Almost half of Zambia’s Treasury releases in August went towards servicing debt and clearing verified domestic arrears, official data show, but the pressure came overwhelmingly from the domestic side of the government’s balance sheet rather than from the external obligations that dominated the country’s debt crisis.

Of ZMW16.1bn ($852mn) released by the Treasury during the month, ZMW7.6bn ($402mn) went to debt service and arrears, according to the Ministry of Finance and National Planning. Domestic debt service accounted for ZMW6.5bn, compared with ZMW253mn for external debt payments, while another ZMW814mn was used to settle verified arrears owed to government suppliers and contractors.

The contrast with July is striking. Debt and arrears payments rose about 77% from ZMW4.3bn, while their share of total Treasury releases increased from roughly 20% to 47%. Domestic debt service more than doubled from ZMW3.2bn to ZMW6.5bn. Over the same period, external debt service fell from ZMW366.6mn to ZMW253mn, while arrears payments rose from ZMW683.7mn to ZMW814mn, according to the ministry.

That shift helps illustrate the changing nature of Zambia’s fiscal constraint after years spent restructuring its external debt. The restructuring has substantially reduced near-term foreign-debt payments, but servicing domestic borrowing is still competing heavily with other calls on public resources.

The remainder of August’s releases included ZMW4.1bn for the public-service wage bill and related obligations, ZMW1.8bn for government programmes and general operations, and ZMW1.7bn for transfers, subsidies and social benefits. Capital expenditure received ZMW896.4mn.

“Treasury asserts that timely debt service and the clearance of verified arrears remain important to strengthening fiscal credibility, supporting confidence in the management of public resources, and improving liquidity conditions for businesses and other entities owed money by the Government,” the ministry said.

Road infrastructure received ZMW598.4mn of the capital allocation, with another ZMW298mn going to other ongoing infrastructure projects. Within the ZMW1.8bn government-programmes allocation, the Electoral Commission of Zambia received ZMW249.8mn to support the conduct of the August general election.

Zambia defaulted on its Eurobonds in November 2020 and subsequently stopped servicing most of its external debt before restructuring much of those obligations under the G20 Common Framework. By early 2026, agreements had been reached covering about 94% of its external debt within the restructuring perimeter, according to the International Monetary Fund.

The benefit of that restructuring is visible in the disparity between August’s ZMW253mn external-debt allocation and the ZMW6.5bn spent servicing domestic debt. Secretary to the Treasury Felix Nkulukusa said in late August that annual external debt-service requirements had been reduced to about $900mn from an estimated $2.6bn Zambia would otherwise have faced.

Zambia is meanwhile seeking a successor IMF programme after completing its previous $1.7bn, 38-month Extended Credit Facility in January.

Discussions advanced during an IMF mission to Lusaka in May, with the Fund identifying reducing the domestic interest burden and securing stronger revenue gains among the priorities for a new arrangement, alongside preserving macroeconomic stability and supporting private sector-led growth.

Finance Minister Situmbeko Musokotwane said in July that Zambia hoped to reach agreement on the programme by the end of 2026.