IMF Staff Concludes Visit to Zambia
Press Release No. 15/531
November 20, 2015
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
At the invitation of the authorities, an International Monetary Fund (IMF) team led by Tsidi Tsikata visited Zambia during November 11–20 to review recent economic developments and discuss the authorities’ policy responses to the macroeconomic challenges currently facing the country.
“The Zambian economy is under stress. Low copper prices and a severe electricity shortage are straining economic activity. The Zambian kwacha has lost half of its value since the beginning of the year, causing difficulties for many segments of the economy and population, and putting upward pressure on inflation. Moreover, domestic and external financing conditions have tightened markedly, with increased interest rates on Zambian government debt.
“In recent months, the pressures on the economy have not only reflected the impact of external shocks but also waning market confidence. Fiscal discipline has been undermined by additional spending commitments that stand in contrast to lower-than-budgeted revenues. Further, delayed implementation of critical policy pronouncements such as ensuring cost-reflective pricing of petroleum products and electricity continues to impact negatively on the budget.
“Monetary policy has been appropriately tightened to counter the pressures on the exchange rate and rising inflation, but success will depend on complementary tightening of fiscal policy.
“The mission and the Zambian authorities reached a shared understanding on the current economic challenges and the implications of alternative policy choices. Zambia—with a record of peace and political stability and abundant natural resources—remains a country with great potential to achieve strong and inclusive growth. The mission remains confident that resolute implementation of a credible package of measures to lower the fiscal deficit will go a long way towards restoring market confidence, bringing stability to the economy, enabling a speedy recovery in economic growth, and ensuring debt sustainability.
“It was agreed that the authorities and IMF staff would remain closely engaged in the period ahead. The Zambian authorities undertook to conduct internal consultations based on the outcome of the mission, with a view to defining the forms and timing of engagement.
“The team met with His Excellency President Edgar Lungu, Finance Minister Alexander Chikwanda, Bank of Zambia (BoZ) Governor Denny Kalyalya, other senior government and BoZ officials, members of parliament, as well as representatives of the private sector, labor unions, civil society organizations, and Zambia’s development partners. The mission thanks the authorities and the other stakeholders it met, for their openness and the constructive spirit in which all discussions were held.”