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Drilling Down Zambia's 2026 Budget, by KPMG, UNDP

Drilling Down Zambia's 2026 Budget, by KPMG, UNDP
Frontier Africa Reports By Frontier Africa Reports • January 21, 2026 at 12:08 PM GMT+1

Key Figures:

  • Total Budget: ZMW 253.1 billion

  • Domestic Revenue: ZMW 206.5 billion

  • Foreign Grants: ZMW 12.1 billion

  • Projected GDP Growth: 6.4% in 2026

  • Target Inflation: 6-8%

  • Fiscal Deficit Target: 2.1% of GDP

 

The 2026 National Budget Speech, delivered by Honourable Dr. Situmbeko Musokotwane, Minister of Finance and National Planning, marks a pivotal moment in Zambia’s journey towards sustainable economic growth and inclusive development. With a total allocation of ZMW253.1 billion, representing 27.4% of Gross Domestic Product (GDP), the Budget reflects the government’s commitment to consolidating past socio-economic gains while laying the foundation for a resilient and equitable future.

Under the theme “Consolidating Economic and Social Gains Towards a Prosperous, Resilient, and Equitable Zambia,” the Budget builds on the transformation agenda initiated in 2021. It seeks to lock in progress made over recent years while accelerating the shift to a diversified, job-creating economy that benefits all Zambians.

Despite global economic uncertainties, the Budget outlines a comprehensive economic plan focused on four key areas: economic transformation and job creation, human and social development, climate resilience, good governance and institutional reforms. These priorities are aligned with the Eighth National Development Plan (8NDP) and set the stage for the forthcoming Ninth National Development Plan.

Macroeconomic Objectives
The 2026 Budget is anchored on ambitious but achievable macroeconomic targets:
l Real GDP growth of 6.4%;
l Reduce Inflation to the 6% – 8% band;
l Fiscal deficit reduced to 2.1% of GDP;
l Net domestic borrowing capped at 2.3% of GDP;
l International reserves maintained above 4 months of import cover; and
l Increase domestic revenue to at least 22.3% of GDP.

These targets reflect the government’s focus on macroeconomic stability, fiscal discipline and sustainable growth.

Strategic Priorities
i) Economic Transformation and Job Creation
The Budget prioritises scaling up copper production beyond one million tonnes annually, formalising artisanal mining, and boosting agricultural exports. Energy diversification is being accelerated, with over 1,500 MW of solar projects and 300 MW of thermal generation at Maamba planned. Major investments in transport infrastructure will enhance connectivity and trade, while a ZMW5 billion SME fund and credit guarantees will stimulate private sector growth and job creation.

ii) Human and Social Development
Education remains a cornerstone, with continued free access supported by teacher recruitment and school infrastructure upgrades. Health allocations will fund essential drugs, modern equipment, and hospital operations. Water and sanitation investments aim to uplift living standards, while expanded social protection programmes—including Social Cash Transfers and the Food Security Pack—will cushion vulnerable households against economic shocks.​

iii) Governance and Institutional Reforms
The government is strengthening public financial management, dismantling domestic arrears, and enforcing discipline in debt servicing. Resources are allocated to maintain peace and security, support law enforcement, and fund democratic processes, including the 2026 general elections. Digitisation, regulatory reform, and improved service delivery are central to building transparent and accountable institutions.

iv) Climate resilience
The 2026 Budget also emphasises climate resilience and food security, with scaled-up irrigation projects, dam construction, and the expansion of the e-voucher system for agriculture inputs. These measures aim to safeguard productivity in the face of recurring droughts while positioning Zambia as a competitive exporter of agricultural products.

Conclusion
Overall, the 2026 Budget is ambitious and consolidates the macroeconomic stability and social gains achieved since 2021. At the same time, it aims at laying the groundwork for faster, and more inclusive growth in the years ahead.

UNDP 

Over the years, the United Nations Development Programme (UNDP) has been supporting countries to strengthen their fiscal stance in order to accelerate the achievement of their national development objectives and the Sustainable Development Goals (SDGs). Traditionally, the support has centered around budget formulation and budget analysis, recognising that a budget a critical policy instrument for the realization of the desired development outcomes.

