An ICIJ investigation published October 26 traces how borrowing by Zambia’s state power utility intersected with drought and electricity rationing. The wider lesson is that sovereign risk can travel through a public utility into production, employment and household incomes long before it appears in a government bond price.
The new ICIJ investigation into Zambia’s state-owned power company, ZESCO, changes the focus from the familiar question of who lent to the country to a more operational one: how debt inside a utility changes the reliability of electricity, and how unreliable power then reaches farms and small businesses. The investigation, published October 26, draws on internal records and loan agreements, and describes the interaction of a long-term ICBC loan, the utility’s financial strain and severe drought-related hydropower shortages.
The finding matters because an electricity supplier is not merely another borrower on a national balance sheet. It is an input provider for almost every productive sector. When its revenue is constrained by debt service and its generating system is exposed to rainfall, financial stress can become a physical constraint on output. The article follows that path from financing arrangements to load shedding, and then to a Lusaka-area farmer unable to power borehole pumps or reliably plan labor and planting.
ICIJ reports that ZESCO signed a $285 million loan agreement with Industrial and Commercial Bank of China in 2011. The report describes this as one among several debts the utility incurred over subsequent years. It also documents a 2018 payment episode involving a $20 million installment, after ZESCO had paid $15 million in management fees connected to a separate loan. These are specific transactions reported by the investigative consortium, not a complete account of every ZESCO liability or the current loan balance.
The mechanism is more important than the headline amount. A utility with foreign-currency obligations and weak cash flow must prioritize debt service alongside maintenance, fuel, spare parts and investment. If obligations have hard payment dates or cash-control arrangements, management has less flexibility when revenue falls or generation breaks down. That can create a feedback loop: less spending on resilience or repairs makes supply less dependable, while unreliable supply weakens customers’ ability to pay and the utility’s ability to recover revenue.
Zambia’s exposure was amplified by its generation mix. Hydropower has historically supplied much of the country’s electricity, so a drought can sharply reduce available generation. The ICIJ account describes the 2024 drought and load shedding that began in March of that year, with some households and businesses experiencing only a few hours of power a day. In this setting, the utility’s financial condition and the climate shock do not operate as separate risks. They compound one another.
The investigation opens with a farmer near Lusaka who relied on electric borehole pumps to irrigate crops. Without dependable electricity, water access faltered, vegetables spoiled, livestock activity was reduced and the business cut planting and seasonal hiring. The account is a reported case study, not a national statistical estimate. Its value is that it makes a transmission channel visible: an energy interruption becomes a loss of perishable output and a reduction in local labor demand.
That chain also helps explain why electricity shortages can suppress activity beyond the power sector. A small producer may have no affordable backup generator, may not be able to store output, and may face customers whose own incomes are falling. Lost production then reduces cash available for wages, supplier payments and utility bills. The resulting effects are dispersed across many firms and households, making them harder to see in the accounts of the lender or the central government.
For Zambia, the case intersects with an existing debt history rather than replacing it. The library’s Zambia debt history covers the sovereign default and restructuring context; its economic outlook covers the broader drought and debt question. This new frame is narrower: it asks how the liabilities of a state-owned utility affect the delivery of a core service, and how that service supports private production.
Public discussion of sovereign borrowing often contrasts Chinese lending with multilateral or commercial finance. The investigation complicates that binary. ICIJ describes China as a source of infrastructure finance that could move where other capital providers were cautious, while also documenting opaque terms, links between contractors and lending, and pressure around repayment in the ZESCO case. The Chinese Embassy in Zambia denied that China uses lending to pursue political interests or pressures borrowers; ICBC did not respond to ICIJ’s requests for comment, according to the investigation.
The practical issue for a borrower is not the nationality of a creditor alone. It is the full contract: pricing, maturity, currency, collateral or account controls, fees, covenants, confidentiality, and the ability to restructure when an external shock arrives. The terms determine whether stress can be managed through negotiation or immediately constrains cash needed for operations. Where several lenders hold different claims, incomplete disclosure can make it difficult to establish who must agree to a restructuring and on what basis.
Zambia’s earlier sovereign default and restructuring illustrate that coordination problem. The country’s government and central-bank structure matters because public borrowing, state-enterprise oversight and monetary stability are institutionally linked but not identical. A utility can generate contingent liabilities for the state even when its debt is not booked as a direct sovereign bond. Investors therefore assess not only the treasury’s debt but also the balance sheets and service obligations of large public entities.
Hydropower dependence can be an advantage when water is abundant: it reduces exposure to imported fuel and can support low operating costs. It becomes a concentration risk when drought lowers reservoir levels and alternative generation is limited. Climate resilience in this context is not only an environmental program. It is a balance-sheet and continuity-of-service question involving diversified generation, transmission capacity, maintenance, storage and the ability to finance investment without overloading the utility’s cash flow.
The financing challenge is circular. A financially weak utility may be unable to invest in resilience, but new borrowing can deepen its fixed payment burden. Tariff increases can improve cost recovery but may be unaffordable for households or politically difficult. Public subsidies can protect customers but move costs to the state budget. Each choice reallocates risk among consumers, taxpayers, lenders and future users rather than making the underlying risk disappear.
This is why debt sustainability analysis needs to connect public-sector liabilities with service delivery. A debt ratio alone cannot show whether the country can maintain power lines, pay for imported electricity or replace generation during a drought. Likewise, a loan’s headline interest rate does not reveal whether repayment priorities will crowd out maintenance. The relevant unit of analysis is the complete system: sovereign accounts, state-owned firms, infrastructure performance and the income base that ultimately supports repayment.
Three signals will clarify whether the episode remains a case study or becomes a broader financing precedent. First is disclosure: whether Zambia publishes sufficiently complete information on state-enterprise debts, loan terms and payment priorities. Second is operational performance: whether ZESCO’s generation mix and grid reliability improve as hydrological conditions change. Third is restructuring practice: whether creditors and the government reach arrangements that preserve essential investment while making obligations transparent and serviceable.
The central conclusion is not that foreign lending alone caused Zambia’s power shortages. The investigation documents a combination of drought, utility debt, prior borrowing choices and infrastructure dependence. The useful analytical shift is to treat financing terms as part of the production system. When a public utility owes money, the consequences can appear not only in a debt negotiation but also in irrigation, food supply and employment.