Zambia’s Fiscal Reality Cannot Be Ignored
Zambia faces a dual fiscal and public health crisis that is straining its ability to fund essential services. Rising debt obligations are consuming a growing share of domestic revenue, while declining donor support is reducing the funds available for public services. In 2024, Zambia reportedly lost K91.5 billion through illicit financial flows (further squeezing public investment in healthcare, education, and social protection).
Against this backdrop, CTPD argues that Zambia must urgently strengthen its health taxation agenda. The 2025 Supplementary Budget measures, especially higher excise duties on tobacco, alcohol and sugar-sweetened beverages (SSBs) should be seen not as isolated tax changes, but as part of a broader strategy to protect public health, strengthen domestic revenue mobilisation, and reduce long-term economic vulnerability. The debate must also move beyond industry profits and consumer prices to confront the full social and economic costs of harmful consumption. Zambia is already paying dearly for inaction.
The Rising Cost of Non-Communicable Diseases
Non-communicable diseases (NCDs), including cancer, diabetes, cardiovascular diseases, and chronic respiratory illnesses, are rapidly becoming a major national development challenge. These diseases now account for nearly three in every ten deaths in Zambia, with an estimated 18% risk of premature mortality between the ages of 30 and 70. Tobacco consumption alone kills approximately 7,400 Zambians annually. Beyond the devastating human impact on families and communities, the financial burden on the health system is substantial. The Ministry of Health estimates that treating tobacco-related illnesses costs the country over K2 billion annually far exceeding the revenue previously generated from tobacco taxes. Harmful alcohol use similarly contributes to road traffic accidents, gender-based violence, lost productivity, and risky behaviour associated with HIV transmission.
Importantly, these burdens fall disproportionately on poor households. CTPD’s position is that health taxation is not simply a fiscal issue, it is also a social justice issue. Low-income families are often the most vulnerable to harmful consumption patterns and the least able to absorb the financial shocks associated with chronic illness, healthcare costs, or loss of income. In many cases, families are pushed deeper into poverty because of diseases linked to tobacco, alcohol, and unhealthy diets.
What the 2025 Health Tax Measures Seek to Achieve
The 2025 Supplementary Budget begins to respond to this challenge. The increase in tobacco excise duty from K452 to K750 per mille represents a 66% rise. Excise duty on clear beer has been restored to 50%, wine excise increased from 60% to 80%, while the levy on SSBs doubled from K1 to K2 per litre.
These reforms are consistent with global evidence and World Health Organization (WHO) recommendations, which recognise health taxes as one of the most effective tools for reducing harmful consumption while generating sustainable domestic revenue. Importantly, health taxes work precisely because they influence behaviour. Higher prices discourage consumption, particularly among young people and low-income consumers who are most price sensitive.
Current modelling suggests that these measures, if supported by stronger enforcement systems such as digital tax stamps and improved compliance mechanisms, could generate approximately K3.2 billion annually. Even under conservative assumptions, revenues above K2 billion remain achievable. At a time when Zambia faces major financing gaps in the health sector and declining external assistance, such revenue could provide critical support for health services and NCD prevention programmes.
Challenging the Industry Narrative
Predictably, parts of the tobacco and alcohol industries oppose these reforms, citing illicit trade, job losses, and risks to farmer livelihoods. CTPD argues that much of this opposition reflects commercial interests more than evidence-based policy concerns.
Global evidence challenges the claim that higher taxes automatically drive illicit trade. In practice, illicit trade grows where enforcement is weak, borders are porous, and compliance systems are inadequate, which is why stronger enforcement must accompany tax reforms.
It is equally important to challenge the claim that health taxes harm farmers. Research shows many smallholder tobacco farmers remain trapped in exploitative contract farming systems marked by debt and weak bargaining power. Zambia should have an honest discussion about agricultural diversification and sustainable alternatives for farming communities.
A Necessary Public Policy Reform
CTPD sees health taxation not as punishment, but as a corrective policy tool that shifts some of the social and economic costs of harmful products from taxpayers and the overstretched health system back to the industries and products that create them.
As Zambia faces tighter fiscal space and rising public health pressures, incremental responses are no longer enough. A stronger health taxation agenda is now a fiscal and public health necessity.
In Part II, CTPD will examine key enforcement and implementation issues, including illicit trade controls, digital tax stamps, Special Economic Zone loopholes, and transition support for tobacco farmers and affected workers.
About the Author
Robert Mwale serves as Lead Public Finance Researcher at the Centre for Trade Policy and Development (CTPD). He also serves as Coordinator for the Zambia Civil Society Organization Debt Alliance (CSO DA) and the Zambia Tax Platform (ZTP). He holds a bachelor’s degree in economics from the University of Zambia (UNZA), A Master of Science in economics from the Copperbelt University and Master of Science in Financial Services from ZCAS University. He also has qualifications and competency in Investment Advisor and Stockbrokers Course.
