Zambia to Launch Mining Revenue Stabilization Fund
Zambia to Create “Rainy Day” Fund as Copper Revenues Surge Amid Record Production
Zambia, Africa’s second-largest copper producer, will channel higher-than-expected mining revenues into a stabilization fund this year, creating a fiscal buffer to protect the economy when copper prices retreat.
Secretary to the Treasury Felix Nkulukusa described the mechanism as a “rainy day” fund designed to capture excess mineral revenues as production climbs to record levels while prices remain near historic highs. Any mining revenue collected above budget projections will be deposited into the fund rather than immediately spent.
“That differential will not be immediately used in the budget,” Nkulukusa said in an interview in Cape Town during the African Markets Conference.
The objective, he explained, is to cushion the national budget against future commodity price shocks and smooth expenditure during downturns.
Government officials expect to finalise the legal and operational framework for the fund within the year, after which surplus revenues can begin flowing into the account.
The move comes as the International Monetary Fund (IMF) recently advised Zambia to prioritise the introduction of a fiscal rule and accelerate public financial management reforms.
Nkulukusa acknowledged that implementing a formal fiscal rule ahead of the general elections scheduled for August could prove politically challenging.
However, he noted that the stabilization fund would achieve similar counter-cyclical outcomes, describing it as a matter of sequencing rather than policy substitution.
Zambia is also seeking a new IMF programme after completing its previous arrangement in January. An IMF mission from Washington is expected in Lusaka for preliminary discussions, although any final agreement is likely to follow the elections, according to Finance Minister Situmbeko Musokotwane.
The stabilization initiative marks another step in Zambia’s economic recovery. In 2020, the country became Africa’s first sovereign to default during the COVID-19 pandemic.
Following a comprehensive external debt restructuring and fiscal reforms, the economy has rebounded, supported by rising copper output and robust global demand.
The recovery is reflected in financial markets: the kwacha has emerged as one of the world’s strongest-performing currencies against the US dollar this year, foreign investors have increased exposure to domestic government bonds, and Zambia’s stock market ranks among the top global performers over the past 12 months.
By institutionalising a mechanism to save windfall mining revenues, the government aims to reinforce macroeconomic stability and reduce vulnerability to commodity price volatility.
