Zambia is preparing to enter discussions with the International Monetary Fund for a new economic support program, though officials have made it clear that any final agreement will have to wait until after the nation's elections in August. Finance Minister Situmbeko Musokotwane announced that negotiations would begin "almost immediately," providing the clearest timeline yet from the Zambian government regarding its intentions to secure continued IMF backing.
The decision to postpone finalizing the deal is a calculated move. According to Musokotwane, who spoke with reporters in Cape Town, the IMF prefers to negotiate with a government that has sufficient time to implement the agreed-upon policies. This means waiting for an administration that will have a full term ahead of it rather than one in its final months before a national vote.
The Strategic Timing Behind the Delay
The August elections will determine whether President Hakainde Hichilema secures a second term in office. Since taking power in 2021, Hichilema has worked to reverse the economic damage from Zambia's historic debt default in 2020. His administration quickly secured an IMF facility and used it to guide the country through a complex debt restructuring process while restoring confidence among international investors.
Musokotwane has consistently emphasized that fiscal discipline will be maintained during the interim period between the expiration of the previous program and the start of a new one. However, the political calendar has created practical limitations. Parliament is set to dissolve in May, raising questions about whether any meaningful agreement could be reached before then. The Finance Minister's recent statements confirm that the timeline simply doesn't allow for completion before the electoral process unfolds.
Learning from the Previous IMF Program
Zambia's last IMF arrangement, a $1.7 billion extended credit facility approved in 2022, officially expired in January of this year. That program played a crucial role in stabilizing the economy after the country became Africa's first pandemic-era sovereign defaulter. Initially, Zambia had requested $1.3 billion, but the amount was increased as the depth of the crisis became apparent.
The facility provided critical support as Lusaka navigated debt restructuring negotiations with multiple creditor groups. Last week, the IMF completed its sixth and final review of the program, releasing an additional $190 million to Zambia. The government had briefly considered requesting a one-year extension to access another $145 million but ultimately decided that a fresh program would better serve the country's evolving needs.
Copper Revenues Provide Breathing Room
Zambia's economic outlook has been buoyed by a strong performance in its copper sector, which accounts for over 70% of export earnings. Rising global prices and increased production volumes are expected to boost state revenues significantly this year, providing some financial flexibility during the transition period between IMF programs.
However, the government faces mounting expenditure pressures. A recent constitutional amendment has expanded the number of parliamentary constituencies, which will require additional budget allocations. Musokotwane acknowledged that a supplementary budget will be necessary to cover these costs, complicating the fiscal picture during an already politically sensitive period.
Shifting from Crisis Management to Growth
With the economy on more stable footing, Zambia's next IMF program is expected to look different from its predecessor. Rather than focusing primarily on crisis management and debt restructuring, the new arrangement will likely emphasize longer-term development objectives. Key priorities are expected to include job creation initiatives, accelerating economic growth, maintaining fiscal discipline, and deepening structural reforms following the completion of debt restructuring.
The program's design will reflect Zambia's progress in restoring macroeconomic stability and its ambition to build a more resilient and diversified economy. This forward-looking approach aligns with the IMF's evolving relationship with African nations that have successfully navigated debt crises.
The Election's Role in Economic Policy
The timing of the negotiations underscores the intersection of political cycles and economic policymaking in emerging markets. By waiting until after the elections, the IMF ensures that its program will have sustained political support for implementation. For Zambian voters, the economic management of the past four years, including the successful IMF partnership, will likely be a central campaign issue.
President Hichilema's ability to secure and implement the previous IMF deal was a cornerstone of his first-term economic policy. A second term would provide continuity for the new program's objectives, while a change in administration could shift priorities. The IMF's cautious approach reflects its experience with programs that falter due to political transitions.
What Happens Next
Negotiations will begin in the coming weeks, but substantive talks and final agreement will wait for the post-election government. This approach allows both sides to develop a program that reflects the mandate of the newly elected leadership. In the meantime, Zambia will rely on improved copper revenues and continued fiscal prudence to bridge the gap.
The Finance Minister's transparency about the timeline helps manage market expectations and demonstrates confidence in the country's economic trajectory. Investors and development partners will be watching the election outcome closely, as it will shape Zambia's economic policy direction for the next five years.
Conclusion
Zambia's path forward with the IMF illustrates how democratic processes and international financial cooperation must align for maximum effectiveness. While the delay may seem like a setback, it represents a strategic decision to ensure the next program has the political foundation necessary for success. As August approaches, all eyes will be on Zambia's voters to decide who will lead the country's next chapter of economic recovery and growth.