Zambia’s Fuel Subsidy Boost Hurts Chances of Winning Over IMF

Zambia’s move this month to further subsidize fuel prices highlights the government’s balancing act of seeking to retain power while convincing the International Monetary Fund to approve a bailout before an election scheduled for August.

The finance ministry removed a 16% value-added tax on gasoline and diesel prices from Jan. 1, which it said was necessary to avoid increases at the pump. The IMF opposes subsidies and that could prove to be a stumbling block in the government’s talks for assistance from the Washington-based lender.

It could also hinder discussions with holders of $3 billion in Eurobonds as they have ...