Zambia is set to receive a disbursement of $184 million from the International Monetary Fund (IMF) after the lender’s board approved the fourth review of an extended credit facility. This injection of funds comes as part of a 38-month IMF-supported program aimed at stabilizing Zambia’s economy. Following a staff-level agreement reached last month, the disbursement brings the total funds received under the program to approximately $1.3 billion.
The IMF has praised Zambia’s economic performance, noting that the country has made significant progress in maintaining macroeconomic stability. According to the IMF, Zambia’s commitment to fiscal and debt sustainability remains strong, with continued efforts to reduce inflation and support vulnerable households. The IMF also highlighted the country’s focus on advancing structural reforms and improving governance to spur long-term growth.
However, Zambia is currently grappling with the devastating effects of a severe El Niño-induced drought. The drought has led to a sharp reduction in food and electricity supply, forcing the country to rely on imports to meet demand. This has caused inflation to rise to a three-year high, placing additional strain on the country’s economic recovery efforts. Zambia’s energy sector, which depends on hydropower for around 85% of its electricity, has been particularly vulnerable, with water shortages further hampering electricity generation.
As a result of these challenges, the IMF has revised its growth forecasts for Zambia. For 2024, the IMF has lowered its economic growth projection to just 1.2%, down from earlier estimates. The 2025 forecast has also been reduced to 6.2%, from 6.6%, largely due to constraints in electricity supply.
Despite these setbacks, the IMF assessed Zambia’s public debt as sustainable, though it remains at high risk of external debt distress. The IMF expects this risk to moderate in the medium term. In response, Zambia’s Finance Minister Situmbeko Musokotwane reaffirmed the government’s commitment to fiscal consolidation and pledged to tighten monetary policies further to combat inflation. Musokotwane also emphasized the government’s continued efforts to advance critical governance and structural reforms.
The funds from the IMF will provide crucial support to Zambia as it navigates these economic challenges, with hopes of returning to a path of sustainable growth in the near future.