FOREIGN EXCHANGE RESERVES ARE NOT FOR EATING, SAYS DR MUSOKOTWANE
Finance minister Dr Situmbeko Musokotwane says Zambia’s improved foreign exchange reserves will help the country better handle expected shocks – El Niño and the continued chaos in the global oil supply.
Dr Musokotwane says the new three-year agreement with the International Monetary Fund (IMF) worth US $1.5 billion will strengthen the country’s foreign exchange which dropped to around US $5.8 billion from US $6.2 billion in May 2026 after the government introduced subsidies to protect local consumers from the volatile international oil price triggered by the US-Israel war on Iran.
The government has since removed the subsidies on fuel by reinstating the excise duty on imported fuel and is expected to reinstate the VAT by December 2026, the move expected to increase prices at the pump.
Dr Musokotwane told journalists in Lusaka on Friday after the government announced that it had reached a new IMF staff-level agreement on a new three-year Extended Credit Facility worth about $1.5 billion that Zambia is in a much better position to handle any expected shocks on the economy
“With the disbursements… we should see that further support to Zambia in the sense that with the chaos that is happening in the world, the possibility of a drought, Zambia will stand on good grounds if there are further shocks coming, it means that we are in a position to go through those shocks stronger than without the IMF programme,” Dr Musokotwane said.
“This money [US $1.5 billion Extended Credit Facility] is anticipated to help improve the reserves of the country and also support the budget. I also want to say that foreign exchange reserves are not for eating as some people said during the campaign [for the August 13 general election].”
He said the expected El Niño weather pattern “Godzilla” – one of the strongest and potentially most historic events on record is likely to lead to extreme dry weather in Zambia like many Southern African countries, with drought conditions persisting for longer, putting agriculture and hydropower generation under strain.
The production of maize, the country’s staple crop, and other seasonal crops is likely to be hurt by the anticipated dry conditions.
Dr Musokotwane says improved foreign exchange reserves will help mitigate the impact of the adverse weather pattern on Zambia.
“Foreign exchange reserves are there to ensure that when you have a catastrophe; if you have a drought and you need to import food, the reserves will help. If there’s a shortage of fuel in the country, and there are financial pressures everywhere, you know where to touch. The reserves that are going to go into this programme [extended credit facility] will augment our own efforts at building reserves so this will make Zambia to be stronger and be able to face tomorrow stronger,” said Dr Musokotwane.