On 26 September 2025, the Zambian Minister of Finance and National Planning, Dr Situmbeko Musokotwane (Minister), unveiled the Government’s Budget for 2026 (Budget), with the theme ‘Consolidating Economic and Social Gains Towards a Prosperous, Resilient and Equitable Zambia’.
The ZMW 253 billion Budget represents a 17% increase from the initial 2025 budget and a 6% rise from the supplementary-adjusted Budget. It has been prepared based on the macroeconomic targets for the 2026 fiscal year, with a focus on consolidating reforms introduced during the last four years of the UPND administration, restoring fiscal credibility, and promoting inclusive economic growth.
Specifically, gross domestic product (GDP) growth is projected to reach 6.4% in 2026, up from 5.8% in 2025. Inflation is expected to decrease to within a single-digit range of 3% to 8%. As of August 2025, inflation had moderated to 12.3%, still above the 2025 target range of 6% to 8%.
Domestic revenue collection is targeted at 22.3% of GDP, a slight improvement from 21.3% in 2025. The budget deficit is projected to narrow to 2.1% of GDP, compared to the revised 4.6% deficit in 2025. Foreign exchange reserves are expected to be sufficient to cover at least four months of imports, which is an increase of one month from the previous year.
To support these fiscal objectives, the Government has outlined a series of administrative and policy measures aimed at enhancing revenue performance and growth in key economic sectors. These include:
- Energy sector incentives;
- Mining sector incentives;
- Manufacturing sector incentives;
- Transport infrastructure and PPPs; and
- Tax and doing business reforms.
Sector specific incentives and reforms
Energy
Zambia is currently experiencing a severe energy shortage due to underinvestment in the sector, exacerbated by the 2024 draught. Additionally, the expanding activities in the mining sector are driving up the demand for electricity.
To support this critical sector and stimulate investment across the value chain, the Government has announced incentives for the sector.
First, the Minister has proposed to increase the intending trader period for hydro-electricity generation for VAT purposes – to 10 years from seven years. This means that eligible businesses in the hydro-electricity subsector, will now be able to claim VAT on inputs for up to 10 years, compared to the current seven-year period.
Second, the Government has extended ‘energy priority sector’ incentives to include the transmission and distribution of electricity. Specifically, projects involved in these areas will now receive customs duty relief.
Currently, customs duty relief is provided for machinery and equipment used in power station installation under the Investment, Trade and Business Development (Priority Sector Declaration) Order, which prioritises electricity generation. This relief will now also extend to the transmission and distribution segments.
Third, the Government has proposed establishing a ZMW 500 million Electricity Fund (Fund) to strengthen electricity security and ensure stable supply. This is in addition to preceding key reforms such as the the Multi-Year Tariff Framework, Electricity Open Access Framework, Net Metering Policy Framework and the Energy Single Licensing System.
While operational details of the Fund have not yet been published, it may support liquidity by ensuring timely payments to IPPs, contribute to transmission infrastructure, or subsidise rural electrification. The Fund could also provide a buffer to meet domestic demand through purchases from regional power markets such as the Southern African Power Pool (SAPP).
Lastly, from a legislative perspective, the Government is proposing to review key energy legislation, namely the Energy Regulation Act and the Electricity Act. A mid-term review of the National Energy Policy 2019 and Implementation Plan will also be undertaken. These reviews aim to support the deployment of renewable energy and promote open access to the grid.
Mining
The Budget reaffirms the mining sector’s central role in Zambia’s economic development strategy. Copper production reached 820 676 metric tonnes in 2024, with the Government targeting one million tonnes in 2025 and three million tonnes annually by 2031. This growth trajectory is supported by a stable fiscal regime, regulatory reforms and increased investor confidence.
Accordingly, the Minister has announced that the Government will construct mineral marketing centres in Mumbwa and Rufunsa to support the formalisation of artisanal and small-scale mining and improve transparency in mineral trading. The centres, expected to be operational by the end of 2026, will serve as regulated platforms for the sale and purchase of minerals. This will simultaneously enhance price transparency, reduce exploitation of small-scale miners, facilitate tax compliance and traceability of mineral transactions, and support the integration of artisanal mining into formal supply chains.
The Minister announced that the Minerals Regulation Commission, established under the Minerals Regulation Commission Act 2024 (MRC Act), will become operational in 2026 to oversee compliance, licensing and coordination with the Zambia Revenue Authority (ZRA) to ensure adherence to tax laws across the sector.
