Zambia’s amended 2026 Annual Borrowing Plan (ABP) has introduced new instruments and altered risk profiles within the domestic debt portfolio.
This has sparked concerns among analysts over inflationary pressures and private sector growth.
Economist Alinaswe Simfukwe warned that government’s increased reliance on domestic borrowing to finance the K34.5 billion fiscal framework could heighten inflation risks.
He explained that heavy borrowing may drive up inflation expectations if investors question debt sustainability and fiscal discipline, prompting demands for higher interest rates.
Mr. Simfukwe cautioned that excessive government borrowing from local markets could crowd out private sector access to credit, as commercial banks may prefer lending to government through low‑risk securities.
“This shift can reduce private investment, slow growth in the supply of goods and services, and ultimately weaken the country’s productive capacity,” he said.
He added that when supply growth fails to match demand, inflationary pressures intensify.
Simfukwe also stressed the importance of grace periods in debt agreements, noting they give government breathing space to mobilise resources and stabilise public finances.
Meanwhile, Public Finance Researcher Robinson Nakambo attributed the rise in domestic borrowing to increased issuance of government bonds and treasury bills, which have pushed up bond yields.
He said higher yields directly affect commercial banks, driving up lending rates and raising the cost of doing business.
“When government securities offer higher returns, financial institutions redirect capital toward these instruments at the expense of private sector lending,” he said.
He added that this tightens credit conditions for businesses and slows economic expansion and job creation.
He emphasised that while domestic borrowing remains a key financing tool, prudent debt management is essential for long‑term stability.
Mr. Nakambo recommended prioritising concessional and long‑term financing options with favourable terms to manage debt sustainability and minimise rollover risks.
He added that aligning borrowing strategies with the 2026–2027 supplementary framework would be critical in supporting sustainable development.