Monday, November 04, 2013

Chikwanda more pragmatic than predecessors - Katele
By Chiwoyu Sinyangwe and Gift Chanda
Mon 14 Oct. 2013, 14:01 CAT

FINANCE minister Alexander Chikwanda is being more pragmatic than most of his predecessors did in the past, says Katele Kalumba. And Zambia Congress of Trade Unions (ZCTU) president Leonard Hikaumba says the 2014 national budget is very ambitious.

Meanwhile, the World Bank has urged the Zambian government to resist major policy changes that could have budgetary implications next year. Chikwanda on Friday unveiled a K42.68 billion budget for next year, about 30.7 per cent of the size of Zambia's economy.

Commenting on the budget, Kalumba, who served as finance minister in Frederick Chiluba's regime, said Chikwanda was focusing the budget preparation on putting 'more money in people's pockets."

"The major thrust of the minister is to put money in people's pockets. Most significantly for me is that a considerable amount of money will be put in infrastructure development, and he has outlaid a lot of resources for that," Kalumba said in an interview.

"That is a welcome move. People must see physical deliverables in addition to service. He has also thought out well about how he is going to balance his books."

Kalumba also said the planned borrowing of K10 billion as part of financing next year's budget was not unrealistic as the economic growth projections could support successful repayment.

"There will be need for borrowing and it is economically necessary," he said.

"Technically, the projects he is proposing are feasible and all that is needed is for honourable members of parliament and ministers to go out there and work hard and explain the policies and programmes the minister has pronounced."

Kalumba said it was good that Chikwanda admitted that fiscal year 2013 had been a challenging one due to the unfriendly external environment which depressed copper prices while government's failure to uphold fiscal discipline saw the country's fiscal deficit widening to 8.5 per cent of the gross domestic product at the end of this year.

"A lot of political work to manage the programme is needed and they have got the skill to do it," Kalumba said.

"It (2013) was a very difficult year given what he described in terms of the external environment and given the populist demands in the country, it had to be a delicate year but he has managed to pull through. There was a bit of slippage but it was a necessary slippage given the demands we were facing, including the number of by-elections, most of which were not budgeted for. But he is now focused in terms of what he wants to achieve."

Kalumba said this year's budget was the most pragmatic.

"It is important to be specific when you say you will create employment. You must say how many jobs you are going to create and I think that is a more pragmatic approach than used to be the case before," said Kalumba.

"He is being more pragmatic than most of us did in the past. What I have seen is that it is economically necessary for him to borrow now. There will be some negative short-term effects but the long-term stimulus effects to the economy will cover that and I think, if there is fiscal prudence after this phase of initial borrowing for major physical infrastructure, in the future the benefits will pay off. I am very convinced the investments for which he wants to borrow are very sustainable. I live in a rural area, I have seen the effects of bad roads on goods and services. A bag of mealie-meal in Chienge will cost you K80 for 25 kilogrammes because of the distance and the bad roads."

And in a separate interview, Hikaumba said the upward adjustment in exempt threshold for Pay As You Earn would bring relief to workers.

"What this implies is that workers earning K3,000 and below will not be paying any tax but those earning above K3,000 means the first K3,000 of their income will not be subjected to tax," he said. "So, this enhances the take-home pay. Although the amount of relief is small, it's a positive development."

Hikaumba said there was need for more consultations in the proposed reforms to the Public Service Pension Fund.

Chikwanda, during the budget presentation, said the government would implement changes to the Public Service Pension Fund that will include changing the retirement age, revising the basis for calculating the pensionable emoluments and reviewing the commutation factors.

But Hikaumba said: "We need very thorough discussions between the employers and workers in order to have an outcome that is pleasant to the employers and workers. We have an article in the current Constitution that gives protection to workers' pension benefits, so anything that is being proposed should not be less favourable to what is in existence now; it should be better."

And World Bank country director for Zambia, Malawi and Zimbabwe, Kundhavi Kadiresan said the government's plan to reduce fiscal deficit next year through higher revenues from reduced exemptions and control of expenditure on salaries is encouraging.

Next year, the government plans to narrow the budget deficit to less than 6.6 per cent of Gross Domestic Product (GDP).

The government, which is one of the country's biggest employers, also plans a two-year wage freeze for civil servants and a halt to hiring, after increasing salaries by as much as 50 percent in September.
The public-wage bill will account for 52.5 percent of government revenue in 2014.

"These steps will enable the government to maintain and grow its expenditure on priority activities," Kadiresan said, adding that a lower deficit would also allow the government to consolidate its fiscal position.

The budget gap this year is seen reaching about 8.5 percent of GDP, from the 4.3 per cent earlier projected.

"The government must execute the 2014 budget as planned by resisting major policy changes that could have budgetary implications during the year," said Kadiresan.

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