Maravi

Government dependency on domestic borrowing worries ZNFU

Government dependency on domestic borrowing worries ZNFU
By Chiwoyu Sinyangwe
Thu 17 Nov. 2011, 14:00 CAT

ZNFU fears that the government's plan to finance 21.1 per cent of the 2012 national budget via domestic borrowings is likely to counter intentions of freeing more liquidity to local entrepreneurs. The Zambia National Farmers Union stated that it would have preferred to see the government mobilise money via broadening the tax revenue base.

The influential union of commercial and smallholder farmers in the country stated that the proposed government borrowing of 1.3 per cent of the GDP was likely to "crowd out" as commercial banks will find it attractive to lend to the government than to the agriculture sector because of the perceived risk of the sector.

"The proposed government borrowing from the domestic market of about 21.1 per cent of the total budget will create competition with the private sector on domestic borrowing," ZNFU stated.

"Government should consider broadening the tax base as opposed to resorting to domestic borrowing in the long term so that resources from the domestic market can be freed to the private sector. This will help stimulate private sector borrowing and investment so as to create the much-needed employment and further revenue for the government."

ZNFU supported the government's efforts to help reduce the cost of finance after it reduced corporate tax by commercial banks to standard 35 per cent from the previous 40 per cent on the backdrop of the reduction in statutory reserve ratios which would create an extra K700 billion in commercial banks to lend out.

ZNFU also stated that there was need to address the import duty on agriculture inputs and zero-rate value added tax on agriculture products and also remove livestock levies hindering the development of the livestock sector.

The farmers body stated that the fuel levy paid by the agriculture sector, which they said doesn't serve its purpose, also needed to be removed.

And ZNFU applauded the PF government for allocating about K 1.7 trillion of its inaugural K27. 7 trillion towards the agriculture sector, a jump from K1.2 trillion in 2011.

ZNFU, however, stated that the 2012 agriculture allocation of six per cent was still short of government commitment of increasing agriculture sector allocation to 10 per cent in line with the Maputo declaration and under the Comprehensive African Agriculture Development Programme (CAADP) to propel the agriculture sector to higher heights and contribute to inclusive growth.

ZNFU stated that it was "enthralled" that the 2012 national budget recognized constraints facing the agriculture sector and proposed strategies of ensuring that key factors affecting the sector are addressed.

"Issues raised which are of importance to the Union include the fact that the agriculture sector still suffers from low productivity, is still rain dependent, lacks appropriate and affordable breeding stocks, low value addition, and is hindered by poor marketing and low investments," stated ZNFU.

Labels: DOMESTIC DEBT, ZNFU

posted by MrK @ 6:50 PM