IMF approves US$187 million disbursement

… to entrench macroeconomic stability

The International Monetary Fund (IMF) recently completed the country’s second review of the 38-month extended credit facility (ECF) arrangement.

According to IMF, the completion of the second review of the ECF arrangement allows for an immediate disbursement of SDR 139.88 million (about US$187 million), bringing the country’s total disbursement under the ECF to SDR 419.64 million (about US$561 million).

Adopted on August 31, 2022, the ECF arrangement totalling SDR978.2 million (100 percent of quota, about US$1.3 billion) supports the country’s home-grown 8th National Development Plan that seeks to entrench macroeconomic stability, attain debt and fiscal sustainability, foster inclusive growth, and improve the livelihood of the Zambian people, especially the vulnerable.

The government authorities have agreed on a Memorandum of Understanding (MoU) with the Official Creditor Committee (OCC) on October 14, 2023, that reflects the June 2023 debt treatment agreement, in line with the IMF program parameters. The authorities remain committed to reaching an agreement with private external creditors that respects the comparability of treatment (CoT) requirements as defined by the OCC and is consistent with IMF program parameters.

So far, program performance has been satisfactory despite a challenging domestic and global environment. All but one quantitative performance criteria for the second review were met.

The authorities requested a waiver of non-observance for missing the end-June 2023 net international reserve target as they have put in place corrective measures. Four out of seven structural benchmarks were met, with two others completed with minor delays.

Economic performance has proven resilient despite recurrent shocks and delays in debt restructuring. Growth was revised upwards to 4.3 percent in 2023 thanks to strong performance in the non-agricultural and non-mining sectors, despite weakened mining production.

The authorities continue taking steps to restore fiscal and debt sustainability, raise and safeguard social spending, preserve financial stability, and intensify structural and governance reforms to unlock growth potential.

Antoinette Sayeh, IMF Deputy Managing Director and acting chair said authorities have maintained efforts to stabilize the economy despite recurrent external shocks.

“Continuing to take measures to restore fiscal and debt sustainability, including advancing with the debt restructuring, and implementing reforms are critical to safeguard macroeconomic stability and foster durable and inclusive growth.

“Zambia’s performance under its Fund-supported program has remained satisfactory, including continued fiscal consolidation—despite lower mining revenues—and structural reform implementation. Sustaining fiscal consolidation remains crucial. In particular, scaling up efforts to mobilize revenues, including by broadening the tax base and removing exemptions, would help preserve social spending, clear domestic arrears, and address development needs. Public financial management reforms are critical to enhance budget execution and the quality of government spending. The authorities are also making efforts to enhance governance and transparency in public debt management.

“The agreed memorandum of understanding (MoU) with official bilateral creditors, formalizing the agreement on a debt treatment consistent with the program’s parameters reached in June 2023, and the authorities’ good faith efforts with private creditors to reach an agreement consistent with the program’s parameters and comparability of treatment (as defined by the Official Creditor Committee) are welcome.

“Prompt implementation of the MoU, together with reaching agreement with private creditors on comparable terms and in line with the program’s parameters, is critical to restore debt sustainability over the medium term.”

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