Zambia’s External Debt Climbs to US$16 Billion as Multilateral Disbursements Drive Q3 Increase

Zambia’s public sector external debt continued to edge upward in the third quarter of 2025, with the Central Government’s external debt stock rising to US$16.04 billion, reflecting sustained reliance on multilateral financing amid ongoing debt restructuring efforts.

According to the Debt Statistical Bulletin for the third quarter of 2025, Central Government external debt increased by 1.62 percent to US$16,039.56 million, up from US$15,783.74 million recorded at the end of the second quarter. The increase was largely driven by fresh disbursements from multilateral creditors, as Zambia continues to finance priority programmes under constrained fiscal conditions.

Bilateral debt rose marginally by 0.26 percent to US$4,262.30 million, while multilateral debt recorded a stronger increase of 4.71 percent to US$5,425.66 million. Other official debt also edged up slightly to US$887.77 million. Eurobond debt remained unchanged at US$2,579.84 million, reflecting the ongoing debt standstill and restructuring process.

The debt portfolio remained heavily exposed to foreign currency risk, with 66.43 percent of external debt denominated in United States dollars. Special Drawing Rights accounted for 20.81 percent, while the euro, Chinese yuan and African Unit of Account accounted for 3.84 percent, 4.47 percent and 3.41 percent respectively. Other currencies made up just over one percent of the total portfolio.

In terms of interest rate structure, the Government continued to tilt its external debt towards predictability. Fixed-rate loans increased to 71.63 percent of the portfolio, up from 71.33 percent in the previous quarter, while variable-rate loans declined to 28.37 percent. This shift reflects restructuring efforts aimed at reducing exposure to global interest rate volatility.

External loan disbursements to the Central Government totalled US$402.24 million by the end of the third quarter, representing 57.67 percent of the annual target of US$697.43 million set out in the 2025 National Budget. Multilateral creditors accounted for over 91 percent of total disbursements, underscoring their central role in Zambia’s current financing framework.

Undisbursed external loan commitments declined sharply by 15.43 percent to US$2,467.69 million from US$2,917.93 million in the previous quarter. The reduction was attributed to continued reconciliation under the debt restructuring process and steady disbursements by multilateral and plurilateral lenders.

Debt servicing pressures, however, remained significant. Central Government external debt service, including interest, amounted to US$388.66 million during the quarter. Eurobond obligations accounted for the largest share at US$201.62 million, or nearly 52 percent of total debt service, followed by multilateral creditors at US$123.55 million.

External debt service arrears continued to rise, with the stock increasing by 2.28 percent to US$3,972.26 million by the end of the third quarter. Principal arrears stood at US$3,195.30 million, while interest arrears amounted to US$776.96 million. Despite progress on restructuring some bilateral loans, arrears remain a major constraint on Zambia’s fiscal space and credit standing.

Contractor arrears linked to externally financed projects showed some improvement. Central Government contractor arrears declined by 7.33 percent to US$418.89 million, reflecting the gradual resumption of payments to contractors following earlier disbursement suspensions.

Meanwhile, Government-guaranteed external debt for state-owned enterprises fell marginally to US$1,368.24 million. The debt remains heavily concentrated in commercial loans, which account for more than 91 percent of the guaranteed portfolio. Kafue Gorge Lower alone accounts for over two-thirds of guaranteed external debt, followed by ZESCO with just over 28 percent.

However, arrears on SOE guaranteed debt worsened, rising by 12.85 percent to US$646.41 million, as unpaid principal and interest continued to accumulate pending the completion of debt restructuring negotiations.

Overall, the latest figures highlight a mixed picture for Zambia’s external debt position marked by cautious progress in restructuring and payment of arrears on one hand, but continued vulnerability driven by rising debt stocks, heavy dollar exposure and persistent arrears on the other.