Thursday, June 20, 2024

IMF cuts Zambia’s GDP forecast to 2% from 2.3%


IMF Meeting
IMF Meeting

The International Monetary Fund says the Zambian economy is expected to slow down to as much as 2% this year.

The Fund cites decline in mining activity and the impact of the drought on hydro power production.

It said the outlook is further clouded by the ongoing drought and heightened debt vulnerabilities.

This is according to a statement released after the IMF Executive Board Concluded its 2019 Article IV Consultation with Zambia Friday evening.

“Growth is projected to slow to 2 percent in 2019, reflecting a decline in mining sector activity in an uncertain environment for mining companies and the drought’s impact on hydro power production,” it said.

“Absent significant policy adjustments, growth is likely to remain subdued over the medium term as expenditure arrears and an ongoing forced adjustment in response to increasing debt-related pressures weigh on the private sector,” it said.

It also stated that it expects Inflation to remain above the top of the Bank of Zambia’s (BoZ) target band in 2019 and 2020.

“The BoZ increased the policy rate by 50 bps to 10.25 percent in May. While the central bank has moved to shore up reserves as market conditions have permitted, reserves are projected to decline to 1.6 months of import cover by end-2019. Key risks include the uncertain impact of the drought, a potential tightening of global financial conditions, a further escalation in trade tensions, and the uncertain growth dividend from recent infrastructure investments.”

It added, “Zambia’s development strategy has focused on a rapid-scaling up of public investment to address the country’s infrastructure needs.”

“While public investment has increased sharply, economic growth remains well below levels seen earlier this decade and is estimated at 3.7 percent in 2018.”

“Inflation averaged 7 percent in 2018, but a depreciation of the currency late in 2018 and again this spring coupled with food price rises has pushed inflation above 8 percent. Fiscal revenues exceeded budget targets in 2018, but the deficit widened above 10% percent on a commitment basis (over 8 percent of GDP on a cash basis) due to a rising interest bill and a surge in public investment reflecting faster than expected execution of public investment projects.”

It stated, “Total public and publicly-guaranteed (PPG) debt including arrears at end-2018 was 78 percent of GDP. The current account deficit widened to 2.6 percent of GDP in 2018 due to higher imports and debt service, while reserves declined from 2.4 months of import cover in 2017 to 1.9 months at end of 2018.”

The Executive Directors agreed with the thrust of the staff appraisal noting the deterioration in macroeconomic outcomes in Zambia and heightened vulnerabilities due to the ongoing drought and recent policy slippages.

They also expressed concern that public debt and debt service have increased rapidly due to heavy reliance on non concessional debt to finance large infrastructure investment.

The noted that this happened while growth has lagged, thus putting Zambia at high risk of external and public debt distress.

Against this background, Directors emphasized the urgency of reforms and of a firm commitment to implement them.

The Directors noted that under current policies public debt is on an unsustainable path, and ongoing financing constraints have started to force the inevitable fiscal adjustment to occur in a disorderly way, with mounting expenditure arrears.

They cautioned that there is a narrow window for tackling fiscal challenges in an orderly and planned manner.

“This would require a large front loaded and sustained fiscal adjustment centered on stronger control and prioritization of public investment projects and postponing the contracting of new non concessional debt, accompanied by enhanced revenue mobilization and the scaling back of exemptions and tax expenditures, while reducing domestic expenditure arrears,” the said.

Directors stressed that the adjustment strategy should aim to minimize drag on growth and contain the impact on priority social spending.

Some Directors also urged the authorities to carefully consider the benefits and disadvantages of shifting from a value?added tax to a sales tax.

Directors welcomed the Cabinet decision in late May to indefinitely postpone the contracting of all new non?concessional loans, cancel some committed but undisbursed loans and enhance the control and management of disbursements of foreign?financed loans, and to strictly adhere to public financial management rules under the 2018 PFM Act.

