Monday, November 04, 2013

Chikwanda unveils K42bn national budget
By Chiwoyu Sinyangwe and Gift Chanda
Fri 11 Oct. 2013, 14:01 CAT

FINANCE minister Alexander Chikwanda is today expected to unveil an estimated K42 billion 2014 national budget. Next year's national budget is a K10 billion increase from the 2013 budget.

Zambia's budget for 2013 was K32.2 billion although pressure from subsidies on fuel which were halted last April and huge salary hike for civil servants last September saw the country's fiscal deficit stressed to 8.5 per cent of the country's gross domestic product, the highest in the post-HIPC period.

According to sources within Treasury, some of the salient sources of finance for Zambia next year will include income tax as well as customs and excise duty at about K15 billion.

The sources said salaries for civil servants have jumped by 50 per cent from this year's projection to K15. 3 billion next year while non-personal emolument programmes had slightly increased from K18.5 billion this year to K22.6 billion next year.

Next year, constitutional and statutory expenditure is provided at K4.7 billion from K3 billion this year.
The government plans to borrow K3.5 billion from local sources and about K10 billion from international financial institutions and other lenders.

In 2012, government successfully issued a US$750 million eurobond and is currently negotiating with Citibank and Standard Chartered for a US$250 million syndicated loan, a bulk of which will go into the road sector where President Sata has launched an ambitious plan to build 8,000 kilometres.

Chikwanda today presents the 2014 national budget at the time key macroeconomic indicators do not appear healthy on the backdrop of uncertainty in key global economies, with copper prices subdued while the agriculture sector is recovering from a combination of poor rainfall and chaotic input distribution.
Zambia's economic growth for 2013 is expected to shrink to six per cent from the targeted seven per cent due to declining copper prices and sluggish performance of the agriculture sector.

The economic growth is, however, expected to pick up to 7.5 per cent between 2014 and 2016.

Secretary to the Treasury Fredson Yamba revealed last month that next year's budget would focus on reducing government expenditure as a way of containing rising fiscal deficit.

"We agreed on measures to reduce the deficit as we move forward in the medium term," Yamba told journalists when an inspectorate team from the "International Monetary Fund) visited Zambia last month.

"This entails that we need to tighten our expenditures and also reduce our borrowing and at the same time, we need to broaden the tax base. That is the only way you can reduce the deficit. So, on the revenue side, you broaden your tax base and then you look at the expenditure side and tighten it."

Since the Patriotic Front government came into power in 2011, the workers in the country have enjoyed an exponential increase in the threshold for Pay As You Earn.

But with the weakening revenue capacity of the government vis-à-vis its increasing expenditure, especially in infrastructure, the government is unlikely to extend, further, tax generosity to workers.

Copper prices have remained sluggish in the larger part of 2013, and government's modest projected increase of K2.185 billion in mineral royalty tax next year from K1.890 billion this year indicate there will be no major changes in mine taxes.

The government had this year planned to create 200,000 decent jobs and as Chikwanda presents the national budget, Zambians would be looking out for a report of the actualised jobs.

The biggest paradox Chikwanda faces as he presents the 2014 national budget is to show how the government will cut back on expenditure without disturbing key social and economic programmes in health, education and infrastructure projects like roads and power stations.

"Just after being in power for two years, you are already constraining your budget," said former finance minister Ng'andu Magande.

"The first budget the PF presented, they said it was for Rupiah Banda; the second one was theirs. Now the third budget, they are talking about regressing… it is like we are going backwards. This year's deficit can only be dealt with by reducing your borrowings next year. If next year they are restraining the budget, how are they going to finish all the road projects they have started? I accept what Mr Yamba said that we have to constrain the budget next year. But what is going to happen to these roads they have started? It means the projects have to be abandoned."

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