The cost of austerity: Wemos’ study assesses the impact of the IMF programme in Zambia
19/11/2024
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The International Monetary Fund’s (IMF) loan conditionalities imposed on Zambia create significant barriers to accessing quality healthcare. While aimed at fiscal stability, these conditionalities have introduced austerity measures that exacerbated inflation, deepened poverty and strained Zambia’s public health system. These are the main findings of the study ‘The cost of austerity: The toll of IMF conditionalities on access to health in Zambia’.
Developed by Wemos under the Make Way programme, the study provides policy recommendations to ensure that economic stability programmes do not compromise access to essential services like healthcare, which are critical for people living in poverty. The recommendations are directed at Zambian policymakers, civil society organizations (CSOs) and the IMF.
The IMF programme in Zambia
Zambia has been facing a severe economic crisis, compounded by high inflation and a rising debt burden. To address this, in 2020, the country sought support through the G20 Common Framework and the IMF’s Extended Credit Facility (ECF) programme, securing a USD 1.7 billion loan over five years. However, this loan came with the condition that the government would apply austerity measures. In response, the government raised consumption tax (value-added tax, or VATs) and increased the fuel and electricity tariffs. These measures ended up worsening social inequalities and hindering access to health in the country.
For example, recent figures from the Zambian Ministry of Health reveal a worrying deterioration in child health and nutrition outcomes. Between 2020 and 2023, children’s immunization decreased from 88.2% to 63.2%. In the same period, children with severe malnutrition rose from 0.7 to 3.1%.
Snapshot: more inequalities after the implementation of IMF austerity measures
Since the IMF programme was implemented, the purchasing power of Zambia’s population has dropped significantly. The austerity measures increased fuel and electricity prices, and triggered inflation across nearly all sectors of the economy. Severe droughts in the country further exacerbated food prices and insecurity, compounding the economic strain. Furthermore, electricity shortages due to the drought are driving up the use of fuel-powered generators at a time when fuel prices doubled in the last three years.
According to government official data, Zambia’s inflation rate rose from 10.3% in July 2023 to 15.4% in August 2024. Food inflation reached 17.4% in July 2024, while the combined costs of housing, water, electricity, gas, and other fuels increased by 11.7% in the same month.
Rising inflation has made everyday life more expensive for everyone, hitting low-income households the hardest. The impact is stark: between 2015 and 2023, the number of adults and children living in poverty and extreme poverty grew significantly (see comparison below).
2015
2023
% Change
Poverty levels
54.5%
60%
+5.5
Extreme poverty
40%
48%
+8
Child poverty
66.5%
70.6%
+4
Source: UNICEF Zambia, 2023.
Although the IMF programme includes minimum spending commitments for essential services like healthcare, education and social protection (known as ‘social spending floors’), these are set too low, leaving vulnerable populations without the support they need.
How the IMF programme impacts access to healthcare
Rising inflation and economic pressures have exacerbated the challenges within Zambia’s healthcare system. Even though the government increased the health sector budget from 8% in 2022 to 11.8% in 2024, inflation has eroded the real value of these investments. Critical shortages of health workers persist, creating understaffed and underequipped health facilities, especially in rural areas. As a result, new infrastructure remains underused, and the system struggles to meet people’s needs.
Moreover, austerity measures have worsened Zambia’s health funding gap, with about 40% of the health budget coming from external donors. With austerity measures limiting public spending and drought emergencies requiring more funding, the health system becomes more fragile and heavily dependent on donor support.
For vulnerable populations, such as people living in poverty or rural communities, access to healthcare is increasingly out of reach. Higher transport costs not only hinder patients from accessing health centres, but also hamper the logistics to distribute medicines and transportation of health workers. Unaffordable out-of-pocket expenses for essential medicines and services create additional barriers. These factors are reversing progress toward universal health coverage, deepening inequalities and leaving Zambia’s marginalized populations without adequate healthcare.
Recommendations: reconciling economic stability with access to health and essential services
The report emphasizes the need for the IMF programme in Zambia to consider the social impacts of its fiscal measures, ensuring access to essential services such as healthcare, education, and universal social protection is safeguarded. To ensure economic stability does not come at the expense of social and health equity, we have formulated the following recommendations, directed at the Zambian government, CSOs and the IMF.
To the Zambian government:
Finalize debt restructuring to free up funds for social sectors.
Engage in broad consultations with CSOs.
Explore outcome-based financing options that reduce reliance on austerity.
To CSOs:
Advocate for inclusive and meaningful participation in policy discussions, with a focus on social equity and alternatives to austerity measures.
To the IMF:
Shift away from austerity and adopt progressive taxation measures.
Adjust debt sustainability analysis frameworks to account for humanitarian needs.
Raise social spending floors.
Promote CSO engagement to ensure inclusive and responsive policies.
