Zambia had hoped to have a $1.3 billion loan agreement with the IMF completed early this year, Treasury Secretary Fredson Yamba said in November.
The IMF’s rejection puts those plans on hold.
It was the second time the IMF had rejected a Zambian proposal.
In August 2017, it also turned down borrowing plans it said threatened debt sustainability.
IMF staff then requested new borrowing plans before it would resume talks on a lending programme, the IMF said from Washington in a written response to a press query.
“However, the latest borrowing plans provided by the authorities continue to compromise the country’s debt sustainability and risk undermining its macroeconomic stability and, ultimately, living standards of its people,” the IMF said.
“Against this background, any future programme discussions can only take place once the Zambian authorities implement credible measures that ensure debt contraction is consistent with a key programme objective of stabilizing debt dynamics and putting them on a declining trend in the medium term.”
Treasury officials could not be reached for comment.
Zambia’s total public debt at the end of August 2017 stood at $12.45 billion representing 47 percent of gross domestic product.
The IMF will continue to engage with Zambia through regular discussions and technical assistance, the fund said.
Zambia and the IMF agreed in October to chart a new path towards debt sustainability after the IMF delayed the conclusion of talks, saying it was at high risk of debt distress.
Chibamba Kanyama, a Lusaka-based independent economist who previously worked at the Washington-based lender as a communications advisor had predicted earlier in the week that change in leadership could prove pivotal for the planned $1.3bn loan after talks stalled last year.
“It’s either a deal breaker or a deal maker,” he said by phone. “The next two weeks will determine how the IMF discussions go”. Either the process will collapse, or the parties will decide to “re-engage afresh”, he said.