IMF Reaches Staff-Level Agreement with Zambia on $1.7 Billion Loan Package

Situmbeko Musokotwane
Zambian Finance Minister

In a move aimed at stabilizing Zambia's economy amid severe drought and macroeconomic challenges, the International Monetary Fund (IMF) has reached a staff-level agreement with the African nation on a $1.7 billion loan package.

The agreement, which is subject to IMF Management approval and Executive Board consideration, will provide Zambia with immediate access to $433 million once approved. The loan is an augmentation of the IMF's existing $1.3 billion support package approved in August 2022.

Zambia's economy has been hit hard by a severe drought, which has led to a contraction in agriculture production, power outages, and a slower recovery in copper production. The 2024 outlook has worsened, with GDP growth now projected at 2.3%, down from 4.6% forecast in December 2023.

To address these challenges, the Zambian authorities have committed to implementing a range of reforms, including:

- Reprioritizing spending to accommodate emergency relief for vulnerable households

- Maintaining fiscal prudence and considering additional domestic revenues

- Tightening monetary policy to curb inflation

- Implementing structural reforms to promote private sector development and economic diversification

The IMF staff team, led by Mercedes Vera Martin, held in-person discussions with Zambian authorities in Lusaka from April 24 to May 7, with virtual discussions continuing subsequently.

The agreement is a significant step towards stabilizing Zambia's economy and restoring sustainability. The IMF staff team praised the authorities for their constructive dialogue and strong cooperation in finalizing the reform package.

A Board meeting is expected by the end of June to finalize the agreement.