The IMG Directors emphasized that strong actions would be needed to reduce debt?related vulnerabilities and called for continued efforts to enhance debt management and transparency.

They urged the authorities to address weaknesses in procurement and in project selection and management to ensure prioritization and greater investment efficiency.

They also stressed that stronger procedures are needed to ensure that budget execution reflects the authorities’ fiscal goals.

Directors noted the importance of ongoing and future technical assistance in enhancing the authorities’ capacity in these areas.

Directors also welcomed the recent monetary tightening by the Bank of Zambia (BoZ).

They underscored the important role for forward?looking monetary policy in securing macroeconomic stability and supporting reserves, in conjunction with a reorientation of the fiscal stance.

They further commended BoZ’s actions to implement the recommendations of the 2017 FSAP, including strengthening its supervisory capacity and enhancing the crisis preparedness framework.

The Directors urged the authorities to closely monitor pressures from the macrofinancial linkages between the financial system and the sovereign.

They also recommended continuing to address nonperforming loans.

Directors saw potential for growth to accelerate over the medium term with the appropriate fiscal adjustment.

They emphasized that achieving inclusive growth and reducing poverty will require a steady focus on improving the investment climate, promoting productivity and human capital, and addressing the risk of corruption.

They advised the authorities to develop proactive strategies to respond to the drought and climate?related risks and to promote well?functioning support programs in the agricultural sector to enhance resilience.


  1. Why don’t economists speak English kanshi? Too much technical jargon in this thing. Here is the reason our economy is growing by 2% and next year it will go to 1%: 1.too much reliance on mining lack of diversification (value addition means aggressively growing manufacturing, aggressively.) 2. slow adaptation of technology, low productivity 3. Zero innovation and entrepreneurship nationwide (why not try biotech, forget ICT that race is already decided) 4. Poor governance. When the whole world is already at artificial intelligence 3.0, you have still not implemented a low cost wifi network nationwide(21st century rule: the one who has the most information wins). Your friends are using Artificial intelligence to power their economies, that is massive competitive advantage for them. The game…

    • And you have a present who spends 80% of his time campaigning we talking about him and his entourage flying from one corner of the country to another to campaign for ward elections…this is a country that is still borrowing colossal sums for Nuclear technology for a country that enjoys abundant sunshine. To sum it up or in a nutshell the reason we are in this mess is down to poor and shambolic leadership of one Edgar Lungu….did you ever see Mwanawasa dancing on stage at a ward election rally?

    • When these foools saw lungu dancing spontaneously at airports or in church even without music they thought
      “ humble leader “

      Not knowing lungu was dancing each time he remembered how many billions he had to spend…..

  2. The game is decided by gross national productivity. Even among nations their is natural selection, adapt or die.

    • Aunty Maggie Dizzy and PF were saying 4 weeks ago that IMF is coming to Zambia using the visit as a testament of PF policies I wonder what they will say now after this damning assessment…really laughable…I am sure it will be the same sour grapes of anti-colonial rhetoric and utterances about sovereignty.

    • Aunty Maggie Dizzy was saying 8 weeks ago that IMF is coming to Zambia using the visit as a testament to PF policies I wonder what they will say now after this damning assessment…really laughable.

  3. This is what happens when you have an incompetent party in power which appoints ministers that end up owning animal ranches whilst drinking out the government coffers. My white Swiss wife says it is typical for zambians. Anyway am spending weekend at one of expensive hotels in UK. It will be a steamy session with my white angel

    • Coonery @ it’s best. This Mu2h0ta wanna be N.E.E.2, believes his the only Zambia sleeping with Mzungu, & having a nice time, which in itself is nothing special.

