IMF Program Expires October 2025: What are its Achievements and Failures?

Time for Genuine Practical Home-Grown Solutions

By Mwansa Chalwe Snr
Zambia’s 38-month Extended Credit Facility (ECF) with the International Monetary Fund (IMF) of $1.3billion – later increased to $1.7 billion in June,2024 to address the devastating effects of drought attributed to climate change – was approved on August 31, 2022, and is set to expire on October 31, 2025. Given that the program is nearing its end, with only eight months to run, this article aims to provide an objective interim assessment of the program, focusing on its achievements and failures so far, which is 79% of the program period.

Zambia’s economy had been experiencing a decade-long decline from 2011 to 2021, due to mismanagement, which led to a surge in external debt exceeding 100% of GDP. This resulted in the country defaulting on its loan repayment in November 2020. The IMF was invited to help.

IMF Achievements
One of the most notable major achievements of the program was the agreement reached with Official Creditors and Bondholders to restructure Zambia’s debt in March 2024. The agreement provided significant debt service relief. This marked a crucial step towards restoring debt sustainability and improving Zambia’s economic outlook.
“The Country also made considerable progress in restructuring its debt, with close to 90 percent now restructured. The last part of the restructuring process is now to agree with commercial creditors such as development and Commercial banks. There has been a lot of progress there too,” IMF Resident Representative, Eric Lautier said in chat with this writer.

The Program’s other major achievement has been revenue mobilization. The IMF program reforms have resulted in improving tax administration and broadening the tax base. In 2020, ZRA collected K57.6 billion but, in 2024 revenue collection was K148.5billion.

These increases in revenue and the savings from reduced servicing of debt because of debt restructuring, which facilitated the recruitment of tens of thousands of teachers, health workers as well as fund increases in the allocation to the Constituency Development Fund (CDF) and the number of Social Cash Transfers recipients.
The program also resulted in the reduction of wasteful expenditure by eliminating unnecessary and inefficient spending, including reducing and minimizing non-essential travel and prioritization of essential and critical expenditure critical spending areas, such as education, healthcare, and social cash transfers.

The combination of improvements in revenue collection and the reduction of unnecessary expenditures, resulted in the reduction of the fiscal deficit from an average of 9% of GDP in the pre-program period to below 2.7% in 2024.
During the IMF Program, the Zambian government conducted various financial management reforms that strengthened public financial management and improved financial reporting, internal controls, and auditing to ensure accurate and reliable financial information which promoted transparency and accountability in public finances.
Zambia’s IMF Extended Credit Facility (ECF) program has also made significant strides in achieving macroeconomic stability in some metrics. The program has helped stabilize key macroeconomic indicators that were previously unstable or volatile.

Zambia’s foreign exchange reserves were also exceptionally low and declining before the program. At the end of December,2020, foreign reserves were a meagre US$1.20 billion, representing 2.4 months of import cover, but at the end of December,2024, Zambia’s Gross International Reserves reached $4.31 billion which is 4.6 months of import cover.
The IMF were a major influence in the Bank of Zambia’s implementation of the Export Proceeds Tracking Framework (EPTF). If it had not been for the IMF, Mining houses would have resisted the requirement that they start routing all their export earnings through local bank accounts, which was meant to promote transparency and facilitating a more comprehensive understanding of export proceeds and tracking of foreign exchange flows.
The first part of this article has shown that the IMF program has made considerable progress in achieving macroeconomic stability and fiscal discipline, demonstrating the government’s commitment to implementing reforms and maintaining fiscal prudence. It can certainly be lauded as a success from the IMF, Ministry of Finance and planning technocrats, Zambian foreign creditors, and investors’ point of view. The second part gives what critics of the Program believe are its failures.

Although the IMF has consistently maintained that Zambia’s economic program is homegrown and not imposed from Washington. This claim is disputed by many critics. In practice the IMF’s imposed conditions have tied the Zambian government’s hands, who have little freedom and flexibility to adjust policies that are not working or alter ineffective aspects of the program.

