The International Monetary Fund (IMF) has approved a fresh release of $184 million to Zambia following its fifth review under a 38‑month Extended Credit Facility (ECF) programme. With this release, Zambia’s total IMF disbursements under the arrangement reach approximately $1.55 billion.
This tranche hinges on Zambia’s commitment to accelerate economic reforms. In particular, Lusaka has pledged to boost tax collection, streamline fiscal policy, and improve governance as conditions for the funding.
Zambia’s Reform Measures and Tax Strategy
As part of its reforms, Zambia intends to raise the withholding tax on government securities from 15% to 20%. The government will also introduce a turnover‑based minimum alternative tax of 1%, designed to reduce the scope for underpaid business income tax.
These revenue measures are part of a broader plan to shore up public finances and close a growing fiscal gap. In fact, the Finance Minister has proposed borrowing an additional 14.8 billion kwacha — around $633 million — from domestic markets to cover shortfalls in the current budget.
Economic Outlook and Context
The IMF expects Zambia’s GDP growth to accelerate to 5.8% in 2025, with a further rise to 6.4% in 2026. These projections reflect a recovery from the historic drought that hampered agricultural production and electricity output, notably affecting hydropower generation (which supplies about 85% of the country’s power).
Zambia has recently concluded a debt restructuring agreement with its main creditors, although talks continue with some smaller lenders such as Afreximbank. While the public debt is now classified as sustainable, external debt remains at moderate risk if reforms stall.
Why This Matters
This new disbursement signals continued support from the IMF, conditioned on Zambia pressing ahead with reforms to stabilise its economy and generate revenue. The country is navigating a delicate balance between stimulating growth and getting public finances under control.
From a financial journalist’s viewpoint, Zambia’s situation illustrates a familiar pattern: emergency assistance tied to reform commitments. The government’s fiscal moves—raising withholding tax and introducing minimum taxes—are necessary steps. However, they risk stifling private sector incentives, especially for small businesses operating near the tax threshold.
While IMF projections of near‑6% growth suggest a rebound, these forecasts remain vulnerable to external shocks. Global copper prices and climate variability pose significant risks. Zambia’s heavy reliance on hydropower leaves it exposed to drought, and inflation pressures may intensify if food imports rise.
Moreover, although debt restructuring has largely been secured, unresolved negotiations with smaller lenders could delay full recovery. Any worsening of the global economic outlook or a rise in commodity volatility could undercut both domestic revenue and investor confidence.
