Patali Raphael

On the kwacha and Zambia's 2027 Budget: A 10 per cent fall in USD/ZMW, from the 19.49 implied by the Budget's lines to 17.54, widens the 2027 deficit by about ZMW7.6bn (USD390m), or 0.8 per cent of GDP. The Budget does not print an exchange rate, so we derive it. The Address provides ZMW16,763.6m for external debt service (p.17), and the Ministry's Debt Statistical Bulletin projects the same payments at USD860.2m (end-June 2026, Table 15). The ratio gives 19.49. USD/ZMW averaged 17.81 as recently as June (Monthly Economic Indicators, August 2026). The exposure sits on the revenue side. Customs and export duties, mineral royalty, grants, and the import and mining shares of VAT and company tax are dollar amounts converted into kwacha. On our estimate they make up 41.4 per cent of 2027 revenue and grants. At 17.54, revenue and grants fall by about ZMW10.0bn and spending by about ZMW2.4bn, before any offset from copper prices. Now bring in the financing. The Budget's foreign loans roughly match the external principal falling due, so the Treasury funds almost the whole deficit at home. At 17.54, domestic borrowing rises from the planned 2.9 per cent of GDP to about 3.6 per cent of the Budget's implied GDP. Banks, pension funds and insurers carry it, while the non-resident share of new bond issuance falls to 15 per cent from 23 per cent in 2027 (IMF Country Report 26/21). The 2026 outturn already shows the cost. The Budget's lines implied 21.97, USD/ZMW averaged 18.91 from January to August, and we estimate the gap cost ZMW8.9bn of revenue and grants. The Minister credits the stronger kwacha, with the maize harvest, for taking inflation to 6.3 per cent in October. His account of the revenue shortfall points to the fuel tax suspension, which the outturn supports, and leaves out the exchange rate. On Friday 6 November the interbank mid stood at 20.32 (Bank of Zambia, 15:30), so the rate currently works for the Treasury. The test from here is the monthly USD/ZMW average. From February to September 2026 the kwacha averaged stronger than 19.49 per dollar every month, and a repeat in 2027 pushes domestic borrowing above plan on the exchange rate alone. canarycompass.com