November 2020 saw Zambia become the first African nation to fail to meet its obligated debt payment to the International Monetary Fund (IMF), missing a payment of more than $40 million. In 2022, the country signed an Extended Credit Facility (ECF) agreement on the terms that it would allow more fiscal freedom to reinvest in stable, supported social reform. 

Sovereign Domestic Debt in Zambia

In 2019, Zambia’s external debt totaled almost $16 billion. A combination of declining national GDP, increased borrowing for commercial projects and a sustained fiscal deficit, further entrenched by the global financial impact of the COVID-19 pandemic, left the country unable to maintain economic growth.

Much of this debt was also worsened by inflexible loan agreements with bilateral lenders. As a result, the type of debt Zambia accumulated carried higher interest rates and strict repayment deadlines that the country struggled to meet.

Before defaulting on its November 2020 payment, Zambia’s debt-to-GDP ratio, a key indicator used by the IMF to calculate a country’s ability to repay debt, was nearing 103%. The IMF expects that countries with ratios below 60% are more able to repay loans effectively and sustainably. Ratios above this level indicate a high risk of economic default.

Conditions in Zambia were classified as extreme poverty under the United Nations (U.N.) frameworks, with more than half of the citizens living on less than $2 per day.

The Gamble of Restructuring

In response to growing trends of debt defaults and fiscal instability in low-income countries, the IMF and the World Bank launched two initiatives aimed at providing debt relief and encouraging poverty reduction strategies: the 1996 Heavily Indebted Poor Countries (HIPC) Initiative and the 2005 Multilateral Debt Relief Initiative (MDRI).

Support from these institutions allowed countries with the highest debt-to-GDP ratios to access comprehensive debt relief. These programs expanded following the COVID-19 pandemic, which disrupted global economic growth and placed pressure on international trade. The expansion produced the G20 Common Framework.

After defaulting in November 2020, Zambia applied for debt treatment under this framework. The goal was to temporarily stabilize debt levels while also improving fiscal management.

The application was formally accepted in the summer of 2022. Zambia received a 38-month ECF worth $1.3 billion, which the IMF increased to $1.7 billion in 2024. Upon approving the ECF terms, the IMF stated that efforts to alleviate Zambia’s debt distress would include increased social spending to “improve access to basic social services… [provide] a critical mitigant against food insecurity… and [increase] spending on health and education.”

The Impact of IMF Debt Restructuring in Zambia

Alongside institutional reforms aimed at preventing future debt mismanagement, IMF debt restructuring in Zambia has also produced several developments affecting citizens’ daily lives.

Across the health and education sectors, the ECF agreement allowed the Zambian government greater fiscal freedom to recruit “tens of thousands of teachers and health workers.” This expansion has improved access to education and strengthened service delivery in clinics and hospitals.

The government also expanded the Social Cash Transfer (SCT) scheme, which provides welfare payments to the country’s most vulnerable and excluded families. More than 1 million households were expected to receive support by the end of 2022.

Although current data remains limited due to gaps in surveys and census collection, the Civil Society for Poverty Reduction in Zambia reports that poverty remains widespread, reaching about 60% of the population in 2024. However, the organization notes that long-term economic stabilization may help lift millions of Zambian households out of poverty.

Some indicators of stabilization have already appeared. Inflation has declined steadily for more than a year and GDP growth has returned for the first time since before the COVID-19 pandemic.

Zambia’s ECF deal officially ended in October 2025. In reviewing progress, the IMF reported earlier this year that while fiscal restructuring during the 38 months showed progress, long-term sustainability will depend on the Zambian government maintaining these reforms independently.

Implementing Positive Social Change

Strategic initiatives like those led by the IMF still face barriers to comprehensive poverty reduction. One of the most significant challenges is the time required to negotiate funding and relief terms.

Zambia’s government waited nearly two years for its agreement to move forward. Other countries in the region, including Ethiopia, Ghana and the Democratic Republic of the Congo, have also experienced delays ranging from months to years before reaching similar agreements.

Some scholars attribute these delays to rigid institutional processes or lingering structural inequalities in global financial systems. The IMF instead points to “delays on structural conditionality” as a key factor slowing negotiations.

Looking Ahead

Despite the challenges, Zambia offers one example of how IMF-supported debt restructuring and ECF programs can provide low-income countries with a structured pathway out of financial crisis. These programs aim to restore macroeconomic stability while protecting essential social spending during broader institutional reforms.

By combining fiscal reform with commitments to health, education and social services, such programs seek to address immediate economic pressures while strengthening long-term fiscal capacity. The impact of IMF debt restructuring in Zambia illustrates how coordinated relief, fiscal reform and targeted social investment can help move a country from default toward stability and create a foundation for sustainable growth and gradual poverty reduction.

– Hannah Michie

Hannah is based in Nice, France and focuses on Good News and Politics for The Borgen Project.

Photo: Flickr