The 2026 Zambia National Budget: An Overview

The 2026 Budget Address, delivered by the Minister of Finance and National Planning, Dr. Situmbeko Musokotwane, on September 26, 2025, aligns with the theme "Consolidating Economic and Social Gains Towards a Prosperous, Resilient and Equitable Zambia." This theme builds on the Eighth National Development Plan and emphasizes sustaining progress made since the UPND government took office in 2021, including economic recovery, debt restructuring, and social programs amid challenges like the 2024 drought and global economic pressures. The budget highlights achievements such as average GDP growth of 5.2 percent over the past four years (compared to 1.6 percent pre-2021), successful debt restructuring under the G20 Common Framework, and initiatives like free education, enhanced Constituency Development Fund (CDF), and drought mitigation through Cash-for-Work and Social Cash Transfer. It addresses ongoing issues like youth unemployment, poverty, infrastructure deficits, and productivity enhancement, while preparing for the Ninth National Development Plan. The budget promotes economic diversification through sectors like mining, agriculture, energy, manufacturing, tourism, and transport, alongside social investments in education, health, and protection.

Key Targets

The budget sets ambitious macroeconomic objectives to drive growth and stability. These include achieving a real GDP growth rate of 6.4 percent, reducing inflation to the target band of 6-8 percent, maintaining gross international reserves above 4.0 months of import cover, increasing domestic revenue to at least 22.3 percent of GDP, reducing the fiscal deficit to 2.1 percent of GDP, and limiting net domestic borrowing to 2.3 percent of GDP. Sector-specific targets include boosting copper production to over one million metric tonnes in 2025 (en route to three million by 2031), increasing maize output to 10 million metric tonnes, wheat and soya beans to one million each by 2031, raising non-hydro renewable energy share to 33 percent from 3 percent, and achieving universal access to clean water and sanitation by 2030. Social targets involve expanding free education to benefit more vulnerable children, recruiting additional teachers and health workers, and increasing social protection coverage to over 1.5 million households.

Revenue

The total budget is K253.1 billion, equivalent to 27.4 percent of GDP. Domestic revenues and grants account for 86.4 percent (K218.6 billion), with the remainder financed through borrowing. Domestic revenues total K206.5 billion (81.6 percent of the budget and 22.3 percent of GDP), primarily from tax revenue at K165.8 billion (65.5 percent of the budget). Key tax sources include income tax at K82.5 billion (with company tax K30.1 billion, Pay As You Earn K31.4 billion, and withholding tax K21.0 billion), Value Added Tax (VAT) at K54.4 billion, customs and excise duties at K28.5 billion (customs duties K14.4 billion, excise duties K14.1 billion), and export duties at K0.4 billion. Non-tax revenue contributes K40.7 billion (16.8 percent), mainly from user fees, fines, and charges at K21.4 billion, mineral royalty at K18.2 billion, motor vehicle fees at K0.2 billion, tourism levy at K0.1 billion, skills development levy at K0.4 billion, and insurance premium levy at K0.4 billion. Grants from cooperating partners add K12.1 billion (4.8 percent). Financing totals K34.5 billion (13.6 percent), with domestic borrowing at K21.6 billion (8.5 percent) and external borrowing at K12.9 billion (5.1 percent, including program loans K3.8 billion and project loans K9.0 billion).

Expenditures

Expenditures total K253.1 billion, allocated across functions to prioritize economic transformation, social gains, and resilience. General Public Services receives K92.6 billion (36.6 percent), covering domestic debt interest at K52.0 billion, external debt servicing at K21.7 billion, arrears dismantling at K4.7 billion, 2026 elections at K1.2 billion, local government equalization at K1.4 billion, and compensation at K0.8 billion. Economic Affairs gets K58.6 billion (23.2 percent), including agriculture, fisheries, and livestock at K15.5 billion (Farmer Input Support Programme K9.2 billion, strategic food reserves K2.1 billion, animal health services K0.8 billion), road infrastructure at K14.5 billion, CDF at K6.2 billion (K40.0 million per constituency), tourism at K1.5 billion, mining at K1.2 billion (aerial mapping K0.5 billion, artisanal mining support K0.4 billion), provincial airports at K1.1 billion, empowerment funds at K0.6 billion, and the new Electricity Fund at K0.5 billion. Education is allocated K33.0 billion (13.0 percent), with school operations at K2.4 billion, infrastructure at K2.3 billion, student loans and scholarships at K1.4 billion, and revised curriculum at K0.3 billion. Health receives K26.2 billion (10.3 percent), including drugs and medical supplies at K6.4 billion, infrastructure at K1.7 billion, equipment at K1.0 billion, and hospital operations at K1.1 billion. Social Protection gets K15.7 billion (6.2 percent), with Social Cash Transfer at K7.6 billion, public pensions at K4.9 billion, Food Security Pack at K1.5 billion, and Cash-for-Work at K1.0 billion. Defence is K11.9 billion (4.7 percent), Public Order and Safety K9.6 billion (3.8 percent, including law enforcement K0.9 billion and national registration system K0.2 billion), Housing and Community Amenities K3.2 billion (1.3 percent, water infrastructure K1.8 billion), Environmental Protection K1.6 billion (0.6 percent), and Recreation, Culture, and Religion K0.7 billion (0.3 percent, chiefs' welfare K0.2 billion).

