LowIV Macro Policy & Sovereign Debt6 November 2026, Friday
Zambia leans on copper to cut next year's deficit to 3%
Zambian Finance Minister Situmbeko Musokotwane presented a 2027 budget to parliament on 6 November that targets a deficit of 3% of GDP. The 2026 deficit reached 5.9% against a 2.1% target, widened by fuel tax cuts in response to the Iran war and by maize purchases.
According to a TimesLIVE report, the government is targeting growth of about 5% in 2027. Copper output is set to rise from about 890,000 tonnes in 2025 to 930,000 tonnes in 2026, and the country is aiming for 3 million tonnes by 2031. In October Zambia secured staff-level agreement on a new $1.5 billion IMF programme.
The Rio Times says the budget totals 284.8 billion kwacha, about $14.5 billion, with spending at 28.4% of GDP. VAT rises from 16% to 16.5%, and a new top income tax band of 39.5% is introduced. A 15% withholding tax on mining company dividends and a 5% export duty on zinc concentrate are proposed. Debt service comes to 67.6 billion kwacha, about $3.4 billion, mostly on domestic debt.
On Talay's reading, the budget rests on copper prices, which hit a record $14,850 a tonne in August. According to the Rio Times, crude oil rose from $64.6 in January to $114 in October, pushing up fuel prices. The fuel tax cut widened the deficit; the 2027 target depends on reversing that cut and on copper revenue holding up. The dividend withholding tax could clash with the stable mining tax regime the minister has promised.
Talay assessment
Bottom line
Zambia paid for cushioning the Iran war's fuel shock with tax cuts in its 2026 deficit, and in 2027 it is shifting the burden onto copper revenue and tax rises. The target depends on copper staying near record levels and output rising. The most likely path is a deficit that closes slightly above the 3% target.
Likely effects
- Mining investmentNegative1–6 months
A 15% dividend withholding tax and a 5% zinc export duty cut miners' net returns and could slow investment decisions despite the promise of stability.
- Household budgetsNegativeWeeks
VAT rising to 16.5% and the end of the fuel tax cut will feed through to consumer prices.
- Debt sustainabilityPositive1–6 months
Narrowing the deficit from 5.9% to 3% and a $1.5 billion IMF programme support confidence after the default.
Possibilities, ranked
- 1Deficit slightly above target55%
Copper revenue stays strong, but spending pressure leaves the deficit in a 3–4% band.
Watch: Quarterly budget execution reports from Zambia's Ministry of Finance
- 2Target met30%
Copper stays near record levels, output approaches a million tonnes and the deficit falls to 3%.
Watch: Zambia's monthly copper output data and the LME copper price
- 3A fresh overshoot15%
Copper prices fall or drought raises food imports, and the deficit again exceeds 5%.
Watch: The IMF programme's first review report
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- 2026 budget deficit▼ 5.9%
- 2027 deficit target▲ 3.0%
- Copper output 2026▲ 930,000 t