Zambia’s Gross Domestic Product ,GDP, growth has been revised to 1.2% year-on-year as power outage put pressure on the country’s economic activities.
An International Monetary Fund ,IMF, mission team led by Ms. Mercedes Vera Martin said the economic impact of the drought has been greater than anticipated due to the intense electricity shortages in the country.
The Fund said the staff team had discussions with the Zambian authorities on economic and financial policies to support the approval of the Fourth Review under the ECF-supported arrangement.
The IMF said that the Zambian authorities have advanced on their program commitments while implementing their drought response in a challenging environment.
At the end of the mission, Martin said, “The Zambian authorities and IMF staff advanced the technical work as part of their discussions for the Fourth Review under the Extended Credit Facility.
“Discussions focused on assessing the economic impact of the drought, updating the economic outlook, and assessing policies and reform efforts to support growth.
“The Zambian economy has been severely impacted by the prolonged power outages due to load shedding, which has notably hindered growth in the non-mining sector.
“Growth in 2024 is projected at 1.2%, from 2.3% previously. Inflation is expected to continue increasing due to past kwacha depreciation, increasing food and fuel prices, and hikes in administrative prices.
“Subdued import demand has helped reduce volatility in the kwacha and support reserve accumulation. Fiscal performance has been stronger than initially envisaged due to lower domestic financing and proactive spending reprioritization.
“To support the most vulnerable, the government has scaled up social cash transfers, implemented a cash-for-work program, and expanded free school lunch programmes.
“Despite challenging conditions, the Zambian authorities have made progress in implementing reforms under the Fund-supported programme.
Against heightened uncertainty, responsive policymaking will be paramount to sustain macroeconomic stability while building resilience to shocks.
To this end, the mission emphasized the need to prioritize progressive revenue measures that will strengthen fiscal buffers and support debt sustainability.
IMF said key initiatives recommended for Zambian government include improved tax administration, streamlined tax exemptions, and enhanced tax compliance.
The mission also underscored the need to advance energy and governance reforms while continuing efforts to level the playing field to promote private sector-led growth that will generate jobs. Agile monetary policy will help bring inflation down while supporting the economic recovery in 2025.
IMF said discussions with the authorities will continue in the weeks ahead, including during the upcoming IMF/World Bank Group Annual Meetings in Washington, D.C., next week.
“The IMF remains a committed partner to Zambia, working closely with the authorities to develop strategies that effectively tackle the country’s current economic challenges”, the statement reads.
