The International Monetary Fund has revised down its growth outlook for Zambia. The IMF now projects real GDP growth of 5.2 percent in 2025 and 5.8 percent in 2026. The change reflects a clear concern. The agency says limited hydropower generation and periodic load management will weigh on non-mining economic activity.

Zambia’s overall performance shows resilience, but the details matter. Real GDP grew 3.8 percent in 2024 and expanded 4.5 percent in the first half of 2025. Those gains came from a strong maize harvest and robust mining output. Mining remains the backbone of exports and foreign earnings. At the same time, repeated electricity shortfalls are constraining industry, services and small business activity.

The scale of the revision is meaningful. Earlier IMF estimates for 2025 were higher. Some forecasts placed growth near 5.8 percent for 2025 and 6.4 percent for 2026 before the more cautious update. The downward move signals mounting risks to Zambia’s rebound. Load management reduces factory operating hours. It raises production costs. It discourages investment that depends on reliable power.

Household conditions are also affected. The IMF notes that inflationary pressures have eased somewhat due to lower fuel and food prices and a firmer exchange rate. Still, consumer prices remain elevated relative to pre-shock levels. High energy costs and interrupted production can feed into prices again if power woes persist. That will reduce real incomes and weaken domestic demand.

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For businesses the fallout is immediate. Manufacturers face higher operating costs from backup generators. Agribusinesses dependent on irrigation and cold storage see spoilage risk. Transport and logistics firms must factor longer lead times and higher fuel use into pricing. Investors weigh these costs against Zambia’s long term potential. For many, the choice is simple. Seek jurisdictions with more reliable power or demand higher returns to offset energy risk.

The fiscal picture also tightens. Zambia continues under an IMF Extended Credit Facility that aims to restore fiscal stability after the country’s debt stress. The IMF has been disbursing tranches tied to reform targets and reviews. Any slowdown in growth reduces tax revenues and complicates debt sustainability. It also raises the stakes for policy makers to act decisively on energy and economic diversification.

The causes are clear and fixable in theory. Zambia relies heavily on hydropower. Drought and lower reservoir levels reduce generation capacity. That creates a need for short run load management and long run energy diversification. The IMF stresses the importance of measures that shore up supply quickly while shifting investment toward renewable and thermal backstops. That mix must be cost effective and environmentally sound.

Practical policy steps are urgent. First, expand emergency thermal generation and grid interconnections to blunt immediate shortfalls. Second, fast track private investment in renewables, especially solar and battery storage, with clear procurement and tariff rules. Third, improve transmission and distribution to cut technical losses and increase system reliability. Fourth, implement demand side management and energy efficiency programs for industry and buildings. Each action reduces the economic drag of power outages.

Regional cooperation can help too. Cross-border electricity trade and coordinated reservoir management across river basins would smooth supply swings. Zambia’s neighbours have complementary resources that could be tapped through targeted power purchase agreements and regional grids. That would reduce the need for domestic emergency measures and make growth more stable.

The IMF downgrade is a warning. It shows how a single structural weakness can ripple through an economy. Zambia’s natural resource strengths and recent agricultural gains matter. They provide a base for growth. But without reliable electricity the country risks slower job creation, weaker business confidence and lower fiscal buffers.

For policy makers the path is straightforward. Move from short term fixes to medium term transformation. Mobilise private capital, improve regulation, and upgrade infrastructure. That will reduce load shedding, protect businesses, and restore a stronger growth trajectory. The difference between the current projection and the higher forecasts is not only statistical. It is the difference between constrained recovery and resilient, inclusive growth.