IMF and Zambia reach staff-level agreement on new credit facility

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IMF-Zambia credit facility deal

Highlights

IMF staff-level agreement proposes a new 36-month Extended Credit Facility for Zambia totaling SDR 1,076 million ($1.472 billion), pending Executive Board approval.
Zambia targets raising the primary surplus to 3 percent of GDP by 2029 through tax reforms, strengthened fiscal risk management, and improved oversight of state entities.
Real GDP is projected to grow 5.6 percent in 2026 as inflation falls to 6.1 percent and international reserves reach $6.1 billion, despite recent fiscal pressures and VAT underperformance.

Program terms and policy priorities

As reported by the International Monetary Fund, the staff-level agreement could underpin a new 36-month arrangement under the Extended Credit Facility with access of SDR 1,076 million, described in the statement as $1.472 dollars. The package is designed to support Zambia's balance of payments and budget financing needs while reinforcing macroeconomic stability, debt sustainability and private-sector-led growth.

An IMF staff team led by Edward Gemayel visits Lusaka from September 29 to October 9, 2026, to discuss the authorities' request for a new arrangement. The Fund says the agreement remains contingent on prior actions and approval by its Executive Board.

The reform program focuses on raising revenue, restraining expenditure and protecting priority social spending. From 2027, the authorities aim to gradually raise the primary surplus to 3 percent of GDP by 2029 through stronger domestic revenue collection, better tax administration and compliance, and a rationalization of tax exemptions under a Medium-Term Revenue Strategy.

The statement also outlines measures to strengthen fiscal risk management, improve oversight of the Food Reserve Agency, state-owned enterprises and public-private partnerships, and address domestic payment and VAT refund arrears. Debt management and transparency are also set to be reinforced through stronger institutional capacity in the Debt Management Office.

Economic backdrop and expected impact

Zambia enters the proposed program after what the IMF describes as significant gains under the recently completed ECF-supported program. Real GDP is projected to grow by 5.6 percent in 2026, supported by agriculture, mining activity and exports, while inflation falls to 6.1 percent in September, within the Bank of Zambia's target range.

Gross international reserves reach U.S.$6.1 billion in September, but the fiscal position weakens as VAT collections underperform, fuel tax intake declines and Food Reserve Agency spending rises well above budget. The authorities respond with corrective steps including reversing temporary fuel-tax relief and scaling back non-priority capital spending while seeking to avoid new arrears.

Monetary policy normalization has begun as inflation returns to target, and the IMF says future decisions should remain data-driven. The Fund adds that exchange-rate flexibility, prudent reserve accumulation and closer fiscal-monetary coordination are expected to help preserve stability, while structural reforms are intended to support diversification, governance, anti-corruption efforts and greater transparency in mining licensing and access to the TAZAMA pipeline.

In our earlier article on Pakistan’s proposed parliamentary vote on the petroleum levy, we covered how the government sought stronger legislative backing for a major revenue tool embedded in its 2026–27 budget and tied to IMF programme fiscal targets. We also noted the growing political pushback over high fuel charges, even as officials treated the levy as central to meeting primary-surplus goals and keeping financing plans on track.

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