Wednesday, August 17

Zambia to Boost Tax Intake as It Targets Growth of 4.4% by 2025


Zambia plans to boost tax revenue, cut its budget deficit and restructure debt as it targets economic growth of 4.4% by 2025.

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(Bloomberg) — Zambia plans to boost tax revenue, cut its budget deficit and restructure debt as it targets economic growth of 4.4% by 2025.

To help shrug off a forecast contraction in its agriculture industry due to extreme weather, as well as the effects of Russia’s invasion of Ukraine that’s caused a surge in gasoline and food prices, the African nation aims to increase tax collections and implement fiscal consolidation, its Finance Ministry said.

Zambia is targeting domestic revenue and grants at 22.8% of gross domestic product by 2025, compared with 21.5% expected for this year, by improving tax collections, reinstating a value added tax and excise duty on petroleum products, and streamlining the mineral royalty regime, the ministry said.

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Additional revenue will be used to expand the agriculture, mining and tourism industries in a bid to generate average growth of 4.2% from 2023 to 2025, compared with 3.1% forecast for this year, it said in its medium-term budget plan published Saturday.

The continent’s second-biggest copper producer expects sustained higher prices and increased production of the metal, a rebound in agriculture, and insurance and financial services industries to be among the key growth drivers.

It aims to reduce its spending shortfall to 5.5% of GDP by 2025 from a revised 9.9% forecast for this year.

The document was released as part of efforts to increase transparency and enhance consultations between Zambia’s government and various stakeholders, the ministry said.

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Africa’s first pandemic-era defaulter reached a preliminary deal with the International Monetary Fund for a $1.4 billion bailout in December. As part of the agreement it must undertake economic reforms, rework debt with creditors, and be more transparent about its borrowings.

Zambia borrowed heavily for a decade to finance an ambitious infrastructure program as well as to pay for energy and farm subsidies. Government debt was at 123% of GDP in 2021, according to the IMF.

Other Key Targets

  • Budget deficit in 2022 forecast to widen to 9.9% from 6.7% forecast earlier
  • Zambia aims to sustain the inflation rate within single digits, at an average of 9.2% in 2023, 8.2% in 2024 and 7.3% in 2025
  • Maintain reserves at above three months of import cover
  • Attain economic growth of 4% in 2023, 4.1% in 2024 and 4.4% in 2025

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