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Musokotwane unveils K16.7 trillion budget

Musokotwane unveils K16.7 trillion budget
Written by Administrator

FINANCE minister Dr Situmbeko Musokotwane has unveiled a K16.71 trillion budget for next year but retained the 2009 theme of Enhancing Growth through Competitiveness and Diversification aimed at economic diversification. But Dr Musokotwane has not mentioned anything on the mining industry despite calls by many Zambians for the re-enactment of the windfall mining tax and on measures to cushion the formal sector from paying huge taxes as well as broadening the tax revenue to include the informal sector.

He has proposed to increase allocation to the agriculture and livestock sectors to K1.139 trillion from K1.096 trillion allocated in 2009, but this is because of the creation of a separate Ministry of Livestock and Fisheries, that would have its own minister and related administrative structures.

Dr Musokotwane also proposed a 26.4 per cent increase of allocation to the education sector to K3.320 trillion from K2.628 trillion that was allocated in 2009 while the health sector would be allocated K1.36 trillion from K1.82 trillion.

He also proposed to revise Pay As You Earn (PAYE) by increasing the non-taxable monthly income threshold from K700,000 to K800,000 while leaving the tax bands unchanged.

Under value added tax (VAT) that still stands at 16 per cent, Dr Musokotwane has proposed to remove import duty and zero rate insecticide treated curtains because malaria is the number one killer disease in Zambia and that the measure would result in minimal revenue loss.

He has also proposed to remove customs duty on cranes and garbage dumpers in order to reduce capital items for businesses that support the Keep Zambia and Clean and health campaign and the measure would result in a revenue loss of K4.2 billion.

Presenting the budget to the National Assembly, Dr Musokotwane said the government planned to spend K16.71 trillion in 2010 which is 22.5 per cent of the Gross Domestic Product (GDP) estimated at about K70 trillion.

He said of the total budget, government would raise domestic revenues of K12.1 trillion or 72.4 per cent of GDP and K2.42 trillion or 14.5 per cent of GDP would be received as grants from cooperating partners.

The balance of K2.184 trillion or 13.1 per cent would be financed through domestic borrowing of K1.48 trillion and foreign borrowing of K697.1 billion.

Nevertheless, Dr Musokotwane said government’s macroeconomic objectives for 2010 would be to limit domestic borrowing to two per cent of GDP, exceed five per cent economic growth and to reduce year-end inflation to eight per cent.

He said the General Public Services would account for the largest share of the budget at 32.1 per cent or K5.36 trillion.

“This is slightly higher than the 31.8 per cent share in 2009, as result of the need to finance certain key expenditures such as voter and national registration at a cost of K128.5 billion, the national census at a cost of K97.6 billion and the constitution making process at K50 billion, these allocations are essential and are a demonstration to this government’s commitment to the democratic process,” Dr Musokotwane said.

Other expenditure allocations include defence at 7.9 per cent or K1.32 trillion from K 1.068 trillion in 2009, public order and safety at 4.6 per cent or K771.5 billion from K610 billion in 2009, economic affairs at K3.21 trillion from K3.021 trillion in 2009.

Under public financial management, Dr Musokotwane proposed to increase allocations to the offices of the Auditor General and Anti Corruption Commission (ACC) to equip them with human capital and operational resources needed to effectively carry out their mandates.

He said the government would move swiftly to introduce a financial intelligence unit to enhance the fight against financial crime.

Dr Musokotwane said a single treasury account would be introduced in 2010 to further improve budget execution and cash management of public finances.

“By streamlining financial management we will reduce the amount of idle balances held across hundreds of accounts at commercial banks, which are accruing unnecessary bank charges. In addition, planning and budgeting legislation will be introduced in conformity with the constitutional amendment,” he said.

He said the government views the improved performance of agriculture and livestock as one of its most powerful tools to reduce poverty and stem the rural urban divide.

“As a demonstration of this commitment, I have increased allocation to the agriculture and livestock sectors to K1.139 trillion from K1.096 in 2009 while the revised farmer input support programme (FISP) will receive K430 billion in 2010 and the Food Reserve Agency (FRA) will be allocated K100 billion and K10 billion will go towards the Food Security Pack that is aimed at protecting vulnerable households from high food prices,” Dr Musokotwane said.

“To increase investment and productivity in the agriculture sector, the Nansanga Farm Block in Serenje will receive K26 billion in 2010 as additional funding to the K42.4 billion that was allocated in 2009 for developing access roads, electricity lines and water development and another K3.4 billion will be allocated to the Luena Farm Block in Kawambwa for preliminary works.”

He said the creation of the Ministry of Livestock and Fisheries would ensure that full support through targeted interventions aimed at controlling animal disease and improving veterinary services.

“Through these interventions, beef will become our next copper and greater attention will also be placed on fisheries development, through the construction of aquaculture centres for the breeding of fingerlings that will be used for restocking,” Dr Musokotwane said.

“Mr Speaker, Sir, to support the livestock subsector, government will continue with the creation of disease free zones to facilitate livestock exports and K12.5 billion has been allocated and the first zone is expected to cover Central, Lusaka and parts of Copperbelt Provinces.”

On tourism, Dr Musokotwane said the sector was the most affected by the global crisis in 2009 and the government would introduce a tourism levy that would become its major source of financing.

“Sir, the focus of government intervention will be on the construction of vital infrastructure in tourism areas and in our continued efforts to transform the Northern Circuit, I have allocated K95 billion from K50.7 billion in 2009 and these funds are meant for construction of Mbala-Kasaba Bay Road, electrification of the area, reconstruction of the airport and restocking of the Nsumbu National Park,” Dr Musokotwane said.

