KSJ's analysis of the 2027 National Budget examines the size of Government's spending plans, where the money will come from, how it will be spent, what changes in taxation, and how previous budgets compare with actual revenue collection and expenditure.
Presented by Finance and National Planning Minister Dr Situmbeko Musokotwane on 6 November 2026, the 2027 Budget is the first national budget of the new post-election term. It is anchored on the theme: "Grow Zambia: From Stabilisation to Unlocking Opportunities, Creating Jobs and Improving Livelihoods for All."
The Government's stated ambition is to move beyond the economic stabilisation programme of recent years towards production, investment, job creation and improved livelihoods. Mining, agriculture, manufacturing and tourism remain central to this strategy, with the private sector expected to play a leading role.
But the budget also presents a difficult balancing act: increasing domestic revenue, meeting substantial debt obligations, expanding public investment and delivering social services without placing excessive pressure on households and businesses.
Here is what the numbers tell us.
At a glance
- Total budget: K284.8bn for 2027, compared with K253.1bn in 2026.
- Domestic revenue: K233.7bn, equivalent to 82.1% of the budget.
- Borrowing: K41.9bn, comprising K28.9bn domestically and K13.0bn externally.
- Grants: K9.2bn, or 3.2% of the budget.
- Debt service: K67.6bn, equivalent to 23.7% of planned expenditure.
- PAYE: The top marginal rate increases from 37.0% to 39.5%.
- VAT: The standard rate increases from 16% to 16.5%.
- Corporate income tax: Rates increase for selected sectors, including farming, agro-processing, fertiliser manufacturing, copper value addition and non-traditional exports.
The size of the budget
The 2027 budget rises 12.5% to K284.8bn, from K253.1bn in 2026. After accounting for expected inflation, this represents an increase of approximately 5.2% in real terms.
This is a substantial increase in nominal spending, but the important question is whether the additional resources translate into more infrastructure, better public services and productive capacity.
The budget represents approximately 28.4% of projected GDP. Its scale must therefore be considered alongside the size of the economy, the Government's revenue-raising capacity and the obligations inherited from previous years.
The budget at a glance
Source: 2027 Budget Speech. Explore the 2027 Budget →
The Minister's presentation comes after several years of fiscal consolidation, debt restructuring and efforts to restore macroeconomic stability. The 2027 plan signals a shift towards growth and investment, although the extent to which that shift can be achieved depends heavily on revenue performance and expenditure execution.
Where the money comes from
Domestic revenue is expected to contribute K233.7bn, or 82.1% of the budget. This comprises K178.1bn in tax revenue and K55.6bn in non-tax revenue.
The largest individual tax sources are VAT (K44.3bn, down 18.5% against the 2026 budget), company tax (K42.7bn, up 42.0%) and PAYE (K35.4bn, up 12.7%).
The remaining financing comes from K41.9bn in borrowing and K9.2bn in grants from cooperating partners.
Of the planned borrowing, K28.9bn will be raised domestically and K13.0bn externally.
The growing contribution of domestic revenue is an important part of Zambia's fiscal consolidation strategy. Domestic revenue financed approximately 58.7% of the budget in 2021, rising to 76% in 2024 and a projected 82.1% in 2027.
This reduces reliance on external financing and grants, but it also means that the Government must collect more from the domestic economy. The implications for taxpayers, consumers and businesses therefore become increasingly important.
The projected increase in company tax revenue is particularly notable. It reflects the expected contribution of mining and other productive sectors, alongside changes in taxation and revenue administration. Higher copper production, improved economic activity, exchange-rate movements and ZRA compliance efforts will all influence whether these targets are achieved.
The decline in budgeted VAT revenue, despite an increase in the standard VAT rate, also deserves attention. It highlights the need to distinguish between statutory tax rates and the actual revenue expected from a particular tax.
Where it goes
Of the K284.8bn in planned expenditure, the largest allocations are economic affairs (K75.9bn, 26.7%), debt service (K67.6bn, 23.7%), education (K38.2bn, 13.4%) and health (K30.3bn, 10.6%).
Economic affairs is the largest functional allocation, reflecting the Government's emphasis on productive sectors, infrastructure, agriculture, transport and economic development.
