The International Monetary Fund (IMF) has approved disbursement of $184 million to Zambia following a successful fourth review of its Extended Credit Facility (ECF) arrangement with Lusaka.

The latest payment brings Zambia’s total disbursement under the 38-month programme to $1.3 billion.

The fund’s second deputy managing director Nigel Clarke termed Lusaka’s programme performance satisfactory.“Fiscal consolidation, prudent monetary policy and further reserve accumulation, exchange rate flexibility, and sound financial policies will be crucial for safeguarding macro-financial stability and building resilience against shocks,” Mr Clarke said.

Zambia’s ECF arrangement was approved on August 31, 2022, for SDR 978.2 million ($1.3 billion), with the access augmented to SDR 1.27 billion (about $1.7 billion) on June 24, 2024.

The programme aims to support Zambia’s Eighth National Development Plan that seeks to entrench macroeconomic stability, attain debt and fiscal sustainability, strengthen public governance, and promote inclusive growth to improve the livelihood of the Zambian people, especially the vulnerable.

Zambia’s economic growth is expected to decline to 1.2 percent, from the 2.3 percent projected in the third review, largely due to the drought that has significantly contracted agriculture and electricity production.

Overall inflation has risen further due to higher food prices and past currency depreciation, despite an improvement in the current account on subdued imports earlier in the year.“Contracting agricultural and electricity outputs have slowed growth and accelerated inflation,” the IMF said.“Nevertheless, the authorities remain committed to maintaining macroeconomic stability and restoring fiscal and debt sustainability, while supporting vulnerable households.”Debt concernThe fund says although Zambia is at a high risk of debt distress because of near-term breaches of the debt sustainability analysis thresholds, the country is expected to reach a moderate risk of external debt distress over the medium term.

Zambia’s fiscal consolidation path envisaged in 2025 is expected to help in restoring fiscal and debt sustainability, while planned measures to expand the tax base, harmonise corporate income tax and index excises are adequate, although heightened risks to the post drought recovery necessitate contingency revenue and expenditure measures.

The fund said Lusaka’s progress in enhancing revenue mobilisation and strengthening spending efficiency and transparency, including of state-owned enterprises, are critical to generate much needed fiscal space, including to support the most vulnerable.“Zambia’s public debt is assessed as sustainable but remains at high risk of overall and external debt distress,” it said.

The assessment is based on a full post-restructuring macro-framework, that incorporates the treatment of official bilateral claims agreed with the official creditors’ committee, the completed Eurobond exchange, and the agreements in principle with most commercial creditors.

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