF staff advanced the technical work as part of their discussions for the Third Review under the Extended Credit Facility (ECF) as discussions focused on analyzing recent economic developments and assessing the economic impact of the drought.

“The team had productive discussions with the authorities. Discussions will continue virtually in the coming weeks, including to better assess the economic impact of the drought and agree on policies to support the completion of the ECF review.

“Reform efforts will continue to focus on sustaining macroeconomic stability and restoring fiscal and debt sustainability, while addressing the humanitarian relief required by the drought.”

She observed that Zambia has made commendable progress in implementing crucial reforms under the Fund-supported program, including significant fiscal efforts in 2023 despite lower mining revenues, adding that authorities have also upscaled social spending to support the most vulnerable and continue to provide free primary education.

“There was agreement between the IMF staff and the Zambian authorities on the need to durably sustain macroeconomic stability and restore fiscal and debt sustainability in line with program parameters. Against continued uncertainty, agile policymaking will be paramount to respond to the impact of the drought while maintaining external buffers.”

“Growth in 2024 is now projected at 2.3 percent, while inflation pressures persist driven by external supply factors and the depreciation of the exchange rate,” Ms. Martin stated.

She added that discussions will continue virtually in the coming weeks toward completion of the Third ECF review.

“Near-term reform priorities should focus on permanent revenue measures and better cash and liability management that would reduce the financing needs crucial to restore fiscal space and debt sustainability.

“In addition, strengthening tax administration, removing tax exemptions, and actively combating tax evasion can also boost revenues and improve governance. Continued progress in enhancing transparency and advancing governance reforms, particularly within the energy sector, is essential. The team would like to thank the Zambian authorities for their cooperation, hospitality, and constructive discussions,” she added.

An IMF team, led by Ms. Martin visited Lusaka from April 24 to May 7 to discuss recent economic and financial developments, as well as economic policies that could underpin the Third Review of the IMF Extended Credit Facility.