Among the major spending categories, economic affairs records the largest increase against 2026, at 29.4%. Defence increases by 23.4%, while other general public services rise by 21.1%. Debt service declines by 8.3%.
These are nominal changes. With inflation, allocations need to grow by approximately the inflation rate simply to maintain their purchasing power.
The distribution of expenditure also raises an important question about the balance between consumption and investment. A significant portion of the budget goes towards recurrent obligations, leaving the Government with less flexibility to finance new infrastructure and development programmes.
The allocations for agriculture, the Constituency Development Fund (CDF), social protection, education and health will be particularly important in determining whether the budget's growth ambitions translate into improvements in household welfare.
For agriculture, the key issue is not simply the size of the allocation but the effectiveness of programmes such as the Farmer Input Support Programme (FISP), maize procurement and agricultural infrastructure in improving productivity and food security.
Similarly, higher allocations to education and health must ultimately be assessed against recruitment, staffing levels, medicines, classroom infrastructure and the quality of services delivered.
Debt
Debt service takes K67.6bn, equivalent to 23.7% of planned expenditure. This comprises K50.8bn for domestic debt and K16.8bn for external debt service.
Put differently, nearly K24 out of every K100 in the national budget will go towards servicing debt.
For perspective, debt service is almost twice the allocation to health and significantly higher than the allocation to education.
The historical comparison is equally important. In 2007, debt service accounted for approximately 6.5% of the budget. Its share increased dramatically, peaking at 45.5% in 2022.
This reflects the accumulated cost of borrowing, rising interest obligations and Zambia's prolonged debt crisis, which culminated in the country's 2020 sovereign default.
Although debt restructuring has provided some fiscal breathing room, it has not eliminated the burden of debt service. Domestic borrowing also remains important, with interest costs competing against other public expenditure priorities.
The Government is targeting a reduction in the fiscal deficit to 3% of GDP in 2027, following a revised projection of 5.9% in 2026. The original 2026 deficit target was 2.1%.
The difference between the original target and the revised projection illustrates how quickly fiscal plans can change when revenue falls short or expenditure pressures increase.
The IMF programme and continued debt restructuring will therefore remain important to the Government's financing strategy and broader macroeconomic outlook.
What it means for households
For PAYE in 2027, the top rate goes from 37.0% to 39.5%; the schedule has 5 bands instead of 4, the new top band starting above K37,000.
On the same monthly salary, PAYE changes by +K75 a month on K40,000, +K575 a month on K60,000, +K1,575 a month on K100,000. Salaries of K20,000 a month or less pay the same as in 2026.
The tax-free threshold is K5,100 a month. In 2017 it was K3,300, worth K10,000 at 2027 prices: in real terms it has fallen, so more of the same real pay is taxed.
Zambia publishes no regular wage series, so KSJ reads pay through PAYE. ZRA collected K31.3bn in PAYE in 2025, 26.0% more than the year before, against inflation of 13.9%: a real rise of 10.5%. The 2027 Budget expects K35.4bn, 12.7% more than the 2026 estimate. PAYE also moves with the schedule, employment and compliance, so this is a guide to pay, not a measure of it.
What do the numbers say about wages?
Zambia does not publish a regular, comprehensive wage-growth series covering the formal economy. KSJ therefore uses PAYE collections and NAPSA contribution data as complementary indicators of formal-sector earnings.
ZRA collected K31.3bn in PAYE in 2025, 26.0% more than the previous year. Against inflation of 13.9%, this represents a real increase of approximately 10.5%.
However, PAYE collections also respond to changes in tax rates, employment, formalisation and compliance. They should therefore not be interpreted as a direct measure of wage growth.
NAPSA provides another reference point. The average earnings figure used to determine its contribution ceiling was K9,309 per month for 2026, an increase of 9.0% over 2025.
KSJ's wage tracker combines this figure with PAYE collections adjusted for tax changes. It estimates formal-sector pay growth of 15.4% in 2025, against inflation of 13.9%, giving an estimated real increase of 1.2%.
NAPSA has 1,103,643 active members out of 3,350,648 registered members, illustrating the difference between the registered population and those actively contributing.
