UPDATE 4-Zambia pledges to slash deficit as it seeks IMF deal, restructuring

* Zambia targets deficit of no more than 6.7%/GDP in 2022

* Aims to seal IMF deal by end-November

* Seeks to conclude debt restructuring Q1 2022

* Pledges mining tax change sought by sector (Adds Chamber of Mines comment)

LUSAKA, Oct 29 (Reuters) - Heavily indebted Zambia pledged on Friday to slash its budget deficit and curb borrowing, as it aims to agree an IMF lending programme by the end of next month and a debt restructuring early next year.

The government of recently elected President Hakainde Hichilema is grappling with a debt crisis caused by excessive borrowing and worsened by the COVID-19 pandemic.

A year ago it defaulted on its sovereign debt, becoming the first African country to do so during the coronavirus crisis.

Presenting the 2022 budget to parliament, Finance Minister Situmbeko Musokotwane said the aim was to reduce the budget deficit from a projected 10.4% of gross domestic product (GDP) this year to no more than 6.7% next year.

The government is targeting economic growth of at least 3.5% in 2022 compared to 3.3% in 2021.

Musokotwane said he planned to reintroduce the deductibility of mineral royalty payments when calculating corporate income tax - a reform long sought by mining firms in its important copper sector.

“I am certain that the world’s mining investors will be looking at Zambia afresh after today,” said Zambia’s Chamber of Mines president Godwin Beene.

“Renewed interest from investors today could lead to new mines in production over the next five to ten years, and with the right supportive policies in place, that could completely change our nation’s development trajectory.”

Zambia’s talks with the International Monetary Fund have moved quickly since Hichilema won a landslide election against incumbent Edgar Lungu in August and appointed experienced economist Musokotwane to rein in public finances.

The economic fallout from years of high borrowing - which came to a crunch when commodity prices fell and COVID-19 hit - was one major reason for Hichilema’s victory at the polls.

“I ... urge this house and the nation at large to rally together and support government to reach an agreement with the IMF by the end of November,” Musokotwane said.

“There is no option to this otherwise the debts we owe will choke this nation to a standstill,” he added, saying the aim was for a debt restructuring to be concluded in the first quarter of 2022.

In order to curtail further debt accumulation, Musokotwane said the government would not contract any external non-concessional loans, except for refinancing purposes. The government-subsidised fuel supply chain would be restructured, he continued. (Reporting by Chris Mfula; additional reporting by Helen Reid Writing by Tim Cocks and Alexander Winning Editing by Angus MacSwan and Catherine Evans)