IMF widens Zambia’s recession forecast to -5% as COVID19 effects deepen
IMF revised Zambia’s recession forecast for 2020 wider to -5.0% from an earlier -3.2% (at the virtual spring meetings in April). This meeting was held after cabinet approved for the Ministry of Finance to commence talks with the IMF for an economic program. The session addressed Zambian governments response to disease pandemic, interventions both on the fiscal and monetary side.
The Denashwar Ghura led Article IV mission team recently completed its virtual sessions with Africa’s largest copper producer, Zambia in sessions that ran from 22 June to the 10 July 2020. Drivers of the suppressed growth cited was the COVID19 amplification of already existing fiscal vulnerabilities and other non financial related risk drivers such as climate change effects weighing on drought impacting both energy and food production. Zambia grappled with energy poverty due to receding dam levels in 2019 which resulted in intense power rationing by the power utility weighing key sectors of the economy.
Discussed, was Zambia’s request for emergency support under the Rapid Credit Facility – RCF to support the government’s efforts to address the social and macroeconomic impact of the COVID-19 pandemic.
The COVID-19 shock has significantly impacted economic prospects—growth this year will be negative, poverty has likely increased, and fiscal pressures have increased further with lower revenues, higher expenditure needs, and an already high debt service burden.
Discussions focused on the economic policies needed to respond to the fallout from the COVID-19 pandemic. Discussions will continue on the fiscal stance and policies in order to move forward with the request for Fund support.