Monetary Policy and Liquidity Crunch

One notable example of the one size fits all approach is the IMF’s insistence on a rigid monetary policy framework which is aimed at reducing inflation through a liquidity squeeze and increasing the Monetary Policy Rate (MPR) and Statutory Reserve Ratios (SRR).This has drawn criticism from prominent Zambian economists like Professor Oliver Saasa and Dr. Lubinda Haabazoka.

“The solution to what we are having now is to grow the economy; not necessarily to fidget with the monetary policy instruments, not necessarily to raise the Statutory reserve ratio, not necessarily to raise the policy rate to make appetite to borrow lower. When you do that, then you are starving out the very actors that are fundamental to solving the problem that you think you are solving; you are starving the private sector,” Professor Saasa told News diggers in an interview.

As of September 1, 2021, the average commercial bank lending interest rate was 25.7%, with the Bank of Zambia’s policy rate at 8.5%. Fast forward to the end of 2024, and the Zambia’s policy rate has skyrocketed 14.5% and Bank lending rate to 28.730%, with some banks charging as high as 33%. Zambia’s high interest rates make it difficult for businesses and households to access credit thus restricting economic activities and job creation.

The exchange rate has not fared much better. In his 2022 budget speech, delivered in September 2021, the Finance and Planning Minister announced that the 2021 average Kwacha exchange rate to the dollar was K16.32. However, as of January 2025, the average exchange rate has risen to around K28, which is a depreciation of 71%.

Economic Growth and Job creation
The IMF supervised program has negatively impacted Zambia’s economic growth and job creation through its restrictive monetary policy, which has limited access to capital for private sector expansion. While the drought and power cuts have undoubtedly contributed to the low economic growth, the IMF program has made a tough situation worse. The numbers do not lie. Consider these GDP growth figures: 2021(5.8%); 2022 (5.2%); 2023 (4.7%) and forecast for 2024 (1.2%). The trend has been that of dropping growth rates since the IMF Program started. The IMF Program has certainly not promoted economic activity and job creation, and there is empirical evidence to support that.

“The private sector health in Zambia declined. Business conditions continued to see deterioration because of the reduction in money supply and the depreciation of the Kwacha, which have negatively impacted demand. Money shortages crippled new orders and forced cutbacks in output, employment and purchasing activity. Stanbic Purchasing Manager Index (PMI) reported in 2024. “Zambian companies recorded the fastest decrease in output since February 2021.”
Petroleum Sector reforms, Cost of Living, and business
The liberalization of Zambia’s petroleum sector, driven by IMF reforms, has had a disastrous impact on the economy so far. Petrol and diesel prices have skyrocketed by over 100% since the program’s inception, significantly increasing the cost of living and doing business. Fuel costs trickle down to affect every aspect of the economy, thus undermining the IMF’s stated goals of fighting against inflation and promoting growth. The evidence is overwhelming and reflected in the soaring prices of mealie meal, fuel, electricity, transport, and other commodities.
The reforms privatized the petroleum sector and led to risk of energy insecurity, corruption, and shortages. And the Petroleum Sector is foreign denominated who externalize their profits. Zambians are few in the sector. This new policy has even been criticized by the President of the Oil marketing Association of Zambia (OMCAZ) – a Private Sector organisation – Dr. Kafula Mubanga who has urged government to partially participate in the sector.

“Let us give the government a 50 percent, let us give 50 percent to the private owners. So, we need to create a balance. The trend of multinationals is always on their way towards election years, they tend to twist governments. You will have a problem towards the last year of elections because most of those players are going to withhold products, said Dr Kafula in an interview with News diggers Newspaper in 2024.

Governance and reduction of Corruption
There are some analysts who believe that one of the key shortcomings of the IMF’s Extended Credit Facility (ECF) program in Zambia is the limited impact of its governance and anti-corruption pillar. The program’s governance pillar is aimed at strengthening institutions, increasing transparency, promoting accountability, and fighting corruption.
It is argued that while the IMF has published reports highlighting the government’s efforts to combat corruption, such as the Access to Information Bill and the planned amendments of the anti-corruption law to be submitted to parliament in March 2025, the practical realities on the ground tell a different story, public perception remains deeply skeptical, as allegations of corruption continue unabated. Corruption allegations continue to plague the country, casting a shadow over the program’s effectiveness despite Transparency International’s recent report of slight improvement in Corruption index. The News diggers Newspaper’s editorial reflects public sentiment.