A salary worth K10,000 per month in 2027 prices attracted no PAYE in 2014. Under the 2027 tax schedule, the same real salary would attract approximately 13.3% in PAYE.
Household tax rates that change in 2027: VAT, standard rate: 16% → 16.5%.
9 of the speech’s revenue measures are on PAYE, VAT or excise: 4 new taxes or charges, 3 increases, 2 administrative changes, as classified from its wording.
- Increase the selected goods surtax to 30 percent from 20 percent on selected processed meat products, including meat and edible offal of bovine, sheep, goats, horses and mules
- Increase excise duty on single use plastics to 200 percent from 100 percent
- Increase excise duty to 30 percent from 15 percent on selected plastic articles
- Adjust the Value Added Tax rate to 16.5 percent from 16 percent
Other household tax changes
The PAYE changes are not the only measures affecting household finances.
The standard VAT rate increases from 16% to 16.5%. Although this is a half-percentage-point increase, the ultimate effect on consumers will depend on how much of the additional tax businesses pass through to prices.
The Budget also proposes changes to excise duties and other indirect taxes, including:
- Increasing the selected goods surtax from 20% to 30% on specified processed meat products.
- Increasing excise duty on single-use plastics from 100% to 200%.
- Increasing excise duty from 15% to 30% on selected plastic articles.
- Increasing VAT from 16% to 16.5%.
The speech also contains changes to mobile money transaction levies and other fees, which should be considered when assessing the cumulative cost of taxation on households.
Social protection is allocated K16.2bn, compared with K15.7bn in 2026. This includes K10.4bn for Social Cash Transfers and K5.25bn for the Public Service Pension Fund.
The important question is whether the increases in social protection and public services will be sufficient to offset the impact of higher indirect taxation and the rising cost of living.
What it means for business
The 2027 Budget adjusts corporate income tax rates for five sectors:
- Copper cathode value addition: 20% to 25%.
- Farming: 10% to 15%.
- Agro-processing: 10% to 15%.
- Fertiliser manufacturing: 15% to 20%.
- Non-traditional exports: 20% to 25%.
The standard corporate income tax rate remains at 30%.
The policy direction is worth examining. While the Government continues to emphasise manufacturing, value addition and export diversification, some of the preferential tax rates intended to encourage investment in these activities are being increased.
This creates a potential trade-off between mobilising more revenue and maintaining incentives for investment in productive sectors.
KSJ's model of a typical investment, incorporating capital allowances and inflation, puts the effective tax rate for a company paying the standard rate at 31.3%, or 16.1% where 35% of the investment is financed through borrowing at the 27.9% average lending rate.
For an investment that only just generates sufficient returns to break even, the estimated effective tax rate is 33.5%, falling to 3.3% with the assumed borrowing structure.
These are modelled estimates, not statutory tax rates. They illustrate how financing costs, capital allowances and inflation can affect the actual tax burden on an investment.
Other business-related tax changes include an increase in withholding tax on mining dividends from 0% to 15%.
The Budget also introduces changes to customs duties, including an increase in duty on ceramic tiles from 25% to 40%, intended to support local manufacturing.
The broader business environment remains challenging. Although the Government is seeking to encourage private-sector investment, the cost of credit remains high, with the average lending rate at approximately 27.9% in 2026.
For businesses, the combination of higher financing costs, tax changes and input costs will influence investment decisions, expansion and employment.
The critical test will be whether the measures generate additional domestic production, value addition and employment, rather than simply increasing the tax burden on existing businesses.
How past budgets held up
The Auditor-General’s reports show ZRA collecting 98% of its budget in 2023, 104% of its budget in 2024, 101% of its budget in 2025. By the PEFA framework’s test for revenue (actual within 97–106% of budget in two of the last three years) that earns a grade A, on KSJ’s calculation.
For FY2025, Statement B of the Auditor-General’s report shows Parliament approving K217.1bn of spending, K33.6bn being added during the year (a final budget of K250.7bn), and K216.3bn actually paid out: 86% of the final budget. Capital spending reached 72% of what was approved.
A national budget is a statement of what Government intends to collect and spend. Its credibility ultimately depends on how closely those intentions match actual outcomes.
KSJ's analysis compares budget estimates with actual revenue collection and expenditure, drawing on the Yellow Books and Auditor-General's reports.
