Zambia loses US$200m due to tax relief

Dr Situmbeko Musokotwane MP – Finance Minister – Zambia

Finance and National Planning Musokotwane Minister Dr. Sithumbeko has said the price cushioning through tax relief offered to citizens and business through suspension of excise duty and zero rating of VAT on petroleum products has resulted in the loss approximately US$ 200 million.

The Minister said this when he shared Zambia’s experiences in addressing the emerging war-induced global economic crisis, at the ongoing Spring Meetings of the IMF and the World Bank in Washington D.C., USA.

Dr. Musokotwane called for broader and more strategic use of fiscal policy across Africa, arguing that the continent must move beyond managing recurring shocks and begin using public policy more deliberately to raise productivity, strengthen energy security, and transform the structure of its economies.

In his remarks to delegates at the over-subscribed IMF Africa Fiscal Forum, the Minister identified the most immediate risk facing many African economies over the next 12 months as a possible energy crisis arising from the conflict in the Gulf region.

He noted that such a development could intensify inflationary pressures, raise production costs, and place additional strain on already constrained fiscal positions.

While indicating that support from institutions such as the IMF would be welcome where necessary, he stressed that African governments must also continue undertaking domestic reforms that improve resilience and strengthen the quality of public spending.

Drawing from Zambia’s own reform path, Dr. Musokotwane said one of the clearest responsibilities of fiscal policy is to shift resources away from inefficient subsidies and toward areas with greater long-term social and economic value.

He cited Zambia’s reorientation from generalized fuel subsidies towards free education and other social sectors as an example of a more purposeful use of public resources.

The Minister also pointed to the use of digital systems in agricultural support programs as a practical reform that has helped improve targeting, reduce waste, and remove ineligible beneficiaries who had previously taken advantage of public support intended for genuine farmers.

But the central thrust of his intervention went well beyond short-term adjustment.

Dr. Musokotwane challenged the forum to confront what he described as Africa’s deeper development problem: the continent’s limited productive base and its declining share of global trade, despite its vast endowment of natural resources, young population, and economic potential.

He questioned why Africa has fallen behind in sectors and commodities that once had strong roots on the continent, and why many of the goods consumed globally are now produced elsewhere by countries that made earlier and more disciplined investments in productivity, skills, manufacturing, and value addition.

Dr. Musokotwane argued that “this is where fiscal policy must become more ambitious.” In his framing, fiscal policy should not be seen only as a tool for financing budgets or cushioning crises.

It must also become an instrument for structural transformation — one that supports productive sectors, upgrades human capital, expands energy capacity, encourages industrialization, and creates the conditions for African economies to compete more effectively in regional and global markets.

“Economies that produce more, diversify more, and trade more competitively,” he observed, are better positioned to absorb shocks without slipping into repeated crisis.

In a reflective conclusion, Dr. Musokotwane noted that over the years many countries that once complained about unfairness in the international system eventually transformed themselves through policy reform, production, and economic expansion.

For Africa, he suggested, “the lesson is not that external conditions do not matter, but that lasting progress will depend on what the continent chooses to do with fiscal policy today.”

The real question, he implied, is whether Africa will continue to respond to vulnerability at the margins, or begin to use public policy to build stronger, broader, and more productive economies for the future.

The Minister’s message was therefore both immediate and strategic: Africa must prepare for external shocks, including possible energy-related disruptions, but it must do so while keeping its eyes on the larger task of economic transformation.

In the end, the continent’s most important fiscal challenge is not merely how to survive the next crisis, but how to build the productive capacity, energy resilience, and competitive strength required to secure long-term prosperity.

Issued by:

Office of the Secretary to the Treasury

MINISTRY OF FINANCE AND NATIONAL PLANNING