Zambia may keep its budget deficit below 6 percent this year because of increased revenue resulting from changes to the country’s mine-tax system, according to Moody’s Investors Service.
The International Monetary Fund last week forecast the fiscal gap in Africa’s second-biggest copper producer will climb to 7.7 percent of gross domestic product this year. That’s higher than the government’s projection of at least 6 percent, which it raised from 4.6 percent after an increase of mining royalties and scrapping of a profit tax in January disrupted revenue flows from the industry. The changes to those levies will be reversed from the start of next month.
“We don’t expect the deficit for the second half to be anywhere near as large, in fact it could be a surplus for that six-month period, ultimately resulting in a fiscal deficit somewhere in the vicinity of 5 to 6 percent of GDP,” Matt Robinson, credit manager at Moody’s, said in an interview Tuesday in the Kenyan capital, Nairobi.
The southern African nation plans on setting the royalty for underground miners at 6 percent, scrapping an earlier plan to charge the same 9 percent rate set for open-cast mines. A 30 percent profit tax will also be reintroduced for both types of operations. The current tax system that came into effect in January charges a 20 percent royalty for open-pit mines and 8 percent for underground operations.
“The mining tax regime revision means lots of the revenue may accrue in the second half of the year, rather than the first half,” Robinson said.
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