Zambia is in talks with Saudi Arabia to secure fuel supplies, while also seeking support from the International Monetary Fund (IMF).
Zambian Minister of Energy Peter Kapala said the New Dawn government had launched talks with Saudi on how to import “cheap oil”.
Kapala noted an attempt at a deal with Saudi by the previous government, but said there was a change of approach.
The Zambian government is no longer buying the petroleum goods itself. Rather, the minister said, the government will bring together oil marketing companies and “negotiate great prices for petroleum products in a government-to-government deal”.
Securing fuel supplies will help reduce price fluctuations, he said.
The government is also in talks with neighbouring Angola on the Lobito refinery. Zambia is keen to secure a stake in the proposed Angolan plant in order to secure products.
The IMF, meanwhile, has announced a $1.3 billion credit arrangement for Zambia, running for 38 months.
“Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path,” it said.
The need for action is becoming more pressing. Zambia stopped fuel subsidies and reduced tax on petrol and diesel in 2021. The tax cuts are due to end this month.
The IMF, in a report this week, warned that while such a move was necessary higher “fuel and electricity prices may lead to social unrest. This could slow down much needed reforms and dent investor confidence.”
Zambia is facing a tough economic climate. The country had $1.3 billion of principal arrears at the end of 2021. It owed $597 million in fuel arrears at that point, including $169mn in late payment interest. Fuel arrears have been building up since 2016.