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Zambia has successfully gained access to approximately $189 million in loans from the International Monetary Fund (IMF) following the completion of the first review under the 38-month Extended Credit Facility (ECF).
In an announcement, the IMF’s Executive Board revealed the completion of the first ECF review and the 2023 Article IV Consultation with Zambia. The completion of the review enables an immediate disbursement of SDR 139.88 million (equivalent to around $189 million), bringing the total disbursements under the ECF arrangement to about $374 million.
The ECF Arrangement for Zambia amounts to SDR 978.2 million (100% of quota), or approximately $1.3 billion at the time of program approval in August 2022. This financial support aims to assist Zambia in implementing a homegrown economic reform plan, restoring macroeconomic stability, and fostering higher, more resilient, and inclusive growth.
On June 22, 2023, the Zambian authorities reached an agreement with the Official Creditor Committee (OCC) regarding a debt treatment aligned with the parameters of the IMF program. This agreement sets Zambia on the path to debt sustainability, ensuring the necessary financing assurances for the completion of the Executive Board review. It also paves the way for the authorities to focus on growth-enhancing reforms that will generate employment and prosperity for the country.
The IMF commends Zambia’s reform efforts since the initiation of the ECF, with the majority of quantitative performance criteria and structural benchmarks for the first review being met. Steps have been taken to reduce inefficient public spending, allowing for increased social expenditure and investments in human capital. Public procurement regulations are being implemented to ensure transparency and value-for-money in public spending. Efforts to improve the business environment and attract private investment are also underway.
The Executive Board also concluded the 2023 Article IV consultation with Zambia. The Zambian economy, despite weathering several external shocks in recent years, is showing signs of strength, with a projected GDP rebound following the COVID-19 pandemic. However, significant challenges remain, including high poverty and inequality levels and vulnerability to climate shocks.
To create an environment conducive to private sector development and attract essential private investment, strengthening economic governance and addressing corruption vulnerabilities are crucial. Fiscal credibility must be maintained while allowing sufficient space for social, developmental, and climate spending. The implementation of recommendations from the IMF’s Diagnostic Report on Governance and Corruption, along with climate-smart growth policies, will contribute to a favorable environment for private sector investment and overall economic growth.
Following the Executive Board discussion on Zambia, Kristalina Georgieva, Managing Director of the IMF, emphasized the importance of sustaining strong policies to safeguard macroeconomic stability, restore debt sustainability, and promote durable and inclusive growth. Fiscal adjustment, revenue mobilization, continued fiscal reforms, and social spending are key areas of focus. Swift finalization and signature of the Memorandum of Understanding with the OCC will restore Zambia’s debt sustainability in the medium term, alongside agreements with private creditors on comparable terms. The Bank of Zambia should remain vigilant to inflationary pressures and continue reforms to preserve financial stability and enhance inclusion. Strengthening economic governance and combating corruption remain integral to the reform process, enabling a favorable environment for private sector investment and growth.
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