2010 National Budget Not Inspiring

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Finance and National Planning Minster, Stumbeko Musokotwane
Finance and National Planning Minster, Stumbeko Musokotwane

The 2010 national budget unveiled in a speech delivered to the Zambian National Assembly on October 9, 2009 by the Honorable Minister of Finance and National Planning is not inspiring at all, given the depth of socio-economic woes the country has been facing since the 1970s. It is not possible for our beloved country to make any headway in socio-economic development with such a mild budget, not even by the year 2030 when the MMD government is dreaming of turning Zambia into a middle-income country.

For reasons of brevity, let me comment on a few highlights of the budget.

Inflation and Taxes:

The attainment of single-digit annual inflation (of 8%) is a target that would be appropriate for countries that have already achieved a high level of job creation and socio-economic development. Zambia is clearly not one of such countries.

There is a need to reduce PAYE, VAT and interest rates in order to stimulate both the supply of goods and services and the demand for goods and services and, in the process, bolster job creation and eco­nomic growth. We need to reverse the recurrent emphasis on sta­bili­zing inflation at the expense of job creation and econom­ic growth.

Value-added tax, for example, could have been reduced to 12.5% from 16%. The increase in the PAYE exempt threshold from K700,000 to K800,000 is not adequate; this should have been increased to at least K1,000,000. And the income bands should have been expanded to make them fairer to tax payers as follows:

2010 Income Bands and Tax Rates:

K0 – K800,000 per month 0%

K800,001 — K1,335,000 per month 25%

K1,335,001 — K4,100,000 per month 30%

K4,100,001 and above per month 35%

Proposed Income Bands and Tax Rates:

K0 – K1,000,000 per month 0%

K1,000,001 — K1,435,000 per month 10%

K1,435,001 — K1,970,000 per month 15%

K1,970,001 — K2,370,000 per month 20%

K2,770,001 — K3,170,000 per month 25%

K3,570,001 — K3,970,000 per month 30%

K3,970,001 and above per month 35%

Lower taxes and interest rates could have functioned as an effective economic stimulus that could have spurred economic activity and job creation, as well as create a new class of tax payers. There is really no other obvious way in which a country can jump-start an economically beleaguered economy like ours.

Dependency on Foreign Investors:

There is too much emphasis in the budget on creating opportunities for foreign investment with little or no emphasis on promoting small and medium-sized enterprises (SMEs) by Zambians. As the United Nations Economic Commission for Europe has maintained, a growing body of empirical evidence supports the widely held view that SMEs are instrumental to socio-economic development. They can, as such, play an important role in improving the socio-economic welfare of a lot of people in a country.

There are many ways in which SMEs can positively contribute to the improvement of the socio-economic well-being of a country’s people, such as the following:

(a) They can create employment opportunities for talented citizens and family members who cannot find jobs in large business establishments;

(b) They can function as a vehicle through which a country’s government can economically empower its people by enabling them to participate actively and directly in their country’s commercial and industrial activities;

(c) They can facilitate the generation of wealth for all sectors of the national economy and thereby reduce existing income disparities;

(d) They can contribute to the improvement of the social and economic welfare of people in their host communities through the provision of various kinds of needed goods and services; and

(e) They can function as the backbone of a country’s economy if they are mainly operated by citizens, as they would be both indigenous and permanent, as Andrew Sardanis has maintained.

Negative Thoughts:

If Zambians “spend lots of their time on negative thoughts,” as the Minister has claimed in his budget speech, it is because over 65% of them cannot find jobs and are eking out a mere living. I cannot imagine people who are wallowing in abject poverty singing empty praises glorifying a government that is incapable of addressing their basic needs.

Henry Kyambalesa

48 COMMENTS

  1. vote

    This is the worst minister of finance in MMD government. He is just like Rupiah, they both have too much medriocrity in their brains.

  2. vote

    #1 what are you on so early this morning. Read about what Magande who you perceive to be the best finance minister said about Dr Stumbeko Musokotwane performance during his tenure. Look at the numbers Zambia is making progress since RB took over. Don’t be just negative and rid on your emotions and crowd mentality. Dig the facts for yourself as for the above story, why doesn’t this Internet party president form a real political party on the ground and put his minister in charge to give us an inspiring budget. Does he know how many constraints our minister has to work with?

