Zambia Maps Deficit Cut as Copper Tailwinds Meet Budget Discipline

Deficit Targets and the 2027 Budget Map

Zambia's fiscal gap is now expected at 5.9% of GDP this year, almost three times the 2.1% target. Presenting his annual budget on Friday, Finance Minister Situmbeko Musokotwane said the goal is to narrow the shortfall to 3% of GDP next year and reach 1.2% by 2029.

For 2027, the plan sets spending at 284.8 billion kwacha and expects to cover it with 233.7 billion kwacha of domestic revenue, 41.9 billion of borrowing, and 9.2 billion of grants. Getting finances back in line is key to securing final approval for an IMF backed program while the country faces a menacing El Niño.

Why the Gap Blew Out This Year

Near-record copper prices helped the revenue side, but spending jumped. The government shielded households from a fuel surge sparked by the Iran war and, in an election year, purchased corn from farmers at five times the originally intended volume.

The risk picture has darkened. In recent weeks, the growth outlook was lowered as the effects of the Iran war combined with another drought risk.

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Copper, Taxes, and the Investor Angle

A copper windfall is propping up the government as prices topped $14,000 a ton this year, which lifted royalties and tax receipts for Africa's number-two producer. Even so, output is projected at 930,000 tons this year - falling short of a goal exceeding 1 million tons - with targets set for 2027 at more than 1 million tons and for 2029 at 1.4 million tons. By then, BloombergNEF expects the market to shift into a supply deficit, a setup that typically supports prices.

To reinforce domestic revenue, officials plan to lift the VAT to 16.5% from 16% and apply a 15% withholding tax to dividends from mining companies. The bottom line: the budget math leans on copper receipts and targeted tax measures while navigating drought and energy shocks, a mix that matters for your exposure to Zambian sovereign risk and miners tied to the country's output and pricing.

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