International Monetary Fund Cites Progress in Macroeconomic Stability in Zambia but Warns of Emerging Fiscal Pressures
An International Monetary Fund (IMF) staff team has indicated that Zambia has made significant progress in restoring macroeconomic stability following the completion of its IMF-supported reform programme, although emerging fiscal pressures and global economic risks could weigh on the country’s outlook.
The IMF mission, led by Edward Gemayel, visited Zambia from February 26 to March 4, 2026, as part of the Fund’s routine engagement with the Zambian authorities and other stakeholders to assess recent macroeconomic developments and policy priorities.
According to a statement issued at the end of the visit, the IMF team held discussions with government officials on economic performance, the evolving outlook, and policy measures required to sustain the country’s ongoing reform efforts.
The Fund noted that Zambia has recorded notable progress under the recently completed IMF-supported programme, with public external debt largely restructured, international reserves strengthened, economic growth recovering, and inflation declining to within the target band of the Bank of Zambia.
These outcomes, the IMF said, reflect sustained reform efforts by the authorities and have helped rebuild Zambia’s credibility with creditors and financial markets.
Despite these gains, the IMF cautioned that the economic outlook remains subject to downside risks amid domestic challenges and rising global uncertainty.
Economic growth for 2025 has been revised downward to 4.5 percent, reflecting weaker-than-expected performance in the mining sector, softer wholesale trade activity, and persistent energy-related constraints affecting non-mining industries.
Growth is projected to moderate to 5.5 percent in 2026, partly due to a normalization in agricultural output following the bumper harvest recorded in the previous year.
The IMF also warned that rising global oil prices and heightened geopolitical tensions could place renewed pressure on inflation and the exchange rate.
According to the Fund, allowing domestic fuel prices to adjust in line with higher international oil prices could help limit potential losses in fuel tax revenues if external pressures persist.
The mission further highlighted emerging fiscal pressures despite the government’s target of achieving a strong primary surplus in the 2026 budget.
Early indications of fiscal slippage have begun to surface, driven by spending pressures linked to the public sector wage bill, government support to the agricultural sector, and election-related expenditures.
In particular, the IMF noted that the scale and financing of operations by the Food Reserve Agency will require careful management to prevent the re-emergence of quasi-fiscal risks.
Without corrective measures, the Fund projects that Zambia’s primary surplus in 2026 could fall by about one percentage point of GDP from the 3.8 percent target set during the last review under the Extended Credit Facility (ECF) programme.
The IMF therefore underscored the need for authorities to transparently incorporate all spending pressures into the fiscal framework while implementing contingency measures to safeguard the gains achieved under the reform programme.
The Fund also emphasised the importance of continuing fiscal structural reforms aimed at strengthening revenue mobilisation and customs administration to broaden the tax base and create a more equitable and efficient tax system.
Zambian authorities, according to the IMF, have expressed interest in negotiating a successor programme following the completion of the previous arrangement.
IMF staff indicated that discussions on a potential new programme could begin as early as late April, although substantive negotiations are expected to resume only after the country’s general elections later this year and the formation of a new government.
During the visit, the IMF delegation held meetings with Hakainde Hichilema, Finance Minister Situmbeko Musokotwane, and Denny Kalyalya, as well as other senior government officials, civil society organisations, and development partners.
