Outlook on Zambia’s Debt Dynamics and Its Implications for Economic Outlook
Zambia continues witnessing some significant strides and remarkable effects in addressing its sovereign debt burden, following years of fiscal pressure exacerbated by external shocks and pandemic-related slowdowns.
As of mid-2025, glad to seeing approximately 90% of the country’s external public debt being tackled estimating at about USD 13.3 billion, which has been restructured under agreements in principle with bilateral, commercial and bondholders.
Key milestones include:
✅ Successful restructuring of Eurobond debt, providing an estimated USD 2.5 billion in cash-flow relief over the next three years.
✅ Formal agreements with official bilateral creditors, including China and members of the Paris Club, under the Common Framework.
✅ Steady reduction of domestic arrears, now estimated at K77.5 billion, as the government prioritizes payment to local suppliers and contractors.
While these developments mark critical progress, challenges remain.
Disagreements persist with certain creditors—particularly non-Paris Club multilaterals (“ baby multilaterals ”) such as Afreximbank and TDB—over the application of restructuring terms.
This could delay Zambia’s full exit from default and pose risks to market sentiment.
Recent assessments from the IMF note that while Zambia’s debt remains at high risk of distress, debt service-to-revenue ratios are projected to decline from nearly 70% in 2024 to below 14% by 2026, reflecting fiscal consolidation and the positive impact of restructuring.
The IMF also projects that the debt-to-GDP ratio could fall from current levels near 110% to below 90% by 2026, assuming continued economic growth and exchange rate stability.
The Zambian government remains committed to restoring debt sustainability while preserving macroeconomic stability. Reforms under the Extended Credit Facility (ECF) continue, with the IMF’s fifth review expected to unlock further disbursements to support budget execution and FX reserve buffers.
Looking Ahead: Further progress on domestic arrears, resolution of creditor coordination disputes, and effective implementation of structural reforms will be critical in cementing Zambia’s long-term recovery and restoring investor confidence.
The Ministry of Finance and Bank of Zambia should continue to engaging transparently with the key stakeholders in order to ensure that debt resolution translates into improved social and economic outcomes.
