ZAMBIA will use bumper mining revenues to establish a stabilisation fund in order to protect its budget against a retreat in copper prices, said Bloomberg News on Wednesday.
Secretary to the Treasury Felix Nkulukusa described the mechanism as a “rainy day” fund, designed to capture state mining revenues that exceed budget projections at a time when production is rising to record levels and prices hover near all-time highs. Surplus mineral revenues will be set aside rather than spent immediately.
“That differential will not be immediately used in the budget,” Nkulukusa said in an interview with the newswire in Cape Town. “So that the time that we will have challenges on the price and the budget, we will then be able to use those revenues to smoothen the budget process.”
The government will finalise the fund’s framework this year before beginning to deposit surplus cash. Nkulukusa framed the move as a precursor to a broader fiscal rule, which the IMF has urged Zambia to adopt, but which would be politically difficult to implement ahead of general elections scheduled for August.
“The stabilisation fund is saying even before we go to the fiscal rule, can we start preparing ourselves?” he said. “It’s not an issue of either or. It’s an issue of sequencing.”
Zambia, Africa’s second-largest copper producer, is also seeking a fresh IMF programme after completing its previous one in January, said Bloomberg News.
An IMF mission arrives in Lusaka this week for preliminary discussions, though Finance Minister Situmbeko Musokotwane has said any deal cannot be finalised until after the August vote.
