PREVIEW
The President waited until after his re-election to sign up to the Fund’s austerity menu. The price is higher taxes, privatisation and reform
A regime of structural reforms, privatisation of state-owned enterprises and higher taxes are the price of the US$1.47 billion IMF loan for President Hakainde Hichilema that was agreed in principle on 9 October. Confirming it will require a vote by the IMF board.
Obtaining the 36-month Extended Credit Facility is double-edged win for Hichilema. It shows that local and international concerns about the human rights crackdown after the disputed 12 August elections haven’t constrained his government’s ability to raised funding. But to secure it, he has had to accept some tough budget balancing measures such as tax hikes that will exacerbate cost-of-living pressures (AC Vol 67 No 15, Moving goalposts).
Leader of the IMF mission to Lusaka, Edward Gemayel said on 9 October, said that Hichilema’s ministers had agreed to ‘gradually increase the primary surplus to 3% of GDP by 2029 through stronger domestic revenue mobilization, improved tax administration and compliance, and the rationalisation of tax exemptions’.
The terms of the deal are not a surprise. But Hichilema wanted to delay the agreement – with its tax rises and other policies driving up inflation – until after the elections which were dominated by cost-of-living issues.
In early March, a week-long IMF staff visit reported that the Hichilema government had made ‘substantial progress in restoring macroeconomic stability’ (Dispatches 9/3/26, President Hichilema waits for IMF until after the elections).
But it also pointed to ‘emerging fiscal pressures’ and forecast that the government would miss a 3.8% fiscal surplus target for 2026 by 1%.
The IMF verdict in October is more positive. Forecast economic growth of 5.6% this year means that the Zambia will enter the new loan programme from ‘a position of strength’.
The first key test will be the upcoming 2027 budget. Finance Minister Situmbeko Musokotwane has said that government spending is projected to rise by 7%.
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