  3. vote

    #2 When you lose your job at the embassy in South Africa, you will start seeing clearly. Magande has actually condemned the budget. Because of bootlicking, you have impetus to show your photo!

  4. vote

    THIS BUDGET SUCKS AND I WONDER HOW THE GAPS IN THE BUDGET WILL BE FUNDED SINCE THE RELATIONSHIP WITH DONORS HAS BECOME PRECARIOUS.

  5. vote

    LT PUT THE ALL PDF FORMAT BUDGET ON THE WEB IT IS AVAILABLE AT THE MINISTRY OF FINANCE WEBSITE.

  6. vote

    Goodmorning Zambia
    We need a Finance Minister and a budget that will inspire us. Time for a big chage!

  7. vote

    I agree the budget doesn’t inspire a major economic jump start. The only good thing is on agriculture though it’s also biased towards subsistence farmers than commercial farmers who feed the nation and not their families only. Ba Lt your proposed Income Tax bands luck knowledge of Zambian spending cultures. More desposable income for most Zambians translates to more leisure activies..i.e an upgrade from drinking mosi to amstel, heineken and other imported brands. This means the treasury will have no money and the people more unproductive. We need to invest in education that makes the Zambian more productive from an early age. I have always known academics to be poor at performance so Iam not surprised at Dr Musokotwane.

  8. vote

    Some people are so happy with statistics! 1.8 trillion Situmbeko has scored, what is that to do with an ordinary Zambian, Does it make his life better ? There are no results worth mentioning on the ground for people to see and applause RB & his minions for the job well done during the year 2009. All is just theory and thats what we are carrying in the next year 2010. Stupit bootlickers are happy with it.

  9. vote

    The iicrease of the PAYE exempt threshold from K700,000=00 to K800,000=00 is a mockery and a big insult on the Zambian taxpayers.I stand to be corrected by those involved in the preparation/approval of the budget. Is there any civil servant who is currently earning less than K800,000=00? If this PAYE exemption threshold does not give any relief to most civil servants why include it on the exempt threshald band.Be realistic Dr./RB and give a bit of relief to your fellow citizens.

  10. vote

    By January 2010 the taxes paid by most Zambians wills increase in the range of K100,000=00 to K200,000=00.This is as a result of the introduction of the Carbon emission Tax. Just think of all the taxes Zambians pay towards their motor vehicles -fuel levy, insuarance, Fitness, Road tax and now Carbon emission tax. Why has it taken them 4 years to start collecting this so called Carbon tax. I hope the revenues raised ( about 30.5 Billion) from this tax will go towards Enviromental protection and not to fund MMD 2011 election campaigns.

  11. vote

    MMD chief bootlicker, first and foremost; Magande is not the basis for my intelligent analysis of Zambia’s budget and please tone down your approach on this blog. Your picture when compared to your comments are a complete contrast, I mean let’s debate sensibly here. When I say this Minister is worse with his boss, I am referring to the windfall tax and tax relief for workers as well widening the informal tax base. The low revenue protracted in this budget is scaring, at the same time your MMD people are busy insulting the donors who will fund our budget. The windfall tax is really a neccessity in this environment. Iam a Mining and Metallurgy expert in Asia and I know what I am talking about. it’s not crowd influence and emotions blah blah, let’s not narrow down important matters to…

  12. vote

    One more thing, Iam not the spokesman for your so called internet party president, my advice is ask him all those questions you asked me. Iam a professional and not an ass*** oh sorry ,boot licker like you.

  13. vote

    I tend to resist the tempation of disassembling fellow bloggers but their opinions and institutions. But Henry Kyambalesa’s fixated hatred and pessimism is below western based teacher. American parents must keep his prejudice away from their children. I respect his Blog party space spew any nonsense but this kind of fixated mind is subnornormal by every standard to be western based.No wonder he has found it hard to move beyond the internet politics. For 9 year snow his only progress has been from a briefcase party Presidency to the blog thread.He is President and all party functinaries in himself.

  14. vote

    Book theories that are lacking a perspective of the real world are not only dangerousl but useless in any dispensation.Henry is a disconnected theorist high in his utopian world view. No wonder his personal life involves around failure but dead theories.

  15. vote

    Henry, thanks for the analysis. There is a critical shortage of such analysis pa Zed. Having said that, I suggest you make the analysis a bit deeper and improve the flow. For instance, you have to justify why you think 12% is better than say 10%, and how the revenue loss will be covered. In the next sentence you call for a reduction of PAYE. How will it be covered? While I agree with your arguments, they lack grounding.

