The Centre for Trade and Policy Development (CTPD) has warned that the government’s decision not to extend the International Monetary Fund (IMF) Extended Credit Facility (ECF) programme risked undermining investor confidence and reversing the country’s recent balance-of-payments gains. In a statement issued in Lusaka on Wednesday, CTPD Lead Public Finance Researcher, Robert Mwale, said Zambia was not exiting the programme from a position of fiscal strength but at a moment of heightened vulnerability, a move he cautioned could destabilise the exchange rate. Mwale noted that the decision to abandon the ECF comes just as the economy was beginning to show credible signs of recovery after years of fiscal stress and debt distress.
He said data from the IMF Country Report and the Ministry of Finance indicated that withdrawing from this policy anchor could quickly erode recent gains. “In 2025, total government expenditure surged from 25.5 percent of GDP in 2024 to 28.0 percent, while the cash fiscal deficit widened sharply from –3.3 percent to –5.3 percent of GDP,” Mwale said. He stressed that this fiscal slippage occurred even under the discipline of an IMF programme, warning that removing the anchor in an election year increased the likelihood of budget diversion, off-budget spending, and weakened expenditure controls.
Mwale said the immediate impact of losing the ECF’s guardrails would be increased reliance on domestic borrowing. He noted that Zambia had historically financed cash-basis deficits through Treasury bills and bonds—a practice that crowded out the private sector. “Between 2024Q3 and 2025Q3, total debt increased by 11.7 percent from $25.3 billion to $28.01 billion, driven largely by domestic debt, which surged by 25 percent from $8.51 billion to $10.60 billion,” he said.
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External debt, Mwale added, rose by 4.1 percent from $16.72 billion to $17.41 billion over the same period. He said this pattern suggested that without the ECF, Treasury securities may once again become the default tool for financing deficits. Although private-sector credit grew by 52.1 percent in 2025, Mwale said this expansion was projected to slow to 29.7 percent in 2026 as government borrowing needs increase.
“Excessive domestic borrowing would place upward pressure on interest rates, reverse the easing inflation path, and stifle productive investment. Most concerning is the threat to debt sustainability,” he said. Mwale highlighted that Zambia’s public debt fell sharply from 123.9 percent of GDP in 2024 to 91.9 percent in 2025, with projections pointing to a further decline to 79.0 percent in 2026—improvements he said were “directly anchored in IMF-backed fiscal consolidation.”
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