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The Centre for Trade Policy and Development (CTPD) has warned that government’s proposed financing strategy for the 2026 Supplementary Estimates of Expenditure could worsen Zambia’s domestic debt-service burden despite measures aimed at supporting key sectors of the economy.
Government recently proposed a supplementary budget of K26.3 billion intended to support agriculture, social protection, mining oversight and liquidity management.
However, CTPD Public Finance Researcher, Robinson Nakambo, said the main concern was not the expenditure itself but the plan to finance part of the budget through increased domestic borrowing.
Mr Nakambo said government’s proposal to raise K7.5 billion from the domestic government securities market comes at a time when Zambia was already facing elevated domestic debt-service pressures.
“The central issue is not only what Government intends to spend, but how that spending will be financed,” Nakambo said.
He explained that CTPD’s debt monitoring analysis indicated heightened portfolio risk driven mainly by domestic debt servicing costs, high interest payment obligations and continued external debt exposure.
Read more: CSPR flags budget gaps in 2026 supplementary estimates, calls for greater transparency
According to the organisation’s latest analysis, Zambia’s portfolio risk index currently stands at 1.51, with domestic service pressure identified as the largest contributor to the country’s debt risk profile.
CTPD said Zambia’s total public debt currently stood at approximately US$28.96 billion, with external debt accounting for 60.5 percent and domestic debt representing 39.5 percent.
Nakambo noted that although external debt remained significant, debt-service pressures were increasingly being driven by domestic obligations.
“In the latest quarter, total debt service stood at about US$4.87 billion, of which domestic debt service accounted for 88.2 percent,” he said.
He added that interest payments alone accounted for 41.3 percent of quarterly debt service, while rolling four-quarter debt service reached approximately US$11.02 billion.
Nakambo warned that increasing reliance on domestic borrowing could push up interest rates, crowd out private sector access to credit and increase financing costs for businesses and households.
He further cautioned that additional liquidity injection without corresponding productive growth could undermine efforts to control inflation.
CTPD has since urged government to treat the supplementary budget as a short-term stabilisation measure rather than a permanent spending mechanism.
The organisation also called for a credible quarterly borrowing plan, transparent debt-service projections, stronger expenditure prioritisation and safeguards to protect private sector access to financing.
“Zambia must not solve today’s expenditure pressures by creating tomorrow’s domestic debt-service trap,” Nakambo said.
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