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The Civil Society for Poverty Reduction (CSPR) has urged the government to clearly outline the Yuan tax settlement mechanism—along with risk mitigation measures and oversight arrangements—following its decision to accept the Chinese currency for the settlement of mining taxes.
CSPR Executive Director, Isabel Mukelabai, expressed concern over the lack of clarity on risk management, including how Yuan tax payments will be valued and which exchange rates will apply.
In a statement issued in Lusaka on Thursday, Mukelabai cautioned that without clear valuation rules and effective hedging, the policy could shift currency risk to the central bank and taxpayers.
She acknowledged government’s justification for allowing four Chinese mining firms to pay mining taxes and royalties in Yuan, saying it could reduce conversion costs linked to Yuan-denominated loans and support diversification of foreign reserves.
“CSPR welcomes the limited scope of the policy, as it applies only to mining taxes and royalties and does not affect other government revenues,” she stated.
Mukelabai, however, noted that critical details remained unclear, including whether Yuan tax revenues would be ring-fenced for debt servicing and whether they would be sufficient to settle outstanding Yuan-denominated loans.
She added that government should have provided projected Yuan revenues and quantified expected savings from reduced currency conversions, further questioning how the policy aligns with the country’s Debt Management Strategy and the Public Debt Management Act.
“Zambia’s external debt and mineral exports are largely denominated in US dollars, raising concerns about potential currency mismatches,” Mukelabai noted.
She stated that while currency diversification could support economic stability, such decisions must be backed by clear analysis and strong risk management, urging authorities to ensure the policy does not undermine competitiveness in the mining sector.
Mukelabai also called for transparency, including regular public reporting and parliamentary oversight of the multi-currency revenue system.
“CSPR supports the move in principle but is concerned about the weak fiscal, legal and risk safeguards in the policy announced by the Ministry of Finance and National Planning (MoFNP),” she said.
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