From a fiscal and policy perspective, regarding mining operations and investment, the Minister proposed the removal of the 10 years carry forward limitation on disallowed interest deductions under the Income Tax Act.
Other proposals include the extension to maintain books of accounts in United States dollars for mineral processing businesses. This measure aims to provide greater flexibility in financial reporting for mineral processing businesses, facilitating more efficient business processes and aligning accounting practices with operational realities in the sector.
The Minister also clarified that machinery and equipment required in mining and exploration are Customs Duty exempt. This measure is aimed at providing clarity on the provisions of Regulation 96 of the Customs and Excise (General) Regulations of 2000, that customs duty exemption is on the machinery, equipment and other goods used in geothermal, oil and gas exploration.
Furthermore, the Minister proposed to allow the recognition of mineral valuation certificates (MVC) under the MRC Act as an alternative basis for determining the free-on-board (FOB) value of exported minerals.
This measure intends to harmonise customs valuation which mandates only transaction-based FOB pricing with the minerals regulation framework that introduced the MVC as the official mechanism for valuing mineral exports. Last, the Minister proposed an increase in the turnover threshold for artisanal and small-scale mining from ZMW 800 000 to ZMW 5 million to align with the standard turnover tax threshold and enhance compliance in the sector. Currently, operators with an annual turnover of ZMW 800 000 or less pay presumptive tax at 4% of turnover, after deducting the mineral royalty tax.
The mining sector is expected to benefit from increased regulatory clarity and targeted infrastructure investment. The establishment of marketing centres and the operationalisation of the Minerals Regulation Commission signal a shift towards greater formalisation and oversight. These developments are likely to improve transparency, enhance compliance and support the sector’s long-term growth.
Manufacturing
The manufacturing sector remains a key focus of Zambia’s industrialisation agenda. The Budget outlined ongoing investments in infrastructure, policy reforms and fiscal incentives aimed at enhancing local production and value addition.
Newly proposed fiscal and customs incentives aimed at supporting domestic manufacturing include the removal of customs duty on complete knock down components for vehicle assembly, including electric vehicles, tractors and trailers. This is intended to encourage the assembly of motor vehicles and foster growth in Zambia’s automotive industry.
The Minister also proposed to remove the 5% surtax on selected goods applicable to flat rolled products of iron or non-alloy steel, painted, varnished, or coated with plastics. This is intended to lower output costs and enhance manufacturing efficiency.
In the agricultural value chain, specifically the dairy sub-sector, the Minister proposed a series of measures. These include higher duties (15% to 25%) on powdered milk, cheese, yoghurt, UHT, harmonisation of a 0% surtax, removal of duty on pasteurisation machinery, and extending the 2% local-content allowance to income earned from value addition to milk, raw hides and skins.
In the automotive industry, the Minister proposed to reduce the excise duty on new hybrid vehicles to 15% from 30% to promote the use of environmentally friendly vehicles in line with the Government ‘s policy of reducing greenhouse gas emissions.
The Minister also proposed the removal of the 5% surtax on selected goods applicable to flat rolled products of iron or non-alloy steel, painted, varnished, or coated with plastics to lower output costs and enhance manufacturing efficiency.
The manufacturing sector is expected to benefit from a combination of protective tariffs, targeted incentives and infrastructure expansion. The development of new economic zones presents opportunities for greenfield investment, while the revival of strategic facilities such as Mulungushi Textiles may catalyse growth in agro-processing and light industry. Businesses operating in agro-processing, automotive assembly and light manufacturing may find favourable conditions for growth, subject to compliance with evolving regulatory frameworks.
Transport and logistics
The 2026 Budget reiterated Government’s strategic focus on connecting Zambia to all neighbouring countries and regional and international markets through comprehensive, collaborative, and innovative infrastructure financing, development, and operations models such as the public private partnerships (PPPs).
In 2021, the Government announced its aggressive pursuit of PPPs as a mechanism to fund and construct transport infrastructure. Four years later, it has been revealed that 10 PPP agreements in the road sector with a total investment value of USD 1.7 billion, have been signed. Additionally, more agreements are on the horizon.
