Zambia GDP Growth to Improve

An International Monetary Fund staff team led by Tsidi Tsikata visited Zambia during May 31-June 10, to continue discussions on the 2017 Article IV consultation and the authorities’ request for an IMF-supported program, imf.org reported.

At the end of the visit, Tsikata issued the following statement:

“IMF staff and the authorities have agreed on remaining actions needed to reach staff-level agreement on a program that could be supported under the IMF’s Extended Credit Facility. The remaining actions entail measures to improve fiscal performance and concrete steps toward implementation of key policies contained in the 2017 budget.

“The near-term outlook for the economy has improved in recent months, driven by good rains and positive sentiments in the financial markets as evidenced by increased foreign investor participation in the government securities market.

“A bumper harvest and increased hydroelectricity generation are expected to boost economic activity by more than previously projected; IMF staff project real GDP growth to improve slightly from the revised official rate of 3.4% in 2016 to about 4% in 2017. We also project the annual inflation rate (6.5% in May) to remain at single-digit levels, notwithstanding the impact of the move toward cost-reflective electricity tariffs.

“Improved fiscal performance and discipline are needed to sustain market confidence. Fiscal performance in the first four months of 2017 was mixed relative to budget estimates.

Total domestic revenue (tax and nontax) fell short of the projected level while total expenditures appeared to be broadly in line with the budget.

“Weaknesses in the management of public finances and public investment pose significant risks to the 2017 budget objectives of ‘restoring fiscal fitness for sustained inclusive growth and development’ and scaling up social spending.

“Against the backdrop of contraction of credit to the private sector and a benign inflation outlook, IMF staff welcomed recent further easing of monetary conditions by the Bank of Zambia. In view of growing nonperforming loans in banks and non-banks, the mission welcomed BoZ’s efforts to strengthen its supervision of the financial system, including with technical assistance from the IMF.”