Reflections on Zambia’s Current 2025 Budget Performances
Zambia’s 2025 budget execution paints a picture of measured progress under strain, where fiscal consolidation efforts are gradually taking a hold, but the structural weight of debt service continues to limit fiscal space.
Diving into budget support structures as indicated below;
- Revenue Trends
First and Second quarters made strong remarkable Growth with a serious deficits.
Strong Tax Collection: Government has shown efficiency in mobilising tax revenues, with PAYE, company income tax, and excise duties performing above target.
This reflects stronger tax administration and improved compliance measures.
Weak Spots Remain : VAT and mineral royalties continue to underperform, pointing to underlying weaknesses in consumption demand and mining sector revenue contribution.
Non-tax revenues and grants remain unreliable, exposing the budget to financing gaps.
- Expenditure Execution
Slow Disbursement: By March, only 5.7% of the annual budget had been disbursed, well below the 25% benchmark. This suggests inefficiencies in cash flow management and procurement bottlenecks.
Debt Dominance : Debt servicing continues to absorb over 50% of monthly expenditure.
This is symptomatic of Zambia’s structural debt overhang, where interest and principal repayments crowd out productive and social spending.
- Fiscal Balance & Deficit Path
In the first half of 2025, Zambia posted a budget deficit of K11.3 billion (~1.2% of GDP), slightly above projection.
Near Term Outlook
If Q3 and Q4 can deliver stronger revenues as expected, the full-year deficit could still be contained around 3.1% of GDP, which is consistent with IMF programme commitments.
- Macro Context
Growth Outlook: GDP is projected to rebound to 6.6% in 2025, driven by recovery in agriculture after the 2023/24 drought, as well as improved energy generation.
Inflation Path : Inflation has been moderating steadily, expected to end the year within the 6–8% target band, supported by tighter monetary policy and improved food supply.
Debt Position : The debt-to-GDP ratio is expected to decline below 100% for the first time in seven years (projected at 91.1% in 2025). While this signals progress on debt sustainability, the absolute burden of debt service remains heavy.
- Risks & Vulnerabilities
External Risks: Commodity price volatility, foreign exchange pressures, and potential climate shocks could derail revenue performance.
Domestic Risks : Arrears accumulation, underperformance in VAT and SOE dividends, and slow execution of capital projects could undermine fiscal credibility.
Political Economy Risks : As Zambia heads into a critical reform period, populist expenditure pressures could challenge fiscal discipline already put tightly in place.
Expectations and Outlook
The 2025 budget shows that Zambia is moving in the right direction in terms of fiscal consolidation and macroeconomic stabilization.
However, sustainability depends on maintaining strict spending discipline, diversifying revenue sources, and deepening structural reforms to reduce the economy’s vulnerability to debt servicing pressures and external shocks.
In short, Zambia’s 2025 budget performance demonstrates that discipline is paying off, but resilience is still under construction.
Join me next business week as I get into discussions around national budget for 2026 with it’s patterns of expectations.
