Zambia: Improved fiscal performance needed for market confidence

An International Monetary Fund (IMF) staff team said Zambia needs to improve fiscal performance and discipline to sustain market confidence.

  • The remaining actions needed to reach staff-level agreement entail measures to improve implementation of key policies in 2017 budget
  • GDP growth to improve slightly from 3.4% in 2016 to about 4% in 2017
  • Staff welcome efforts to strengthen the legal framework for managing public resources


President Edgar Lungu

The 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.

According to the report, fiscal performance in the first four months of 2017 was mixed relative to budget estimates and total domestic revenue (tax and nontax) fell short of the projected level while total expenditures appeared to be broadly in line with the budget.

The team, however, notes that, on the expenditure side, while the government has cleared substantial arrears, it appears that new arrears may be emerging.

zamb-MMAP-md“The government is taking steps to strengthen commitment control, including by expanding the coverage of the Integrated Financial Management Information System (IFMIS) to all central government agencies. Other remaining fiscal measures relate to reduced spending on the Farmer Input Support Program through improved targeting of beneficiaries and limiting maize purchases to the level in the budget.”

Mr. Tsikata said 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 (ECF).

“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. In that context, IMF staff welcomed the heightened attention and efforts underway to strengthen the legal framework for managing public resources, including the introduction of the Planning and Budgeting Bill, and amendments to the Public Finance and Public Procurement Acts. IMF staff urged the authorities to continue strengthening their public debt management capacity in order to underpin their efforts to put public debt on a sustainable path.

“The remaining actions entail measures to improve fiscal performance and concrete steps toward implementation of key policies contained in the 2017 budget. We aim to reach understandings in the coming weeks that would form the basis for presenting the authorities’ request for an ECF arrangement and the report on the 2017 Article IV consultation to the IMF Executive Board in August 2017,” he said.

“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 percent in 2016 to about 4 percent in 2017. We also project the annual inflation rate (6.5 percent in May) to remain at single-digit levels, notwithstanding the impact of the move toward cost-reflective electricity tariffs.

The team met with President Edgar Lungu; Minister of Finance Felix Mutati; BoZ Governor Denny Kalyalya; Minister of Agriculture Dora Siliya; Minister of Development Planning Lucky Mulusa; other senior government and BoZ officials; members of parliament; and representatives of the private sector, labor unions, civil society organizations, and Zambia’s development partners.


Categories: Development

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