The warning appears in an IMF technical assistance report examining the effect of droughts, floods, extreme heat and rainfall volatility on Zambia’s economy and public finances.
IMF modelling projects debt at 119.9% of gross domestic product under the most severe scenario, compared with 60.3% under the baseline. Debt could reach 93.8% under the hot scenario and 74.4% under the high-emissions scenario.
The Fund stressed that the figures were illustrative scenarios rather than forecasts but said the results demonstrated how weaker growth, declining revenue and rigid expenditure could undermine debt sustainability.
The 2023-2024 drought demonstrated the economic risks. Maize production fell by 54%, while severe electricity load-shedding reached as much as 23 hours daily as water levels affecting hydropower generation declined.
Hydropower accounts for about 80% of Zambia’s installed generation capacity, while mining, the country’s main export sector, is the largest electricity consumer.
The Fund said prolonged power shortages could reduce mining production and tax revenue, increase electricity imports and place pressure on government to support the energy sector.
A severe drought could reduce economic growth by 0.7 percentage points during the first year, followed by losses of 0.5 and 0.6 percentage points during the following two years.
The Fund estimated that the associated revenue loss could reach 0.2% of gross domestic product.
Additional drought-related government spending amounted to about 1% of gross domestic product in 2024 and 0.3% in 2025.
The modelling found that one severe drought between 2030 and 2032 could raise public debt to 76% of gross domestic product without corrective fiscal measures. Returning debt to the previous trajectory could require an adjustment equivalent to about 4% of gross domestic product.
The Fund recommended that Zambia quantify long-term climate risks by October 2027 and publish the first numerical climate-risk assessment in the Fiscal Risk Statement.
Zambia should expand the analysis to floods and storms, clarify institutional responsibility and strengthen the fiscal-risk register by identifying exposure, potential costs and mitigation measures, the IMF concluded.
–IMF/ChannelAfrica–
