IMF gymnastics for Zambia, are they bearing fruit?

The Mast COMMENT

IMF gymnastics for Zambia,

are they bearing fruit?



On Monday, the Executive Board of the International Monetary Fund (IMF) approved the fourth review of Zambia’s 38-month Extended Credit Facility (ECF) arrangement.

The approval triggered an immediate disbursement of the fifth tranche under the ECF arrangement amounting to about US $184 million (SDR 138.8 million). This brings Zambia’s total disbursement under the ECF-supported programme to SDR 992.86 million (about US $1.3 billion). Ordinarily, this money and the IMF’s statement that the programme performance remains satisfactory

should be encouraging – positive news. But despite the IMF pumping money into the economy and the new dawn’s debt restructuring ‘song’, Zambia’s economy is far from getting better. We are still deep in the mud. It raises the question, what happens once the IMF facility is done with – is over? Already the UPND administration has failed to deal with inflation despite the Bank of Zambia interventions, and the cost of living is skyrocketing! And now Minister of Finance and National Planning Dr Situmbeko Musokotwane says: “We are encouraged and will continue with fiscal consolidation, and we stand ready to tighten monetary policy further to reduce inflation and accelerate governance and structural reforms.”

Further tightening monetary policy? It is now becoming clear that the IMF facility was never going to be a panacea to Zambia’s economic challenges

As Choolwe Kangwa argues, “The IMF’s recent disbursement of US $184 million, marking the completion of the fourth review under the Extended Credit Facility (ECF), presents a deceptive picture of Zambia’s economic recovery. While the IMF commends ‘satisfactory programme performance’,

deeper analysis reveals concerning underlying fundamentals that threaten long-term economic stability. Despite accessing US $1.3 billion of the total US $1.7 billion ECF facility, Zambia’s fiscal position remains precarious. The recent parliamentary presentation of a second supplementary budget seeking substantial increases in both domestic and external borrowing limits signals persistent challenges in fiscal management and budget execution.

The economy continues to exhibit fundamental vulnerabilities: contracting agricultural output due to severe drought, reduced electricity production affecting industrial capacity, accelerated inflation threatening macroeconomic stability, and high risk of overall and external debt distress despite restructuring. While the IMF assesses Zambia’s debt as technically sustainable, several red flags emerge:

Public debt remains at high risk of distress; External debt indicators breach thresholds through medium term; Recent debt restructuring provides temporary relief without addressing core issues, and new borrowing plans threaten to erode restructuring gains. The government’s response to economic challenges raises concerns: Multiple supplementary budgets within single fiscal year; Expanding borrowing limits despite debt vulnerabilities;

Reactive rather than strategic fiscal management, and limited progress on revenue mobilisation reforms. The path to genuine recovery faces significant obstacles: Drought impacts threatening growth projections, persistent inflationary pressures, continued dependence on external financing and limited fiscal space for developmental spending.

While the IMF’s support provides temporary relief, it masks deeper structural issues. The combination of expanding borrowing limits, multiple budget revisions and persistent debt distress indicators suggests that Zambia’s economic recovery remains fragile and potentially unsustainable.

The current trajectory indicates that despite international support and debt restructuring, fundamental weaknesses in fiscal management and economic governance continue to threaten Zambia’s long-term economic stability. Without dramatic policy reforms and enhanced fiscal discipline the IMF’s support may prove to be merely a temporary respite rather than a catalyst for sustainable economic recovery.”