Friday, December 24, 2010

Musokotwane predicts 9% excess revenue

Musokotwane predicts 9% excess revenue
By Chiwoyu Sinyangwe
Fri 24 Dec. 2010, 04:01 CAT

FINANCE minister Dr Situmbeko Musokotwane (right) says Zambia’s 2010 revenue collection will exceed the target by nine per cent due to increased tax collections from mining companies and domestic tax arrears. And Dr Musokotwane says the government plans to export the bulk of maize from the current bumper harvest to recover the money spent by the Treasury.

In a Letter of Intent to International Monetary Fund (IMF) managing director Dominique Strauss-Kahn, Dr Musokotwane said domestic revenue had this year performed better than expected.

“This performance is attributed to higher collections under income and value added taxes arising from tax arrears and an increase in tax collections from mining companies,” Dr Musokotwane said.

He said following the maize output of over 2.8 million metric tonnes this year, the highest in more than 22 years, the government gave Food Reserve Agency (FRA) K1.3 trillion to buy the grain.

The expenditure which was not budgeted for, and accounted for about 1.7 per cent of the country’s economic growth is said to have put pressure on the national budget for 2010.

FRA intends to sell the bulk of the maize to deficit countries in the region in 2011 and thereafter, repay the government,” Dr Musokotwane said.

He said the government decided to increase its expenditure outside the plans for the fiscal year 2010 so as to prevent the grain from going to waste by “remaining unsheltered in the fields with the onset of the rainy season.”

Dr Musokotwane said the government would get K495 billion from the mine tax arrears to finance the purchases of the maize and borrow a further K402 billion from commercial banks via government securities.

Foreign mining companies in the country have agreed to pay K1.426 trillion in tax arrears arising from the 2008 mining tax regime as the signed 10-year mine stabilisation tax agreements.

Dr Musokotwane said Bank of Zambia was currently working out a way of mopping excess liquidity from the market so that the high fiscal expenditure on maize purchases does not fuel inflation.

The Bank of Zambia controls the country’s annual inflation, which currently is in single digit, by monitoring and controlling broad money supply in the market.

“The Bank of Zambia is committed to undertake sterilisation operations to ensure that its liquidity injection does not fuel inflation,” said Dr Musokotwane.

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