The 2026 National Budget comes at a pivotal moment for Zambia, as the nation navigates the dual imperatives of safeguarding economic growth and human development gains as well as accelerating progress towards the SDGs. With about 60 percent of the population still living below the national poverty line, high income inequality, persistent energy challenges, and recurring climate shocks undermining livelihoods, the policy choices reflected in this budget will have far-reaching implications for inclusive growth, resilience, and social justice.

This analysis builds on the insights from the KPMG–UNDP Pre-Budget Survey, which gathered evidence-based stakeholder perspectives, priorities and expectations for the 2026 National Budget across key areas of the economy. The survey revealed several critical issues. Businesses remain under severe pressure from persistent inflation, Kwacha volatility, and high interest rates, all of which have reduced profitability, raised operational costs, and dampened investor confidence. Taxation emerged as a major constraint, with many stakeholders calling for more business-friendly and inclusive fiscal measures, including incentives for youth and women’s employment, as well as greater support for MSMEs.

While debt restructuring has helped improve business confidence, there is need to prioritize optimal use of freed-up fiscal space to scale-up investments in health, education, social protection, and climate adaptation. Inequality also stood out, with stakeholders noting that the current tax system does little to reduce disparities. Another priority highlighted was the need to promote inclusion by supporting women’s economic empowerment and expanding opportunities for persons with disabilities through tax incentives, infrastructure investments, and accessible education.

Against this backdrop, we commend the Government efforts to pay attention to measures aimed at improving human development outcomes in the budget. Like many countries worldwide, Zambia faces complex choices amid recurrent economic shocks, the lingering effects of the COVID-19 pandemic, and the adoption of transformative digital technologies. These challenges are compounded by heavy debt burden that constrain the country’s ability to provide essential services such as health and education or to address the impacts of climate change and environmental degradation. Targeted investments, therefore, are critical to ensure that current and future generations can thrive.

It is encouraging to note that expenditures on poverty reduction programmes have increased by nearly 59 percent, underscoring a strong commitment to SDG 1 on poverty eradication. Interventions such as Social Cash Transfers, the Food Security Pack, Cash-for-Work initiatives, and pension support represent vital lifelines for millions of households at risk of deeper deprivation.

Education and skills development also feature prominently in the 2026 Budget, with significant allocations for free education, student loans, and empowerment initiatives under the Constituency Development Fund (CDF). These investments in human capital aim to tackle unemployment, particularly among youth, while also driving long-term gains in equity and productivity, in alignment with SDG 4 on quality education and SDG 8 on decent work.

The health sector, which in the recent past has become vulnerable due to declining donor support, has received a critical 84 percent increase in funding, an important boost at a time when overall financing had previously been constrained. These allocations, directed towards medicines, infrastructure, and services, are an essential response to challenges such as disease outbreaks, infant and maternal mortality, malnutrition, and climate-induced vulnerabilities, advancing SDG 3 on health and well-being.

On the fiscal side, measures to broaden the revenue base are intended to strengthen sustainability while safeguarding the Government’s capacity to deliver on social priorities. However, careful calibration will be necessary to ensure that such measures do not exacerbate inequality or disproportionately affect vulnerable households.

Related to this is the aspect of the standard of living. While the Government has introduced measures to safeguard and promote income generation, inequality remains a significant challenge. Zambia’s income inequality rate, at 63.4%, is higher than South Africa’s 59.9%, despite the latter often being regarded as one of the most unequal countries in the world. Notably, the budget allocation dedicated to inequality reduction measures has decreased slightly, from 7.4% in 2025 to 6.0% in 2026. However, it is encouraging to see that, among other measures aimed at reducing inequalities of all kinds, the 2026 National Budget has included tax relief for employers of Persons with Disabilities (PWDs), thereby creating an incentive for greater inclusion in the workforce.

As this report shows, Zambia’s enhanced investments in social protection, education, and health hold the potential to accelerate progress across multiple SDGs. However, realising this promise will not occur by mere happenstance but will require diligent implementation, robust monitoring, and continuous dialogue among Government, development partners, the private sector, and civil society. With collective resolve, the 2026 National Budget can be a turning point—transforming fiscal choices into tangible sustainable human development outcomes and ensuring that no Zambian is left behind.