An International Monetary Fund staff team concluded a visit to Lusaka after advancing discussions on a successor IMF-supported arrangement for Zambia and reviewing policy priorities for the period ahead. The team said the authorities remain committed to a new Fund-supported program after the elections, anchored in macroeconomic stability and fiscal consolidation while protecting social and other priority spending. It pointed to progress under the completed Extended Credit Facility arrangement, with gross international reserves at USD 6.4 billion, April 2026 inflation at 6.8 percent within the Bank of Zambia’s target band, a 2025 primary surplus of 3.1 percent of GDP, and debt restructuring agreements covering about 94 percent of the restructuring perimeter. The statement also warned that conditions have become more difficult in 2026. Growth was revised down to 4.3 percent because of weaker mining output, a normalization in agriculture after the exceptional 2025 harvest, softer trade, energy constraints, and spillovers from the war in the Middle East, while end-2026 inflation is projected at 8.5 percent. Fiscal pressures have intensified, with the primary surplus now projected at 1.1 percent of GDP versus 3.8 percent at the time of the Sixth Review, reflecting weaker tax collection including from the suspension of fuel VAT and excise duties, pre-election spending pressures, a civil service wage adjustment, agricultural subsidy overruns of about 1.3 percent of GDP, and fiscal risks linked to the Food Reserve Agency. The mission also cited weak domestic VAT administration and refund backlogs, called for careful calibration of the Bank of Zambia’s policy rate and maintenance of reserves at around five months of prospective imports, and urged the authorities to restore the TAZAMA open-access framework, publish the terms of emergency fuel procurement arrangements, and move to transparent monthly fuel import auctions when conditions allow. For a successor Extended Credit Facility arrangement, the mission identified priorities of preserving macroeconomic stability while shifting toward more inclusive, private sector-led growth. Areas highlighted included copper value addition, easing energy supply constraints, and improving the attractiveness of agribusiness, tourism, and textiles. It also said stronger revenue mobilization, better governance and transparency, and climate adaptation and mitigation policies are needed to reduce the domestic interest burden, bring debt to a moderate risk of distress, and strengthen resilience to drought and energy shocks.

Original source View in tracker