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Zambia Sees Wider Budget Deficit in 2022

FILE - Zambia Finance Minister Situmbeko Musokotwane speaks during a press briefing with other African finance ministers at International Monetary Fund headquarters in Washington, April 25, 2009.

Zambia's Finance Minister Situmbeko Musokotwane said on Friday that the budget deficit will be higher this year than originally expected and economic growth will be slower than last year.

Musokotwane, who unveiled the 2023 budget, said that the 2022 budget deficit is forecast to reach 9.8% of GDP, up from 6.7% anticipated in October last year.

The deficit is expected to be no more than 7.7% of GDP in 2023, up from an earlier target of no more than 6.3% seen in February.

Economic growth was projected at 3% in 2022, with a 2023 growth target of 4%. Last year, the economy grew 4.6%.

"We appeal to our creditors to support us so that together we can quickly attain debt restructuring," Musokotwane said.

Zambia's external public debt reached $14.87 billion at the end of June 2022, he said.

Zambia in November 2020 became the first country in Africa to default on its sovereign debt during the COVID-19 pandemic. According to the International Monetary Fund, the copper-rich country is seeking $8.4 billion of debt relief from 2022 to 2025.

The government said in March that the country's external debt will be $17.27 billion at the end of 2021. It canceled $2 billion in undisbursed loans in July.

The IMF in late August approved a $1.3 billion, three-year loan to Zambia, a crucial step in the southern African country's quest to restructure its debts. The IMF says the country had a 133% debt-to-GDP ratio at the end of 2021.

Musokotwane said that the government had secured $300 million on concessional terms from the World Bank to promote commercial farming.

He also said the government would increase participation in the mining sector by acquiring "golden shares" and that it had made headway in resolving problems at Konkola and Mopani copper mines, where it is seeking new investors.

To attract investment and ensure increased production, Musokotwane said the government planned to restructure the mineral royalty tax with regard to copper.

Zambia gets 70% of its export earnings from mining and has pledged to review its mining tax policy and increase exploration to boost and diversify production.