“The concentration is on past corruption, involving those who previously served in government. It must be demonstrated that his administration is tackling corruption within his own administration. It is not enough to address the sins of the past; the government must also confront corruption in its present form”, News diggers Newspaper which is alleged to be a sympathiser of the current administration wrote in its editorial of 28th January 2028. “Without addressing graft within its ranks, the UPND risks falling into the same patterns that plagued its predecessors. The fight against corruption cannot be judged by intentions alone, by actions on the weak members of society or the opposition. It must be measured by tangible outcomes from serving government.”

The challenge lies in changing most of the public’s perception that corruption is still rampant. It is essential to demonstrate a genuine commitment to fighting corruption, without sacred cows or selective prosecution.
According to Transparency Corruption Index (CPI), Zambia’s score increased from 37 in 2023 to 39 in 2024, ranking 92 out of 180 globally.
“In 2024, Zambia’s CPI score increased from 37 to 39, ranking 92 globally. Zambia’s CPI score currently ranks above the Africa average of 32 but below the global average of 43 with 91 countries performing better than Zambia in the fight gains corruption,” Transparency International Zambia (TI-Z) Advocacy, Policy, and Research Coordinator Bright Mazonde said.
Should the IMF Program be Extended?
At the moment it is not known whether the Zambia IMF Program would be extended. Program extension is a contentious issue. According to IMF Resident Representative Eric Lautier: ” On the Program extension, it is not for us to comment on this but for the authorities to decide.”
Finance Minister Dr. Situmbeko Musokotwane has hinted at the extension of the Program to facilitate further concession borrowing from the International Monetary Fund’s Resilience Facility Fund (RSF). This was during the World Bank and IMF annual meetings in Washington last year. He said that the government is in talks with the International Monetary Fund (IMF) to secure additional financing under its Resilience and Sustainability Trust (RST) which is a 20-year loan programme designed to assist countries in building climate resilience and ensuring sustainable growth. The facility’s core condition is for a country to have an existing IMF Program with a minimum of 18 Months to run.

“We are talking to the management so that we can expedite this as quickly as possible. Anything that helps to bring more concessional money, in other words cheap money, repayable over a longer period, is helpful,” Musokotwane told Bloomberg. “There is a possibility that we ask for an extension of the programme.”

On the other hand, many enlightened Zambians believe that the IMF has already achieved its key objectives, including stabilizing the economy and facilitating Zambia’s debt restructuring. The extension of the program will result in the continuation of compromising Zambia’s economic sovereignty which limits its economic policy space to create jobs and bring the cost of living and doing business down without foreign undue influence from the IMF.

It is crucial that the Zambian authorities weigh the potential benefits against the potential costs and risks including political. They should consider the long-term implications for Zambia’s economic sovereignty and sustainable growth, when making their decision whether to extend the Program and request an additional IMF loan under its Resilience and Sustainability Trust (RST), which is a 20-year loan program.

Conclusion
The major criticism of the IMF is its one-size-fits-all approach in some of its policy reforms which failed to address some of Zambia’s unique economic challenges during the Program duration. This has led to perceptions that the IMF’s policies are overly rigid and disconnected from ordinary Zambians’ unique economic needs, consequently, exacerbate their economic hardships.

Further, Zambian IMF critics have argued that its approach to reforms is hypocritical, pushing for extreme market liberalization and subsidy removals, despite Western countries having implemented protectionist policies when they were at the same stage of Zambia’s development. The US and Europe, for instance, still provide subsidies to strategic industries including agriculture, defence and clean energy projects.
There are two solutions that will transform Zambia’s economy which the World Bank and IMF have long ignored in their programs. One is the elimination and consolidation of most of the excessive regulations, and the multitude of licences that restrain and suffocate private sector growth. Two, the reduction of the informal sector that is 90% of the economy. Just these two home-grown solutions will change Zambia’s economic landscape within two years like it did to Brazil between 2003 to 2012.

The writer is a Chartered Accountant, Author and an independent financial analyst and Economic Commentator.