AfDB Approves $108M Loan to Boost Zambia's Fiscal Sustainability and Economic Resilience

The funding will support the Fiscal Sustainability and Economic Resilience Support Programme, a cornerstone initiative aimed at building a resilient and diversified Zambian economy.

The Board of Directors of the African Development Bank Group (AfDB) has approved a $108 million loan to Zambia, marking a significant step in strengthening the nation’s economic governance and implementing critical reforms across public sectors. The funding will support the Fiscal Sustainability and Economic Resilience Support Programme, a cornerstone initiative aimed at building a resilient and diversified Zambian economy.

“This multi-sectoral programme is designed to improve fiscal sustainability and increase private sector participation, with a strong focus on agro-industrial development, climate-smart investments, public-private partnerships, and the growth of micro, small, and medium enterprises (MSMEs),” said Raubil Durowoju, the AfDB’s Country Manager for Zambia.

Strengthening Fiscal Governance and Revenue Generation

The programme will address key challenges in fiscal management by enhancing Zambia's domestic revenue generation capabilities. Measures include:

• Rolling out an electronic “smart invoice” solution to improve tax compliance.
• Registering 12,000 VAT-liable taxpayers to expand the tax base.
• Supporting Zambia’s membership in the Global Forum on Transparency and Exchange of Information for Tax Purposes, improving global tax cooperation and transparency.

Additionally, the programme will bolster the efficiency and transparency of public spending by advancing Zambia’s public investment management strategy, aimed at optimizing the allocation and impact of public resources.

Advancing Agro-Industrial and Climate-Smart Investments

To stimulate economic growth beyond the mining sector, the initiative focuses on agro-industrial development, including:

• Backing Zambia’s Agricultural Mechanisation Strategy, led by the Ministry of Agriculture, which will establish ten mechanisation centres to enhance productivity and market access for farmers.
• Providing equipment hire services for farmers, especially those lacking access to agricultural tools, to boost production for both national and international markets.

A financing mechanism for sustainable agriculture will allocate 257 million kwachas ($9.4 million) for the 2023-2024 agricultural season. Managed by private sector financial institutions, this market-based initiative will supply tailored agricultural inputs to small and medium-sized farmers who face challenges accessing affordable financing.

Promoting Private Sector Participation and Diversification

The programme also emphasizes private sector involvement through public-private partnerships and other initiatives aimed at creating a more diversified economy. These reforms are expected to drive investment in climate-smart projects, fostering sustainable growth and development in key sectors.

Zambia-AfDB Partnership: A Growing Portfolio

As of 30 November 2024, the African Development Bank Group’s active portfolio in Zambia encompassed 24 projects, totaling $872.3 million. This latest funding reinforces the AfDB’s commitment to partnering with Zambia in achieving its developmental goals.

The new initiative is expected to have a transformative impact by addressing fiscal challenges, promoting agricultural productivity, and diversifying the economy. Through targeted interventions and a focus on sustainability, the programme aims to strengthen Zambia’s economic foundation, ensuring resilience and inclusivity in the years ahead.