  16. vote

    # 2 please enlighen us on the progress that has been made since RB took office. Surely, you can back your claim with independent facts. We are eagerly awaiting your report.

  17. vote

    Fifty Ngwee,

    Professor Kyambalesa has written several books, including “Socio-Economic Challengens: The African Context”. He also has a website at agenda123 /com.

    I won’t presume to speak for him, but on previous occasions, he has pointed out the large number of political appointments, which have to go, and a decentralisation from central government to provincial government. There is a lot of money being wasted in government today.

    I would say, that if half of all government revenues ($550 million in 2004) was directly paid out to local councils, all local council fees and levies could disappear. How about that for savings?

  18. vote

    ” Lower taxes and interest rates could have functioned as an effective economic stimulus that could have spurred economic activity and job creation, as well as create a new class of tax payers. ”

    In the neoliberal world view, lower taxes would ‘spur economic activity’. However, in the real world, the only solution is to ensure that people actually earn more money while maintaining or increasing their purchasing power.

    And that means an increase in real jobs, and an enforced minimum wage that is above the living wage. It also means developing the country in such a way that it involves ordinary people in the economic activity of the country – massive job creation, not attracting FDI at all cost.

  19. vote

    ” There is too much emphasis in the budget on creating opportunities for foreign investment with little or no emphasis on promoting small and medium-sized enterprises (SMEs) by Zambians. ”

    Excellent point, and to be expected from the neoliberal, ‘FDI at all costs crowd’. They seem to think that foreign money is better than domestic money.

    This is what can be expected from this MMD crowd. In a political hierarchy so rigid, they can’t even change their mind with the rest of the world that neoliberalism (privatisation, deregulation and corporate free markets) has failed. The only alternative is for democracy to step in, and vote them out of office. And keep our fingers crossed that the other bunch is not enamored of the same economic ideology.

  20. vote

    By the way, has anyone yet seen “Capitalism: A Love Story” by Michael Moore? I hope it is standard viewing at the cabinet. Leaders all over South and Central America have rejected this philosophy in favour of Demand Side Economics.

  21. vote

    13. Sobongo Kibinda Wa BaKabwa,

    ” The low revenue protracted in this budget is scaring, at the same time your MMD people are busy insulting the donors who will fund our budget. ”

    There is even a worst cost to this bloated budget. Whenever there is a budget shortfall, instead of spending less, the government makes up the difference by borrowing from domestic banks.

    This has caused them to monopolize loans, and as a result borrowing rates are over 20% for ordinary people. That is a real limit on economic activity, as no legitimate business can borrow at over 20% interest.

    So this budget is not only bad, it is dangerous to the nation’s economic health. But the World Bank likes it though. : -/
    And they are the worst mismanagers of all.

  22. vote

    MrK
    I hear your point of view and share your pain in the way things are done in Zambia. I also appreciate Henry’s contribution on the matter. My point is that while I am in general agreement with Henry, I feel that his article should have been more succinct, sharp and be internally consistent. I think you highlight the importance of this by informing us that he is a well published author. And any author knows that you have to make sure public exposure of your view are done so with skill.

  23. vote

    MrK

    Having gotten that point out of the way allow me to comment on a few technical issues. Firstly, I agree that there is so much wastage in the expenditure side of the budget. As a nation we need to press the authorities on this issue. Perhaps this is the side effect of having a narrow tax base. Only the few paying PAYE can really feel the pain of wastage while the untaxed don’t give a damn.

  24. vote

    If you look at Zambia’s fiscal history since the early 70’s, when there was a tax reform that shifted the budgetary dependence on mining tax revenue, one will come to the conclusion that the low economic growth and poverty we see in Zambia is as a result of poor fiscal management and continued reliance on mining.
    The public sector was too large, inefficient and distorted the incentive structure upon which the private sector (including the SME) should have grown created wealth for the country. Concurrently large fiscal deficits lead to excessive money printing, chocking debt inflation and instability.