Continuing along the same path, the Government has proposed a series of income tax concessions to stimulate growth in the railway sub-sector. Specifically, the Minister has proposed amending the Income Tax Act to establish a fiscal regime for the PPPs involved in the rehabilitation, renovation, operation, maintenance, management, and financing of the TAZARA Special Purpose Vehicle (SPV).
Table 1. Income tax concessions for the railway sector
|
Measure |
Period |
Proposed Rate (%) |
|
Reduce the corporate income tax rate from 30% for an SPV during the operation period as follows: |
Year 1 to 5 |
0 |
|
Year 6 to 15 |
10 |
|
|
Year 16 to 25 |
12 |
|
|
Year 26 to 28 |
30 |
|
|
Exemption from the minimum alternative tax for the first 12 years of operation |
|
|
|
Deductibility of losses incurred in a charge year to 70% from the current 50% of income tax from the same source |
|
|
|
Increase the carry forward period of losses from the current five years to 12 years |
|
|
|
Increase in the capping on interest deduction from 30% to 70% of EBITDA |
|
|
|
Increase the carry forward period of disallowed interest from the current five years from 12 years, subject to Section 29(4) of Income Tax Act |
|
|
The transport sector provides an essential service to other priority sectors such as agriculture, mining, and tourism. The Government aims to shift 30% of bulk cargo from rail to road, as road transportation currently dominates the sector, representing over 96% of export value.
In 2023, Zambia refined its PPP framework to align with international best practices and promote investment in infrastructure development. The sector is now benefiting from diversified financing, including PPPs and support from development partners.
Tax and doing business reforms
The Budget introduces wide-ranging tax and business reforms aimed at improving equity, simplifying compliance and aligning Zambia with evolving global tax standards.
Property transfer tax and forfeiture of shares
The Minister has proposed several changes to the Property Transfer Tax Act (PTT Act) to enhance compliance and close loopholes that allow for tax avoidance. Specifically, the Minister has proposed limiting the types of share surrender or forfeiture that are exempt for Property Transfer Tax purposes. Currently, Section 6(1)(h) of the PTT Act exempts any share surrender or forfeiture where there is no consideration.
Additionally, the Minister has proposed extending the relief applicable to group reorganisation under Section 5(2)(A) of the PTT Act to cases that result in a change of shareholding in a company incorporated in Zambia, provided that the companies involved in the transfer have been part of the group for three years or more preceding the transfer.
This proposal will allow for the use of a nil realised value when transferring shares for the purpose of a group reorganisation, resulting in a change of shareholding in a company incorporated in Zambia, if the companies involved in the transfer have been part of the group for three years or more, preceding the transfer.
Currently, a nil value may be determined for PTT purposes when transferring shares in a company incorporated outside Zambia for the purposes of group reorganisation in two instances: first, when there is no change in shareholding with respect to the company resident in Zambia; and second, when the companies involved in the transfer have been part of the group for three years or more preceding the transfer.
Anti-fragmentation rule
The Minister has proposed the introduction of an anti-fragmentation rule to prevent multinational enterprises (MNEs) operating in Zambia from breaking up a single, cohesive business operation into multiple, smaller, and seemingly separate activities to avoid creating a permanent establishment (PE).
This proposal will align domestic law with OECD BEPS Action 7, which specifically targets the artificial avoidance of PE status through fragmentation and dependent-agent schemes. It also strengthens the country’s ability to curb base erosion and uphold internationally agreed standards for fair and effective cross-border taxation.
Beneficial ownership disclosure
The Minister proposed to amend the Registration of Business Names Act to mandate the disclosure of beneficial ownership information and enable Zambia to meet the international standards regarding disclosure of beneficial ownership as recommended by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Voluntary disclosures tax authority
The Minister proposed removing penalties that could be charged to a taxpayer who voluntarily discloses errors and omissions to the ZRA as a means of encouraging voluntary disclosure. Currently, there is no provision in place to incentivise taxpayers to voluntarily disclose and rectify their tax matters.
Exemption of private funds from income tax
The Minister has proposed exempting income earned and retained by private funds from CIT. Currently, only income distributed to participants is exempt. This amendment is designed to stimulate the growth of the private funds sector and make the country an appealing destination for investment.
Zero rate supplies to government projects funded through loans
The Minister has proposed to zero rate supplies of the government projects funded through loans to ease government cashflow. Currently, supplies to donor funded government projects are zero rated for VAT purposes while supplies to loan funded government projects are standard rated.
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