🇿🇲 INSIGHT | 2027 Budget: Who Pays for Zambia’s Growth?
When Finance Minister Situmbeko Musokotwane presented Zambia’s K284.8 billion National Budget on Friday, 6 November 2026, he delivered a message that deserves attention beyond the figures announced in Parliament. Zambia must increasingly finance its own development. It is a reasonable ambition for a country seeking greater economic independence, but it raises an equally important question: how much more can Zambians afford to contribute?
The proposed tax measures, expected to raise an additional K10.8 billion, come at a time when households and businesses are still adjusting to the cost of living, borrowing constraints and uneven economic opportunities.
Government intends to raise K233.7 billion domestically, representing 82.1 percent of the budget, compared with 58.7 percent in 2021. Musokotwane defended this approach in unusually direct language.
“There are no donors to pay, we must pay ourselves,” he told Parliament.
The statement captures an important shift in Zambia’s fiscal policy. For years, successive administrations have struggled with borrowing, debt servicing and dependence on external financing. Increasing domestic revenue could reduce some of those vulnerabilities. But economic independence is not achieved merely by collecting more money from citizens. It also requires expanding production, creating employment, strengthening tax compliance and demonstrating that public resources are spent effectively.
Among the most consequential proposals is the increase in Value Added Tax from 16 to 16.5 percent. The difference appears modest, but VAT is a consumption tax whose effects extend beyond formal employment. A market trader, a teacher, a small business owner and a household surviving on irregular income can all encounter it when purchasing taxable goods and services. For an item costing K116, including the current VAT, the proposed rate would raise the price to K116.50 if the underlying price remained unchanged and the increase were fully passed on. The greater concern is the cumulative effect across repeated purchases.
Unlike income tax, VAT does not automatically adjust to a household’s ability to pay.
The proposed increase in mobile money levies across transaction bands deserves similar scrutiny. Mobile money has become part of everyday economic life, particularly for people who operate outside conventional banking arrangements. Families use it to send money to relatives, traders receive payments through it, and small businesses depend on it for transactions. Increasing charges may generate additional revenue, but it also raises the cost of participating in the digital economy.
Zambia has spent years encouraging financial inclusion. Could higher transaction costs discourage some of the very people that financial inclusion policies are intended to reach?
The Government has also proposed a new top PAYE rate of 39.5 percent on monthly income exceeding K37,000. Musokotwane sought to clarify that the higher rate would apply only to income above the threshold.
“Only the additional income above K37,000 per month will be taxed at 39.5 per cent,” he explained.
This distinction matters because the proposal does not mean everyone earning K37,000 will surrender 39.5 percent of their salary. Nevertheless, it introduces a higher marginal tax burden for upper-income earners. The broader question is whether Zambia’s income tax structure adequately reflects changes in inflation, purchasing power and household obligations. A salary may appear substantial on paper while supporting several dependants, school fees, housing and other commitments.
Businesses face their own adjustments. The proposed five-percentage-point increase in corporate income tax on income currently taxed at 20 percent or below is intended to rationalise preferential rates. Meanwhile, withholding tax on mining company dividends would rise from zero to 15 percent. These measures seek greater contributions from corporate activity and investment returns. Yet their economic consequences will depend on how businesses respond. Some may absorb the costs through reduced profits, while others could adjust prices, investment plans or operating expenses. The relevant test is whether additional revenue can be collected without unnecessarily discouraging productive investment and employment.
Not every proposal increases taxation. The Government intends to reduce mineral royalty from six to three percent for artisanal and small-scale gold miners selling through approved aggregators. It has also proposed duty relief on imported raw materials used in local sanitary-product manufacturing, alongside incentives for tourism and selected industries. These measures recognise that taxation can encourage formalisation and production rather than simply collect revenue. But the same principle invites scrutiny elsewhere. If lower taxes can encourage small-scale gold miners to enter formal markets, how might higher transaction charges affect informal traders and small businesses already operating on narrow margins?
The expenditure side of the budget provides essential context. Government has allocated K67.6 billion towards debt service, approximately 23.7 percent of the entire budget. Education receives K38.2 billion, while health is allocated K30.3 billion. The proposed K10.4 billion for the Social Cash Transfer programme is intended to support more than 1.6 million households, with monthly benefits increasing to K450 for eligible households and K650 for those with eligible persons with disabilities. These commitments have direct social value, but allocations alone cannot establish results. The questions are whether money reaches intended beneficiaries, whether public services improve and whether Government can account for what it spends.
The debate also concerns the relationship between economic growth and household welfare. Government has framed the budget around moving from stabilisation towards greater production, employment and improved livelihoods. That ambition is understandable after years of debt distress, inflationary pressure and economic uncertainty. However, national growth figures do not necessarily describe the experience of an ordinary household. An economy can expand while particular communities experience stagnant wages, expensive transport or limited employment opportunities. The relevant measure of progress is therefore not only how much revenue the Treasury collects, but whether citizens experience meaningful improvements in their economic circumstances.
Zambia’s recent history offers reasons to examine both sides of this argument. Heavy public borrowing created serious fiscal vulnerabilities, making domestic revenue mobilisation an important policy objective. At the same time, households cannot be treated as an unlimited source of financing. Government must demonstrate that the additional burden is distributed fairly, that public expenditure is disciplined and that economic opportunities expand alongside taxation. The private sector must also contribute, particularly where profits and investment returns justify it. But the distinction between taxing existing economic activity and creating new economic activity remains crucial.
Musokotwane’s statement that Zambians must finance their own development is therefore only one part of the national conversation. The other concerns what citizens receive in exchange for their contributions. Will higher revenue translate into better hospitals, functioning schools, reliable infrastructure and employment opportunities? Will businesses become more productive, or will additional costs ultimately reach consumers?
And will the Government apply the same discipline to expenditure that it expects taxpayers to exercise over their incomes? These questions should guide Parliament’s examination of the proposals before their intended commencement on 1 January 2027. A country’s capacity to raise taxes matters, but so does its capacity to justify them.
The People’s Brief | Francine Lilu & Ollus R . Ndomu
8 November 2026