Introduction
Zambia became the first African country to default on it’s sovereign debt in November 2020 during the covid 19 era, missing a USD 42.5million euro bond coupon payment. The default happened gradually, over a culmination of years of infrastructure-driven borrowing, copper dependence and fiscal management. Zambia completed an IMF programme five years ago, restructured majority of its external debt and currently negotiating a successor arrangement. This brief examines where Zambia stands today, the revealed Chinese creditor dynamics, and what the investor risk outlook looks like for the upcoming elections in 2027 and beyond.
Road to default
At the time of default, Zambia’s debt reached approximately USD 35 billion, a figure that had quadrupled since 2013, with the debt to GNI reaching 168%. The debt comprised of USD 3 billion owed to China, USD 3 billion in Eurobonds, and USD 2.7 billion from multilateral lenders. Debt servicing became the largest spending category by 2019 computing to more than 30% of total expenditure, more than three times the combined allocation towards health and education. The Chinese state banks largely financed infrastructure-driven borrowing that narrowed down to roads, energy and utilities. The structural trap came in when the copper prices fell and revenues collapsed, while debt obligations remained unrelenting.
Zambia received a 38-month Extended Credit Facility of USD 1.3 billion in August 2022, later increased to USD 1.7 billion in 2024, with the program formally concluding in 2025. By completion; inflation declined to 6.8% in April 2026, which was within the bank of Zambia’s target band of 6-8%; gross international reserves reached USD 6.4 billion; and the primary fiscal surplus reached 3.1% of GDP in 2025. The program ended, however, the discipline to sustain it didn’t follow. The IMF noted that Zambia’s long-term sustainability depends on its ability to retain reforms independently. In 2026 the fiscal performance is expected to weaken as the primary surplus is projected to fail from 3.1% in 2025 to 1.1% of GDP, attributed to fuel VAT suspension, weaker tax revenues and pre-election spending pressures.
Zambia’s single largest bilateral creditor is the China Exim bank, to whom it owes more than USD 4 billion. With China’s participation, it slowed down IMF’S funding disbursements and restructuring agreements. Zambia took over two years to secure financing assurances, followed by another 11 months to announce initial restructuring reforms. By November 2023, a revised Eurobond deal was rejected by official creditors including China, over not meeting the comparability of treatment as the bondholder deal were seen as more generous compared to those offered to bilateral creditors. Later in February 2024, China and India signed a restructuring deal with Zambia, and in October 2025, bilateral agreements with China Exim Bank were signed. Rather than accepting cuts on the principal, Chinese banks have insisted on extending loan terms and adjusting financial costs, a move that paralyses other African countries in similar situations. For the continent, Zambia is the standard on debt navigation negotiations with China highlighting a bilateral restructuring that’s not transparent and yet limits room for the debtor to maneuver.
As of May 2026, debt restructuring agreements cover about 94% of the restructuring perimeter highlighting a significant process. France signed a bilateral agreement, the first of its kind, to implement the multilateral 2023 framework in December 2024, paving way for similar agreements with the remaining 15 state creditors. Signaling reform continuity, Zambia chose to negotiate a full successor program instead of extending the ECF by a year. To discuss the successor arrangement, the IMF staff visited Lusaka in April-May 2026, and the negotiations are expected to resume with the incoming government following the August 2026 elections. The 6% gap in restructuring coverage and the successor programme terms are the two most consequential near-term variables.
Recovery is visible, driven primarily by mining activity as growth is projected at 4.5% in 2025 and 5.5% in 2026. However, copper dependency and vulnerability to commodity price cycles affects the outcome. The August 2026 elections sets to introduce a layer of political uncertainty into an already transitional economic environment and the electoral spending pressures has begun in the 2026 fiscal projections. With the pre-election fiscal loosening manifesting in fuel VAT suspension and civil service wage adjustments, signals a tension between IMF-backed reform discipline and political incentives. Currently, Zambia has no access to international capital markets, and the ability to regain access is dependent on completion of the remaining restructuring and successfully concluding the successor IMF program negotiations.
Zambia is the G20 Common Framework’s most visible test case and laid a mixed verdict; an outcome was delivered, however slowly, with significant challenges. The adequacy of frameworks designed around Paris Club norms are challenged given the growing role of China in sovereign debt governance. Chinese financing is not inherently problematic, it’s the borrowing without a debt management architecture, diversified revenue bases and realistic model of repayment that creates vulnerabilities inhibiting progress. Zambia has committed to institutional reforms such as a quarterly debt bulletin, medium-term debt management and a debt management office, as it matters just as the restructuring numbers.
Policy Recommendations
First, complete the remaining 6% of the debt restructuring perimeter. The restructuring coverage must be closed before elections with a clear, documented transition plan handed to the incoming government. Secondly, they should negotiate a credible successor IMF program. One that balances growth ambitions as well as sustained fiscal discipline. Centralised clear conditionalities on expenditure management, revenue mobilisation and debt transparency. Third, with the establishment of a debt management office, quarterly debt bulletin and a medium-term debt strategy, they would signa, credit worthiness to external markets and restore their access to international capital markets. Finally, a structural economic diversification away from copper dependency as it remains Zambia’s most fundamental structural vulnerability. A diversification strategy targeting tourism, manufacturing and agribusiness would relieve the fiscal pressure on commodity cycles to build a more resilience revenue Base for, long-term debt sustainability.
Outlook
Without sustained policy discipline, the macroeconomic improvements achieved under the ECF could still revert as Zambia remains fragile despite the recovery. With the August 2026 elections comes with the weight for the country’s trajectory over the following decade, and it’s influence on the post-election fiscal direction, successor IMF programme terms. For that audience, this dictates whether Zambia’s progress is a cautionary tale or a recovery story, what narrative dominates.