Maravi

(LUSAKATIMES) World Bank warns Zambia on dependence on mining in 2012 budget

COMMENT - My guess is that by this time in 2012, the WB will have a lot of problems of it's own. It is good that the lawbreakers from the previous government are being charged. However, it are criminals like ms. Kadiresan at the IMF and WB that have directed this lawbreaking. Now they are 'uneasy' that the workers of Zambia aren't being robbed and the mines will have to pay. Who owns the shares of the IMF and World Bank? Look into that.

World Bank warns Zambia on dependence on mining in 2012 budget
TIME PUBLISHED - Thursday, November 17, 2011, 4:32 pm
Kundhavi Kadiresan

The World Bank has warned Zambia that the tax shifts that have been introduced in the 2012 budget are likely to increase execution risks and lead to increases prices.

Addressing the media on the 2012 proposed budget, World Bank Country Director for Zambia, Malawi and Zimbabwe Kundhavi Kadiresan, warned that depending on revenue from the mining mineral royalty and the issuance of the bond on the international capital market, increased risks to the budget execution.

“Once there is increased uncertainty about revenue receipts in 2012 because of significant changes made to the tax structure. Also a greater reliance on mineral royalty, which is likely to be much more volatile than PAYE receipts, would increase risk,” Kadiresan warned.

“And two, external borrowing would be difficult to organize given the state of international capital markets.”

The government’s 2012 budget is focused on a strategy aimed at equitable distribution of economic benefits. Towards that end, taxes on low income earners have been reduced, taxes on the mining sector have been increased, budget allocation to social sectors has been significantly scaled up with large increases for agriculture, education, health and infrastructure, user fees for primary health care services have been abolished and grants to local councils doubled.

“The overall thrust of shifts is to enhance pro poor orientation of government’s activities which is commendable,” she said.

“These welcome shifts however come with attendant risks. Risks to budget execution are higher because of higher dependence on mineral royalties which are likely to fluctuate with world prices of export commodities and dependence on external borrowing (the planned US$500 million bond offer) from global markets in an uncertain international environment.”

Ms. Kadiresan said at the current market prices the government’s royalty increase (from 3 to 6 percent) was unlikely to cause serious economic hardships to the mining sector.

“However the situation could change if commodity prices go down significantly,” she said.

“At that time, the government could come under pressure to review royalty rates. Frequent adjustment of royalty rates could, however, send a signal of unstable fiscal regime, thereby reducing Zambia’s attractiveness as a destination for investment for investment in the mining sector.”

She also said the rise in the royalty rate will alter the competitive ranking of Zambia.

On increased prices of essential goods, Ms. Kadiresan said “a sharp increase in expenditures while reducing tax burden on residents, combined with the recent monetary policy measures aimed at reducing lending rates, is likely to put upward pressure on prices.”

Labels: BUDGET, NEOCOLONIALISM, World Bank

posted by MrK @ 6:35 PM