CSPR Seeks Clarity on Zambia’s Policy to Accept Yuan for Mining Taxes
The Civil Society for Poverty Reduction (CSPR) has called for greater transparency and clarity following the Zambian government’s announcement to allow tax settlements in Chinese Yuan for selected mining firms.
According to Isabel Mutembo Mukelabai, Executive Director of CSPR, the move is intended to facilitate the repayment of loans in Yuan and gradually increase Zambia’s foreign reserves in the currency to 15%. Among the government’s key justifications are the avoidance of currency conversion costs and the diversification of foreign reserves beyond the US dollar and gold.
CSPR welcomed the targeted approach, noting that it currently applies only to mining sector taxes and royalties. “This selective implementation preserves traditional currency mechanisms for other government revenue streams and demonstrates strategic currency diversification without overhauling the monetary system,” Ms Mukelabai said.
However, the civil society group raised concerns about the limited scope of the policy and the depth of the assessment underpinning it. Questions remain over whether all taxes from the four Chinese mining firms have been ring-fenced to service Yuan-denominated loans and whether projected revenue and conversion savings have been adequately quantified.
CSPR also highlighted uncertainties regarding how this policy aligns with Zambia’s Debt Management Strategy and provisions for a sinking fund under the Public Debt Management Act, given that the country’s external debt remains in US dollars and minerals are traded in dollars on the London Metal Exchange.
Other issues raised include the lack of clarity on hedging strategies, the exchange rate basis for payable Yuan (current, spot, or future rates), and potential effects on budget execution. Ms Mukelabai noted that without robust legal frameworks, comprehensive fiscal impact assessments, and clear risk management measures, the policy could expose the government, central bank, and taxpayers to currency mismatches and fiscal governance risks.
CSPR stressed the importance of a clear mechanism for Yuan tax settlement, including contingency measures to manage currency valuation risks, updates on multi-currency revenue collection, and strategies to ensure competitiveness of the mining sector for non-Chinese investors.
“Zambia will serve as a model for this policy direction. Enhanced transparency, independent audits, parliamentary oversight, and citizen education programmes are essential to maintain public confidence and avoid market uncertainty,” Ms Mukelabai concluded.