    • So much hate on this site. Why do you all feel angry at me for celebrating and being proud of the white Swiss woman I chose to spend the rest of mý life with. You must not be getting some from your madam if at all you have one. Just because you are in UK does not mean you are sleeping with white women iwe keleni. We know you are busy watching those dirty movies with all free internet here. Jay I have no words for a pillock like yoi

  4. “Growth is projected to slow down to 2% in 2019,reflecting a decline in mining sector activities in uncertain environment for mining companies and the drought impact on hydro power production”.

    When Chikwanda took over,the average growth was 7%.Successive ministers after him have had difficulties to repair the damage he inflicted on the Zambian economy.Worse was Maggie who lacked the stamina to implement the sales tax on mines hence the conclusion by the IMF that mining companies are operating under uncertain environment i.e continued deferment and/or postponement of the sales tax.However,this

    • However,this is just a forecast which can be remedied if those charged with responsibility are to do their job right especially that its partly compounded by a natural occurence i.e a drought.Its a wake up call like ratings from rating agencies which usually do not imply actual default.

    • @Sharp Shooter
      You cant just dismiss this as a forecast.
      Under MMD(Magande and Musokotwane) ,the growth was hitting 7 %. Now we are down to 2%.
      What measures have been put in place to cushion these external effects? Nothing.
      1.6 months of import cover when in just 2 years over $900 million has disappeared through corruption(FIC 2017 and 2018 report)

    • @Independent
      Iam not dismissing it(IMF forecast) as just mere forecasting as
      forecasting is the basis for making rational future economic decisions.A forecast is backed by economic variables( and not constants) which are subject to change given a certain/favourable environment. Just like rating agencies warn countries of a likely default,here the IMF are telling our govt and highlighting critical areas where they are missing it.Its up to the Zambian govt to take remedial measures and get back to the path of economic recovery or dismiss it much to Zambia’s detriment.I hope the new Finance Minister has taken this into consideration.

    • As you can see its a downward spiral from 2011 which is due to poor policies and appalling appointments in Finance Ministry…Lazy Lungu has made two appointments that were not done on merit but for political reasons all that time was wasted and he still carries on handpicking stooges for sensitive govt offices like Cabinet Office …look at whoo are his advisers at State House, these guys look like they are only good for throwing a Rhumba nite party.

  5. The Mwanakatwe Economy expounded on Bloomberg television has come home , wonder why Mr Lungu left it this late despite all the clear signs that the woman was destroying our economy

    • To be fair to Aunty Maggie, she was not appointment based on CV but Lazy Lungu appointed her because him and his ministers would get away with the recklessness under her watch something that Mutati was not standby and watch, just like Luo who has been moved again and is being blamed for closing CBU when she is on record as stating that it was done to the President. Luo like Aunty Maggie are Yes (we) men instead of being professional and advising their boss against certain actions they sit there applauding…in the end its them who look bad not Lazy Lungu to the average semi-literate out there.

    • * To be fair to Aunty Maggie, she was not appointment based on CV but Lazy Lungu appointed her because him and his ministers would get away with the recklessness under her watch something that Mutati was not going to standby and watch, just like Luo who has been moved again and is now being blamed for closing CBU when she is on record for stating that it was done by the President. Luo like Aunty Maggie are Yes (we) men instead of being professional and advising their boss against certain actions they sit there applauding…in the end its them who look bad not Lazy Lungu to the average semi-literate out there.

  6. “Zambia’s development strategy has focused on a rapid-scaling up of public investment to address the country’s infrastructure needs.”
    This very strategy by the PF is a problem for Zambia;
    1.Overpriced contracts awarded to the Chinese
    2. Corruption
    3:More external debt contraction

    • Jona Whiskey’s preoccupation is NOT fixing the economy but flying aimlessly around the globe, campaigning, drinking & dancing Kwasa -kwasa.
      Ba Jona the ex Alcoholic Kachasu drinker has raided the public purse to bribe voters -(Kasaka ka Ndalama), & this 2% is the fruits of his clueless playboy leadership, chapwa!!

