Zambia, IMF reach Staff Level Agreement to access US$187 Million

• Once approved by IMF Management and completed by the Executive Board, Zambia will have immediate access to SDR 433.34 million.
• Ongoing drought has created a more challenging economic environment.
• Zambia’s Agriculture production is expected to contract by 19 percent.

Zambia and and International Monetary Fund (IMF) have reached a Staff Level Agreement on third review of the Extended Credit Facility programme which will trigger fourth disbursement of about $187 Million, upon approval.

IMF Mission Chief for Zambia Mercedes Vera Martin, revealed in a statement that the Staff Level Agreement includes a request made by Government to access an additional 30 percent of quota US$388 Million to preserve macroeconomic stability and support Zambia’s response to external shocks.

Ms. Martin said the ongoing drought has created a more challenging economic environment, reiterating that Zambia’s 2024 real Gross Domestic Product (GDP) growth is now projected at 2.3 percent from 4.7 percent, with additional external and fiscal financing needs.

“In the context of significant macroeconomic challenges that have become more complex to manage due to the severe drought, staff also considered the authorities’ request for an augmentation of the IMF’s financial support to Zambia from the approved SDR 978.2 million or about US$1.3 billion to SDR 1,271.66 million or about $1.7 billion.”

“Once approved by IMF Management and completed by the Executive Board, Zambia will have immediate access to SDR 433.34 million,” Ms. Martin stated.

She also noted that Zambia’s Agriculture production is expected to contract by 19 percent, while power outages will hinder manufacturing activity, as copper production is projected to recover more gradually than initially envisaged.

Ms. Martin added that Inflation, at 14.7 percent in May, is projected to remain elevated, hence the third monetary policy will need to remain appropriately tight, while allowing the exchange rate to play its role as a shock absorber.

“The medium-term outlook remains favorable, supported by expanding mining production and restored debt sustainability.” With inflation still outside the target band, the Bank of Zambia will remain vigilant in curbing inflation toward the 6-8 percent target band.”

“Improving the monetary transmission will help develop interbank money markets. The Bank of Zambia will continue strengthening banking supervision, including by developing an effective deposit insurance scheme and reviewing the financial services framework,” she added.

And commenting on the development,  Finance and National Planning Minister Dr. Situmbeko Musokotwane said the Staff Level Agreement is a testament to Zambia’s determination to rebuild macroeconomic and debt sustainability as well as its ongoing efforts to conclude the debt restructuring process within IMF Programme parameters.

“I want to thank the IMF Mission to Zambia for completing the third programme review which has culminated into a Staff Level Agreement for the Extended Credit Facility Programme. I further wish to thank the Fund for considering our request for additional financing to respond to the ongoing drought that has created a more challenging economic environment.”

“We are happy that the IMF acknowledges the efforts we are making to revitalize Zambia’s economy and achieve sustainable growth,” Dr. Musokotwane stated.

A staff-level agreement with the IMF is a preliminary agreement reached between the IMF staff and the government of a member country on a set of economic policies and reforms that the nation must implement in exchange for financial assistance.

The IMF fielded a mission to Zambia from April 24 to May 7, 2024, as part of the third review of the Extended Credit Facility (ECF) Programme and discussions continued virtually and have now been concluded.