Key Regulatory Changes

The budget introduces several regulatory and tax changes to broaden the revenue base, enhance compliance, stimulate growth, and promote resilience, while providing relief to key sectors. Key tax measures include revising surtax and customs duties on imported steel products, pasta, processed meat, edible offal, carbon dioxide, flexible PVC pipes, polyester fibre, and float glass to support local manufacturing; removing customs duties on complete knock-down components for assembling motor vehicles (including tipper trucks, electric vehicles, tricycles, motorcycles, trailers, and tractors); increasing tax-exempt thresholds for turnover tax and rental income to K2,500 from K1,000 per month, and for artisanal/small-scale mining to K5,000,000 from K800,000; reducing late turnover tax penalties to 0.5 percent from 5.0 percent; providing duty relief on machinery for electricity transmission/distribution and extending VAT refund periods for hydroelectricity businesses to 10 years from seven; harmonizing and increasing duties on imported dairy products (e.g., powdered milk to 40 percent for resale and 25 percent for processing, cheese/yoghurt/long-life milk to 40 percent from 25 percent) while removing duties on milk pasteurization machinery and extending local content allowances to milk, hides, and skins; reducing excise duty on new hybrid vehicles to 15 percent from 30 percent, changing used hybrid valuation to specific rates, and increasing excise on single-use plastics to 100 percent from 30 percent; harmonizing customs duty on firearms to 25 percent and introducing 30 percent excise on firearms/ammunition; excluding large buses (50+ seats) from presumptive tax and registering them under turnover or corporate income tax; zero-rating piped water for VAT; removing five-year limits on disallowed interest carry-forward; increasing income tax deductions for employing persons with disabilities to K2,500 from K2,000; extending advance income tax to all remittances; and providing incentives for rail sector revival. Fees and levies are increased, including mobile money transaction levies (doubled across bands, e.g., K1-K150 to 0.32 from 0.16), toll fees (e.g., medium heavy vehicles to 400/200 from 300/50), citizenship fees (e.g., registration certificate to USD 10,000 equivalent from K26,667), and firearm licences (e.g., rifle/pistol to K2,400 from K89). Housekeeping changes amend the Income Tax Act, Customs and Excise Act, VAT Act, and Zambia Revenue Authority Act to update provisions, strengthen administration, and remove ambiguities. Other regulatory shifts include enacting the Tax Administration Bill for simplified procedures, amending the Anti-Corruption Act for commission independence, revising the Companies Act for beneficial ownership disclosure, and issuing rules for deposit protection and state-owned enterprises to enhance governance and sustainability.

Broader Implications

The budget decisions reflect a strategic focus on fiscal prudence, economic diversification, and social equity to build on post-2021 recoveries while addressing vulnerabilities like drought, high debt servicing, and unemployment. By capping the deficit at 2.1 percent and domestic borrowing at 2.3 percent, it prioritizes sustainability after debt restructuring, with high domestic debt interest (K52 billion) highlighting past borrowing's legacy and the need for restraint. Revenue measures aim to broaden the tax base (e.g., clawing from informal sectors) and incentivize growth in mining, agriculture, energy, and manufacturing, inferring a goal of export-led expansion (e.g., copper, maize surpluses) and job creation through private investment. Expenditures heavily favor social programs (education 13 percent, health 10.3 percent, protection 6.2 percent) and infrastructure (roads, airports, water), suggesting an intent to reduce poverty (still high) and enhance resilience via climate-smart initiatives and diversification from hydro-dependent energy. The emphasis on CDF (increased to K40 million per constituency) and SME relief underscores decentralization and inclusivity, aiming for equitable development. Overall, the budget's goal appears to be accelerating Zambia toward middle-income status by fostering a resilient, investment-friendly economy that generates jobs, boosts productivity, and protects vulnerable groups, positioning the country as a regional hub amid global uncertainties.