Zambia to forgo $200M in tax revenues to cushion impact on consumers and businesses from Iran war

Zambia will forgo around $200 million in tax revenues for a three-month period to cushion the impact on consumers and businesses from a surge in global oil prices driven by the war in Iran and disruptions in the Strait of Hormuz, Finance Minister Situmbeko Musokotwane said Tuesday.

Musokotwane said this would be done by suspending the excise duty and zero-rated value added tax (VAT) on petroleum products from April 1 to June 30.

He said this while sharing Zambia’s experiences in addressing the emerging war-induced global economic crisis at ongoing spring meetings of the IMF and the World Bank in Washington, DC.

Musokotwane called for broader and more strategic fiscal policy across Africa, urging the continent to move beyond managing recurring shocks by using public policy more deliberately to raise productivity, strengthen energy security and transform the structure of its economies.

"Economies that produce more, diversify more and trade more competitively are better placed to absorb shocks without slipping into repeated crisis," he said.

Noting that the immediate risk facing many African economies over the next 12 months is a possible energy crisis arising from the Gulf region conflict, he said such a development could intensify inflationary pressures, raise production costs and further constrain fiscal positions.

"While support from institutions such as the IMF would be welcome where necessary, African governments must also continue undertaking domestic reforms that improve resilience and strengthen the quality of public spending," he added.