Zambia will negotiate a new financing programme with the International Monetary Fund rather than seek an extension of its existing loan agreement, the finance ministry said on Thursday, as the southern African country prepares to conclude a key phase of its post-default recovery.
The government had previously considered a one-year extension of its Extended Credit Facility (ECF), which was due to expire at the end of January and would have provided roughly US$145 million in additional funding.
However, authorities confirmed they had decided to pursue a full successor programme instead, signalling what they described as a transition rather than a retreat from engagement with the IMF.
“This decision should be understood as a reflection of programme completion of the current one and transitioning on to a successor programme,” the Ministry of Finance said in a statement. “It should not be misunderstood to mean disengagement or any weakening of reform commitment.”
Zambia entered the ECF arrangement in 2022 as part of efforts to restore macroeconomic stability and regain debt sustainability after it became Africa’s first pandemic-era sovereign defaulter in 2020.
The programme supported fiscal consolidation, structural reforms and negotiations with creditors, following years of heavy borrowing that left the country struggling to service its debt.
The current arrangement is scheduled to undergo its sixth and final review by the IMF’s executive board later this month. Completion of the review would mark the formal end of the programme.
On Wednesday, the IMF confirmed that Zambia had dropped plans to extend the existing facility, a development that initially weighed on the country’s international bonds as investors assessed the implications.
Zambia’s dollar-denominated bond maturing in December 2053 fell earlier in the session before trimming losses after news emerged that the government intended to seek a new programme. By late morning in London, the bond was trading about 0.4 cents lower at around 72.1 cents on the dollar, according to Tradeweb data.
Analysts said markets appeared reassured by the government’s emphasis on continuity and its intention to remain under IMF oversight, which is often seen as a key anchor for policy credibility.
The IMF estimates that Zambia’s economy grew by 5.8 percent in 2025, supported by a rebound in mining output, improved power generation and higher investment.
Inflation, which has remained elevated in recent years, is expected to return to the central bank’s target range of six to eight percent within the next two years, according to IMF projections.
Despite the improving macroeconomic outlook, Zambia continues to face significant challenges, including high debt servicing costs, pressure on household incomes and vulnerability to external shocks.
Talks with the IMF on the successor programme are expected to begin shortly after the current ECF concludes, officials said.
While details of the new arrangement have not been disclosed, such programmes typically involve continued fiscal discipline, structural reforms and monitoring, and can unlock additional financing from other development partners.
President Hakainde Hichilema, who faces elections in August, has repeatedly pledged to maintain policy stability and reform momentum, even as inflation and the cost of living remain politically sensitive issues.
His government has sought to balance fiscal consolidation with social spending, while advancing reforms aimed at improving governance, boosting private investment and diversifying the economy beyond copper mining.
Zambia’s engagement with the IMF has been closely watched by investors and other heavily indebted African countries, as it navigates debt restructuring and economic recovery in a challenging global environment.
The government said the decision to seek a new programme reflects confidence in the progress achieved under the current arrangement, while acknowledging that continued external support remains necessary.
As negotiations begin, markets will be watching closely for signals on the scope and conditions of the successor programme, as well as its potential impact on Zambia’s fiscal path ahead of the August vote.
