The International Monetary Fund (IMF) announced on Monday that it has reached a staff-level agreement for the fourth review of Zambia’s loan program, which, upon approval by the IMF’s management and executive board, will release approximately $185.5 million to the Zambian government.
This agreement follows an IMF mission to Zambia from October 2 to 15 and subsequent discussions at the IMF and World Bank annual meetings in Washington.
The IMF’s assessment of Zambia’s economic situation highlighted the country’s ongoing struggles, primarily caused by severe drought conditions. These climatic challenges have led to a sharp decline in agricultural output and have contributed to widespread electricity shortages, further dampening economic activity. As a result, the IMF revised its 2024 real GDP growth forecast for Zambia to a modest 1.2%, a significant downward revision from the 2.3% growth forecasted in June.
In addition to these growth challenges, inflation in Zambia has accelerated sharply, reaching 15.7% in October. This surge in inflation is largely driven by rising food prices and a depreciation of the Zambian kwacha, which have well exceeded the country’s target inflation range of 6-8%. These economic pressures are putting considerable strain on Zambia’s households, which are already grappling with the effects of high food prices and a challenging economic environment.
Despite these challenges, the staff-level agreement marks a positive development for Zambia, signaling continued support from the IMF as the country works to stabilize its economy. The release of the $185.5 million is expected to provide some relief and assist with Zambia’s broader economic recovery efforts.
The IMF’s ongoing support for Zambia underscores the country’s importance in regional economic stability and highlights the challenges many nations face in the wake of climate-related shocks and global economic volatility. The IMF’s future discussions with Zambia’s government will be crucial in determining how effectively the country can navigate these economic hurdles and achieve a sustainable recovery in the years ahead.
Melissa Enoch
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