“Sir, in addition to these allocations, I have provided K83.4 billion towards the Support to Economic Expansion and Diversification (SEED) project aimed at fostering growth in the sector. A further K6.4 billion will be used for tourism marketing activities and K6.3 billion will be used to finance operations of the National Museum Board and K4.1 billion will be allocated towards Zambia Wildlife Authority (ZAWA) and K22.4 billion will go towards construction of access roads to and within national parks.”

On manufacturing, Dr Musokotwane said government would continue to place emphasis through construction of arterial infrastructure and investment facilitation through the Zambia Development Agency (ZDA).

On energy, Dr Musokotwane said due to the great expense of constructing power generation and transmission facilities, government would seek private sector participation through the public-private-partnership framework.

“A number of projects have been identified and we expect to start the tendering process shortly. Public resources in 2010 will instead be focused on stepping up rural electrification, for which I have allocated K234.7 billion,” he said.

On transport and communications, Dr Musokotwane said the sector was important in reducing the cost of doing business and improving access to rural areas.

“I have allocated K1.461 trillion towards the construction, rehabilitation and maintenance of our road networks in 2010, projects will include roads and bridges construction, routine maintenance and rehabilitation of airports and airstrips across the country and full details of other projects to be undertaken are available in the work plan for the Road Development Agency,” he said.

He said as a consequence of the continued uncertainty regarding the donor’s commitment to supporting the health sector, government has realigned domestic resources to mitigate shortfalls.

“Mr Speaker, following the alleged misappropriation of resources in the health sector, we have had several meetings with cooperating partners on the resumption of funding to the sector. As result of these meetings, a joint action plan was developed and agreed to determine the way forward. On its part, government has met all its obligations under the first phase of the plan and we await a favourable response from our donors,” Dr Musokotwane said.

“Sir, due to this non-commitment of resources from our cooperating partners, the allocation to the health sector has reduced by 25.3 per cent to K1.362 trillion in 2010 from the K1.823 trillion allocated in 2009. In addition, I have allocated K83.8 billion for drugs and medical supplies in 2010 and for prevention and treatment of HIV/AIDS, I have allocated K33.7 billion and K20 billion will go towards the procurement of essential medical equipment.”

Other allocations for the health sector include K13.7 billion for recruitment of essential and frontline medical staff, K134 billion for continued construction, expansion and rehabilitation of 16 district hospitals and construction of staff houses.

He said the government had placed a high priority on the education and development of the Zambian child.

“Over the last five years, we have devoted substantial resources to the education sector and to continue with this policy, I have allocated K3.320 trillion to the education sector for 2010 and K553.5 billion will go towards construction of infrastructure and K21.4 billion will cater for procurement of educational materials including books and desks,” Dr Musokotwane said.

“Sir, in order to continue support to tertiary institutions, I have allocated K317.9 billion to the three public universities. Of this amount, K164.9 billion will be used to finance their operations while K30 billion will be used for infrastructure development and K114.6 billion will be used to provide bursary support to deserving students and a further K84.3 billion has been allocated to support operations and infrastructure development at TEVET institutions.”

On water and sanitation, Dr Musokotwane proposed to allocate K433.7 billion to water supply and sanitation facilities. In addition, K116.5 billion had been allocated towards the national rural water supply and sanitation programme that would go towards the construction of 1,000 boreholes, 300 demonstration pit latrines and the rehabilitation of 700 boreholes.

On public order and safety, Dr Musokotwane allocated K771.5 billion of which K37.7 billion will go toward the construction of courthouses in all nine provinces while K36.7 billion will go towards construction of police houses and expansion of infrastructure at Mwembeshi Prison.

He said the social protection sector would receive K445 billion of which K194 billion has been provided for grants to the public service pension fund to cater for early retirement from the civil service.

A further K172.7 billion has been allocated as government’s employer contribution to the fund.

On local government, Dr Musokotwane has allocated K135.3 billion as grants to councils in order to enhance decentralisation of service delivery.

“Of these resources, K69.4 billion will be disbursed as a recurrent grant to councils aimed at compensating rural councils for revenues lost from the abolition of unfair and unpopular crop levies and K100 billion has been allocated to the Constituency Development Fund,” he said.

Under revenue measures, Dr Musokotwane proposed to increase excise duty on diesel from seven per cent to 10 per cent with expected revenue gain of K58.8 billion and a carbon emissions tax on both imported and domestic motor vehicles with expected revenues of K30.5 billion.

All these measures would take effect on January 1, 2010.

He said the government was concerned about the burden taxation places on the formal sector especially those in low income brackets.

“Sir, I therefore propose to increase the PAYE exempt threshold from K700,000 per month to K800,000 per month while leaving the tax bands unchanged. This means that those earning below K800, 000 per month will be exempt from this tax and this measure will return K85 billion to the pockets of our workers,” Dr Musokotwane said.

“And to affirm our commitment to provide further relief to the differently-abled, I propose to increase their tax credit to K1,560,000 from K900,000 per annum and these measures will be effected on 1st April 2010.”

He said malaria has remained the number one killer disease in Zambia hence the move to remove import duty and zero rate insecticide treated curtains for VAT purposes.

Dr Musokotwane has proposed to remove customs duty on cranes and garbage dumpers in order to encourage investment by reducing the capital items for businesses in line with the Keep Zambia Clean and Health campaigns.

Dr Musokotwane also proposed to increase fees payable under the lands Act such as consideration fees by 50 per cent, ground rents by 80 per cent and consent fees by 100 per cent.

These measures would result in revenue gain of K11.1 billion and would become effective on January 1, 2010.

Labels: BUDGET, SITUMBEKO MUSOKOTWANE

posted by MrK @ 6:40 PM