  7. Can the dismissal of concerns over the economy please stop? This is what people are worried about. Those loans were supposed to go into growing the economy. Building roads alone without the commensurate growth in goods and services to be delivered by these same roads, can’t do that. Get ready for more hardship. Time for repayment is coming soon.

  8. To start with, how many Zambian representatives were present at this meeting?

    Secondly, this institution is supposed to be lending money to thriving economies not dampening their moods with negative prognosis – that’s the job of Moody’s, Bloomberg & co.

    Lastly, and most importantly, Zambians must stop listening to these foreign institutions and focus on home-made solutions to overcome home-made problems. The idea must be maintaining a firm grip on national resources, no matter what is said by outsiders. A persistent stance and strict policy on mining investments may do damage to the economy now but it will definately earn us more respect and do wonders for the sustainability of our future.

    • Ba guy, muleumfwako insoni. There is no one component enough in this government of dunderheads who would have made any difference whether he was at this meeting or not. Secondly, this is the organisation your dull government is chasing after for a loan so essentially based on their forecast you will not be getting that bailout package. Why try to swing testicles that you do not have? Your party has plundered our economy and have no clue on how to make it recover. Open your eyes mune, those outsiders your are talking about fund your budget coz you have zero clue on how to harness your resources choosing instead to line your corrupt pockets through kickbacks. PF is the biggest curse that has ever happened to this country. Even Satan is impressed.

    • Ati listen to homemade solutions, imwe ba guy, PF has been in power since 2011, up to now no ‘homemade solutions?? Where will it come from this time? Can you point to me anyone in the PF government that would shine with an economic masterplan that would not involve the Chinese and borrowing? Stop living in the theoretical world where everything is logical. This is the PF world were police answer to cadres and houses build themselves. There is zero logic in Lungu’s government. You just p!ss people off with those tuma utopian solutions.

    • Dont mind this @Nine Chale he lives in German, married to a white German woman then logs on LT starts preaching poignantly about African nationalism and Pan-Africanist ideologies…really laughable…preaching about homemade solutions to overcome home-made problems whatever that means when this govt can not even handle a simple KCM matter without bribing their way in Lusaka courts. You can not have it both ways …this govt is too incompetent and Lazy Lungu has no leadership qualities whatsoever.

    • US GDP is about $20 tn while that of Zambia is $20bn. Simple math. USA is 1000 times richer than Zambia.

      IMF economists are well educated and are able to use powerful econometric models that can predict trajectories of economies. You have variables or factors that they monitor. Throw them in a powerful equation in a computer and you have the result. You can even predict trends for the next 5 or ten years. They saw this and denied you ka loan…

  9. This is the true meaning of Dununa Mareverse! Everything is going backwards. Unfortunately many Zambians don’t realize how serious this is. Maybe they will wake up when our growth reaches Zero or Negatives! The scorecard for PF is not looking good! Time to change Diapers before we are all covered in Sh1t!

    • This is nothing let those EUROBONDS kick in …you will see true dancing with red ants in ones pants. How a President can have even tie to fly around like he did in July is just beyond me with such growth rates.

  10. The biggest problem and greatest source of risk to Zambia`s current economic situation is President Lungu and his ruling but grossly corrupt PF.You can not resolve these problems as long as they are in power. In terms of relative expenditure ECL spends more than Presidents Trump and Xi Jinping of USA and China respectively.

  11. I on record saying any wobble in the global economy or drought and Zambia is in deep deep trouble…….drought is a given and Donald trump an’t helping the global economy

    The straw that will break the camels back will be any raise in fuel prices……

  12. Hahaha ,it pains me to laugh how we got rid of Rupiah Banda with his consistent 6.5% growth just bcuz of a little alleged corruption and brought incompetent “angels” who give us poverty growth rates of 2%.Better a thieving competent guy than clueless greenhorns.

    • But the same RB with his people has comeback and he is eating with the same people who kicked him out…says a lot about the man’s integrity!!

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