The International Monetary Fund on Tuesday applauded Zambia’s efforts to resolve tax issues in its copper mining industry but warned that only further tightening of fiscal and monetary polices would contain the country’s large deficits.
President Edgar Lungu directed Zambia’s finance and mining ministers on Wednesday to change royalties on mining firms by April 8, saying the copper-producer could consider temporarily reverting to the tax regime of 2014.
The decision to increase royalties in January for open pit mines to 20 percent from 6 percent, and those for underground mines to 8 percent from 6 percent, rattled unions and miners in Africa’s second-largest copper producer.
“The IMF welcomes President Zungu’s directives calling for a review of the mining tax regime that came into effect in the beginning of this year,” the IMF’s mission chief to Zambia Tsidi Tsikata told a news conference.
“We hope a resolution of the impasse will result in a transparent system applicable to all the mines rather than mine by mine agreements,” said Tsikata, at the end of the team’s 2-week visit to the southern African country.
Secretary to Zambia’s Treasury, Fredson Yamba said at the same event that the government was confident the economy would withstand falling global copper prices and a declining kwacha currency.
“We remain confident that despite external and internal factors…we will still continue positive real GDP growth in the region of 6 percent,” Yamba said.
Zambia’s kwacha sank to its lowest ever against the dollar earlier this month, and has fallen over 20 percent in 2015, hit by lower copper prices and weak demand for the metal from big importer China.