2013 budget has reinforced investor confidence - Babb

2013 budget has reinforced investor confidence - Babb
By Gift Chanda
Mon 15 Oct. 2012, 14:00 CAT

THE 2013 budget has reinforced investor confidence in Zambia, says a senior Standard Bank official.

Analysing Zambia's 2013 national budget, Yvett Babb, Standard Bank Africa researcher, said there has been a lot of speculation on whether the PF government may introduce new revenue measures that may be detrimental to the mining sector but that that has not been the case in the 2013 national budget.

Finance minister Alexander Chikwanda presented a K32.2 trillion budget for 2013 on Friday, raising spending to fund infrastructure and underscoring the government's commitment to creating jobs for majority youths who propelled the PF to power last year.

Chikwanda said spending would rise slightly to 26.6 per cent of GDP from 26.5 per cent in 2012, although the budget deficit would remain unchanged at 4.3 per cent of GDP.

"We know that they Zambia went through a period where they had windfall taxes on the price of copper and there were suggestions under the previous election campaigns that the PF government may seek to reintroduce that but they have been adamant since they came to office that they would not do so," she said on a CNBC Africa special programme on Friday shortly after Chikwanda presented next year's budget.

"There are however continued concerns that the mining sector is not contributing enough to the budget, but we have not seen significant revenue measures that may be detrimental to the mining sector which I think is another positive thing."

Babb said despite being under pressure to create jobs promised to youths who propelled the party to office last year, the PF government did not fall into the trap of introducing new revenue measures that would be less favourable to foreign investors.

She said the PF government's first wholly-developed budget was very much in line with the party's vision of creating more jobs in key sectors such as agriculture, manufacturing and tourism.

"…the positive thing that we have seen from this budget is that they have maintained the budget deficit at fairly suitable and prudent levels at 4.1 per cent of GDP. We have seen they have increased allocation to infrastructure development specifically transport and energy infrastructure and we have seen that they have maintained the levels of recurrent expenditure," she said.

"What we will need to understand further are details regarding the amount of money being allocated to the subsidies. That amount has obviously exceeded previous budget expectations. We have also seen that public expenditure on wages has exceeded budget expectation but again we are keen to see whether this budget has accommodated this increase."

Asked whether Zambia was on the right track in terms of achieving sustainable development, Babb emphasised that job creation and poverty reduction would be crucial for the country in the medium term.

"In the last budget they government did give some direct revenue measures in terms of increasing the tax band for personal income tax therefore allowing for declining in obligation by small and lower earning individuals.

They reduced the VAT on a number of commodities; these all can be seen as supporting lower income individuals in the broader economy but of course the overall question to generate jobs will be key over the medium term and whether this government is going to be successful in terms of addressing the levels of poverty," Babb said.

And secretary to the treasury Dr Fredson Yamba said the 2013 national budget addressed the social agenda President Michael Sata had put forward for the country.
He said significant amounts had been allocated to pressing needs in the health, education and local government sectors.

Yamba further said the government planned to finance the budget deficit of 4.3 per cent of GDP, through domestic and external borrowing.

He said the government had already done a debt sustainability analysis and was sure that the country was in a position to finance that deficit.
Yamba further said the government consulted extensively with stakeholders regarding new tax measures in the budget.

In terms of the breakdown of expenditure of the Eurobond, Yamba said about US$255 million would be spent on capital projects in hydro energy transmission and distribution.

He said the government was going to inject US$430 million in road and rail transport infrastructure.

"The other amounts will go to human capital and access to finance. In this particular aspect we want to look at the rehabilitation of central hospitals, that is three of our referral hospitals because we would like to ensure that we have these hospitals up and running with the right diagnostic equipment.

So we are going to put in US$29 million and access to finance which is one of the major constraints for small and medium business will have US$20 million. Basically that is how the Eurobond will be used but other expenditures, US$1.4 million are fees and transaction cost. We also have a discount premium of US$14.6 million."