The results show that Zambia's revenue collection performance has been relatively strong in recent years.
ZRA collected approximately 98% of its budgeted revenue in 2023, 104% in 2024 and 101% in 2025.
Using the PEFA framework's revenue performance criteria, which considers actual revenue within 97% to 106% of the approved budget, Zambia meets the highest performance threshold on KSJ's calculation.
However, revenue performance tells only part of the story.
For FY2025, Statement B of the Auditor-General's report shows that Parliament initially approved K217.1bn in expenditure. A further K33.6bn was added during the year through supplementary provisions, bringing the final budget to K250.7bn.
Actual payments amounted to K216.3bn, equivalent to approximately 86% of the final approved budget.
Capital expenditure performed particularly poorly, reaching only 72% of its approved allocation.
This distinction matters. A Government can collect close to its revenue target while still failing to execute its approved expenditure programme.
The gap between approved allocations and actual payments raises questions about planning, procurement, cash-flow management, project implementation and the accumulation of unpaid bills.
What the Auditor-General found
The report on FY2023 flags K14.5bn across its categories of finding, about K8.65 for every K100 of that year’s approved spending. The largest are “Failure to Settle Outstanding Bills” (K5.23bn), “Failure to Utilise Funds” (K2.69bn), “Failure to Attain Revenue Target” (K2.62bn). A flagged amount is not necessarily money lost. Separately, the report records K67.0bn of tax arrears that ZRA had not collected; KSJ keeps that out of the totals because it is a running stock, not a finding for the year.
The Auditor-General's reports provide another perspective on public financial management, identifying weaknesses in the collection, utilisation and accountability of public resources.
For FY2023, the report flags K14.5bn across its categories of findings, equivalent to approximately K8.65 for every K100 of approved expenditure.
The largest categories include:
- Failure to Settle Outstanding Bills: K5.23bn.
- Failure to Utilise Funds: K2.69bn.
- Failure to Attain Revenue Target: K2.62bn.
These figures should not automatically be interpreted as money lost or stolen. Audit findings cover different types of financial and administrative weaknesses and must be understood in their respective contexts.
Separately, the report records K67.0bn in tax arrears that ZRA had not collected. KSJ excludes this figure from the K14.5bn total because it represents an outstanding stock of tax liabilities rather than an additional finding for the financial year.
The findings highlight a recurring challenge in public financial management: the difference between allocating resources, releasing them, spending them and demonstrating that they have delivered the intended results.
The targets
The 2027 Budget sets out an ambitious macroeconomic framework:
- Economic growth: 4.9%.
- Inflation: 6–8%.
- Fiscal deficit: 3% of GDP.
- Domestic revenue: 23.3% of GDP.
The growth target will depend heavily on performance in mining, agriculture, manufacturing and tourism.
Copper remains particularly important. The Government expects copper production to reach approximately 930,000 tonnes in 2026, compared with around 890,000 tonnes in 2025, while maintaining a longer-term ambition of producing 3 million tonnes by 2031.
Higher copper output and favourable international prices could support export earnings, company tax receipts, foreign exchange availability and overall economic activity.
Agriculture presents a different set of risks. Production, food security and agricultural spending remain exposed to weather conditions, input costs and the performance of support programmes.
The fiscal target is perhaps the most demanding. Reducing the projected deficit from 5.9% of GDP in 2026 to 3% in 2027 requires stronger revenue mobilisation and expenditure discipline.
The Government is also operating under an IMF-supported programme, with debt sustainability and fiscal consolidation remaining important policy considerations.
The central question is whether the Government can achieve higher growth while reducing the deficit, meeting its debt obligations and protecting spending on essential public services.
The targets are achievable only if revenue projections are realistic and spending remains within the limits Parliament has approved.
About the data
The figures come from the 2027 Budget Speech (the resource envelope, spending by function, tax measures and targets), the Yellow Book (allocations by ministry), and the Auditor-General’s annual reports (what was actually collected and spent, and what the audit found). Speech figures are approved estimates, not outturns. PEFA-style grades are KSJ’s calculation, not an official PEFA assessment. Every figure, with the PAYE calculator and the 3D tax views, is on KSJ Budget Analysis.
