Report

2025 Mid-Year Social Sector Budget Analysis Report

Mid-year analytical report on budget performance and socioeconomic outcomes for the first half of 2025

Three women interact at a roadside fruit stall. One woman, wearing a red shirt, is selecting bananas while another in a black shirt stands beside her. The vendor, dressed in teal, smiles from behind the stall, which is neatly stacked with bananas, oranges, apples, pineapples, garlic, limes, and watermelons. Trees and a wire fence are visible in the background, creating a shaded, outdoor market setting. — UNICEF/Zambia/2024/Adams

Highlights

The 2025 National Budget, themed “Building Resilience for Inclusive Growth and Improved Livelihoods”, reflects Zambia’s strategic response to the socio-economic shocks caused by the 2023/24 drought. With a total allocation of K217.1 billion, representing a 22.0% nominal increase over 2024, the budget is anchored on macroeconomic stability and poverty reduction. It targets 6.6% GDP growth, inflation control between 6–8%, and increased domestic revenue mobilisation to 21.3% of GDP, while safeguarding critical social sector investments.

By mid-2025, Zambia’s economy showed signs of recovery, with real GDP growth of 4.5% in Q1, driven by agriculture (74.4%), mining (16.5%), and food services (27.6%). Inflation eased to 14.1% in June, supported by declining food prices, and the Kwacha appreciated by 17% year-to-date, buoyed by mining receipts and offshore investments. Debt restructuring agreements covered 94% of eligible debt, enhancing fiscal sustainability.

Despite these gains, fiscal performance remained uneven. While total revenues and grants reached K89.2 billion, just 3.0% below projections, VAT underperformed by 14.3%, and non-tax revenues lagged due to inefficiencies in State-Owned Enterprises. External financing fell 174% below expectations, prompting net domestic borrowing of K13.1 billion (1.6% of GDP), raising concerns about crowding out private sector credit.