  25. vote

    This fiscal indiscipline continued through the 80’s, 90’s and into the new century. Not even the Cash Budgeting approach could stop the problem effectively. Once we get a culture or internal system that will guarantee fiscal discipline (lower deficits and some surpluses), we shall have reduced interest rates thus lower crowding out, small current account deficit on the BoP and sustainable debt levels. This can be done in the short-term. In the medium term, we should encourage other sectors other than mining. The long term growth for Zambia will depend on mass education, adoption of new technologies and raising the number of employed and their productivity.

  26. vote

    Before I open my mouth somebody please eductAe me on the economic credentials of Mr Kyambalesa. From the little that I have learnt about him so far, he sounds like a doomsday prophet. Nothing will ever please him, which puts him in the group of prophets of doom like our very own Mmembe to whom everything RB is bad, and everything Cobra is good and deserves praise, including the 90 days required to build Choma – Itezi tezi road during the rainy season. With such negative thinking is Mr Kyambalesa a successful economist?

  27. vote

    I wonder what Kayambalesa’s opinions are on the other aspects of Musokotwane’s budget speech. And the senile Senior Citizen, by calling Kayambales a failure, you seem to be implying that the right to free speech is only for successful citizens. You seem to consider yourself as a successful man after a long career of reading news written by others, and getting a political posting at the Zambian Embassy in Washington, DC. Senior Citizen, taxation and interest rate policies are not theories; they are the instruments used by countries like the United States where you are to heat up or cool off their economies. Wake up old man, this is the 21st century.

  28. vote

    All this talk about fiscal issues etc etc is very admirable. But the bottom line is, we have INCOMPETANT people running the country. Even with best policies in place, unless you have suitably qualified personnell to ensure that these policies are adhered to, we are wasting our time. Zambia should be viewed as a company with the Zambian people as the shareholders. If the CEO and the managers (government) are incapable of running the company (Zambia) profitably, then they should be fired and brought to book for embezzelment if need be. The majority of the people of Zambia are’nt interested in politics….we are interested in the welfare of our people and the future of this wonderful country. There are real issues that need to be addressed sooner rather than later (2011). ENOUGH IS ENOUGH!

  29. vote

    the whole budget does not bring hope…. why would the tax rate for someone earning K1,500,000 be 10% people earning upto k2,000,000 should be tax free…. in Australia when we do our tax returns the first AUD $6000 IS TAX FREE (equvalient k18,000,000) this is how u bring development…. as more people will have more funds to spent… this is just simple economics… and these guys have master’s and doctrates.. and they can’t use their brains.

  30. vote

    Any finance expert will tell you that confidence in an economy is IMPORTANT. And confidence is a two way thing, government has a part to play but so too do the citizens and the business people within the country itself. One can blame the government for all the ills but then you miss a big thing that Dr Musokotwane mentioned. That negative talk with no solid work is merely emptiness and ultimately detrmimental to the economy. So all the Zambians who sit on their butts and do nothing but complain work with the least amount of effort they can and seek not to innovate and find solutions to problems in their communities are also to blame if the economy sucks. If you want to make a change start by planning one and then emplimenting it.

  31. vote

    If you guys want to see more SME’s coming up then start creating businesses and finding creative ways to finance them. You have to be realistic, you can not expect credit or equity financing to be easy to find. Even in developed economies its hard to get so obviously for a poor economy it will be hard. So FDI is a great way of creating jobs on a massive scale, its about scalability here, SME’s need to be started be creative and innovative folks and that means people need to want to get out of the poverty and fight to do so. Many of the world’s biggest business men have fought their way out of poverty this way. So I’m not saying support the government I’m saying be more balanced in your opinions. Yes there gaps, but where the gaps exist, point them out constructively. Build…

  32. vote

    Fifty Ngwee,

    ” Firstly, I agree that there is so much wastage in the expenditure side of the budget. Only the few paying PAYE can really feel the pain of wastage… ”

    Which is why I am a supporter of decentralisation to the local government level. If half of national revenues were spent locally, local people across the nation could keep an eye on exactly what is done with the money. And that may be the ultimate anti-corruption measure. If local councils were
    obligated to hold open sessions at least once every 6 months to explain exactly how much money was spent on what, how much is left, etc. that would create a lot of openness. The public could even vote on specific expenditures. Cho at Zambian-Economist alwayst talks about participatory budgeting, which is another…

