LUSAKA (Reuters) – Canada’s First Quantum Minerals (FQM) said on Friday that it would lay off 2,500 workers in Zambia over plans by Africa’s No.2 copper producer to hike mining taxes.

The southern African country plans to introduce new mining duties, replace value-added tax (VAT) with a sales tax and increase royalties, from January, to help bring down mounting public debt.

The layoffs point to a further escalation of tension between the government and the mining industry in a country where the sector accounts for more than 70 percent of Zambia’s foreign exchange earnings.

FQM said in a statement that it planned 1,250 layoffs at its Sentinel Mine at Kalumbila and 1,250 at the Kansanshi mine in Solwezi in the first quarter of 2019, as well as an unspecified number of contractors.

Zambia’s local mining body said on Thursday that Zambia was pricing itself out of the global mining market with the proposed tax hikes, which are aimed at bringing down mounting public debt.

Concerns about Zambia’s rising debt, alongside accusations of additional hidden borrowing and government corruption, have spooked investors and Western donors in recent months. 

The International Monetary Fund has put on hold talk about an aid package due to Zambia’s debts, which it describes as unsustainable.

Reporting by Chris Mfula; Writing by Alexander Winning; Editing by James Macharia