Finance Minister Situmbeko Musokotwane has pledged to slash the budget deficit and curb borrowing, as the government aims to agree an IMF lending programme by the end of next month and a debt restructuring early next year.
Presenting the 2022 budget to parliament, Finance Minister Situmbeko Musokotwane said the aim was to reduce the budget deficit from a projected 10.4% of gross domestic product (GDP) this year to no more than 6.7% next year.
The government is targeting economic growth of at least 3.5% in 2022 compared to 3.3% in 2021.
Zambia’s talks with the International Monetary Fund have moved quickly since President Hakainde Hichilema won a landslide election against incumbent Edgar Lungu in August and appointed experienced economist Dr. Musokotwane to rein in public finances.
“I … urge this house and the nation at large to rally together and support government to reach an agreement with the IMF by the end of November,” Dr. Musokotwane said.
“There is no option to this otherwise the debts we owe will choke this nation to a standstill,” he added, saying the aim was for a debt restructuring to be concluded in the first quarter of 2022.
In order to curtail further debt accumulation, Dr. Musokotwane said the government would not contract any external non-concessional loans, except for refinancing purposes.
Dr Musokotwane announced that the government-subsidised fuel supply chain would be restructured, he continued.
He also revealed that government planned to reintroduce the deductibility of mineral royalty payments when calculating corporate income tax – a reform long sought by mining firms in its important copper sector.
“I am certain that the world’s mining investors will be looking at Zambia afresh after today,” said Zambia’s Chamber of Mines president Godwin Beene.
“Renewed interest from investors today could lead to new mines in production over the next five to ten years, and with the right supportive policies in place, that could completely change our nation’s development trajectory.”