  33. vote

    It is nice to debate but the one thing I bemoan is this culture of not debating on the facts but opinions and insults. No need to demean others with different opinions since nearly all comments are made from what is perceived correct. I agree with someone who said the analysis could have been done better. Show us that you know what you are talking about. A decrease from 16 to 12%, why that and how is revenue loss will be covered.
    I disagree with the notio that America is successful at this, they have plunged the world in the worst economic disaster and they borrow heavily……

  34. vote

    This is some analysis of the 2011 elections
    Lusaka Province = PF (UPND/PF Pact) ,Copperbelt Province = PF (UPND/PF Pact), Southern Province = UNPD (UPND/PF Pact) ,Western Province = UPND (UPND/PF Pact), Northern Province = PF (UPND/PF Pact) ,Eastern Province = MMD, Luapula Province = Swing State PF (UPND/PF Pact) ? Central Province = Swing State MMD? North Western Province = Swing State UPND (UPND/PF Pact)? The Recommendation to the UPND/PF Pact is for them to solidify their base in their strongholds and to work hard in the Swing states. They need to employ registration Managers in the swing states to aggressively Register new voters while HH and Sata concentrate on Campaining.

  35. vote

    Nbr 33 DUDE: That is a very important point which you have made about the IMPORTANCE of confidence of players (government, citizens, donors, politicians, NGOs, etc) in the economy. And that is the potent weapon which some citizens are using to discourage investors and donors in order to achieve their own selfish political ends without any regard for the good of nation. As far as they are concerned once that confidence is eroded then the government will fail. That is the negative talk which Dr Musokotwane is talking about. But being the gentleman that he is, the Doc did not mention specific names like Mmembe, HH, etc. I spare Sata and NGOs in this critique because they are not so enlightened on economic matters and so they are just used as pawns in a game that they do not understand.

  36. vote

    Joseph Mukuka,

    ” I disagree with the notio that America is successful at this, they have plunged the world in the worst economic disaster and they borrow heavily ”

    For the last 8 years (and actually going back to Ronald Reagan – 1980 onwards) they have had a series of pro-corporate governments, which set out to destroy and undermine government, and favoured capital over labour every opportunity they had.

    However, what makes the American economy powerful, is that 80% of GDP is internally generated. They do not depend on ‘foreign investors’, their economy is one of Americans trading and supplying services to other Americans. And that is what we have to strive for, if development is going to mean anything to ordinary people.

  37. vote

    Continued… The US’s problem is that they have been brought down by the same ideology that has destroyed the Zambian economy and put our mines in foreign hands. The cause is the same – supply side economics, also known as neoliberal economics – deregulation, privatisation of state functions and free markets for corporate capital. And these are elitist ideologies, which has to be pointed out. If you run an economy along these lines, ‘development’ means the overconcentration of wealth into the hands of a tiny number of people – always.

    What we need, is a society that is 90% middle class, where every child goes to school, everyone has access to healthcare, and everyone owns something – a house, some land, a car or just a good education.

  38. vote

    This is some analysis of the 2011 elections
    Lusaka Province = PF (UPND/PF Pact) ,Copperbelt Province = PF (UPND/PF Pact), Southern Province = UNPD (UPND/PF Pact) ,Western Province = UPND (UPND/PF Pact), Northern Province = PF (UPND/PF Pact) ,Eastern Province = MMD, Luapula Province = Swing State PF (UPND/PF Pact) ? Central Province = Swing State MMD? North Western Province = Swing State UPND (UPND/PF Pact)? A Recommendation to the UPND/PF Pact for them to solidify their base in their strongholds and to work hard in the Swing states,they need to employ registration Managers in the swing states to aggressively Register new voters while HH and Sata concentrate on Campaining

  39. vote

    Monitor,

    ” Eastern Province = MMD ”

    Are you sure? Yesterday there was an article in The Post of school children in UNIP getups singing the praises of Michael Sata. If even UNIP is going the way of PF-UPND… 🙂

  40. vote

    Will there ever be a tym when he speak good as Zambians for me i see this buget to be the most inspiring one,with donors withholding their moneys but still goverment has managed to come up with a good one Lets critize with solutions not as tho we’re without heads.

  41. vote

    I relish, lead to I discovered exactly what I used to be taking a look for. You have ended my 4 day lengthy hunt! God Bless you man. Have a great day. Bye

  42. vote

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  43. vote

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    content together. I once again find myself spending way too much time both reading and commenting.
    But so what, it was still worth it!

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