The copper briefcase containing the budget speech
The copper briefcase containing the budget speech

Government has unveiled an expansive 2012 budget on today, with big increases in social spending and farming subsidies to be paid for by a rise in mineral royalties and a debut $500 million Eurobond.

In the first budget since September’s election upset, Finance Minister Alexander Chikwanda put flesh on the bones of new President Michael Sata’s promises to spread the benefits of strong growth in Africa’s biggest copper producer.

Overall spending would rise to 27.7 trillion kwacha ($5.5 billion), or 26.5 percent of gross domestic product (GDP), from 21 percent in 2011, Chikwanda said.

Domestic borrowing for the year would amount to 1.3 percent of GDP and foreign financing would be 3.0 percent, giving an overall deficit of 4.3 percent of GDP, Chikwanda said. Foreign grant aid would amount to less than 2 percent of GDP.

Analysts said the budget certainly qualified as “pro-poor”, although the extra spending did not mean the southern African nation was loading up on debt.

“Even though the budget outlined slightly more spending than had been anticipated, it’s still taking place against a backdrop of increased revenue collection, and an effort to raise more meaningful receipts from previously undertaxed sectors,” said Razia Khan, head of Africa research at Standard Chartered in London.

Most of the extra spending would go on 45 percent and 27 percent increases for health and education respectively, and a 38 percent boost for a farming subsidy programme that has underpinned nearly a decade of 6 percent-plus annual growth.

“The Patriotic Front (PF) won the 2011 election because it listened to the needs of the people at all levels,” Chikwanda said in his budget speech. “Now that we are in government, we have not and will never distance ourselves from the people.”

PF leader Sata, a gruff populist who spent 10 years as opposition leader, has caused slight nervousness among foreign investors, not least for his vitriolic criticism of Chinese mining firms.

However, he toned down his rhetoric in the latter stages of campaigning, and since coming to office has been at pains to build a working relationship with a sector that accounts for more than 70 percent of all foreign exchange earnings.

However, Chikwanda put some pressure on the mining firms, raising minerals royalties to 6 percent from 3 percent for base metals such as copper, and to 6 percent from 5 percent for precious metals.

He also said Lusaka would resurrect the previous administration’s plans to tap international capital markets to raise infrastructure funds, with the launch of a debut $500 million 10-year Eurobond during the year.

However, he made clear that Zambia, a nation of 13 million people, would not get sucked into unsustainable debt.

“As we spend more on our socio-economic infrastructure, our ability to meet our debt obligations should not be ignored,” he said. “In this regard, the government will target concessional borrowing as the first option.”

He also assuaged fears of looser monetary policy, saying the Bank of Zambia would continue to target single-digit inflation through its control of money-supply growth, a move that should support the kwacha currency.

“Investors will be encouraged by this, and we expect the kwacha, impacted by global volatility in recent days

[Reuters]

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68 COMMENTS

  1. now i understand that we are poor and we are in third world…this *****s will take zambia down…it is good not to return back to zed i can seee

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  2. Good that they have avoided borrowing heavily from external sources. As for the $500 bln bond floating, there is need for consistence and streamlining of statements from Ministers and the President on sensitive issues so as not to scupper investor confidence. This is a lot of money since it is ~10% of the budget, if it does not come in then most likely the social sectors will be affected. Or they will raise taxes mid-course once they realise the dosh is not coming One thing for sure, most low income pips will be happy with the K2m threshold! But for most bloggers here it is not much relief, I presume…

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  3. In my opinion, the new government was highly constrained in the resources available for this budget owing to the pre-election spending commitments of the previous government. The targeting of healthcare and education is most welcome and should provide a relief to the low income families who access these services the most. The increase in mineral royalty tax ensures that the nation gets a larger share of the mineral wealth, and provides resources to finance the expansion of the support provided to the small scale farmers, improve healthcare and education. In short, this appears to be ‘more money in the pocket’ if you are willing to go back to the land as a small scale farmer. More information on the details and other parts of the budget are required to make a full analysis.

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  4. Form that information,you certainly cant claim that is a pro poor budget.The devil lies in the details please.

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  5. More money will only be felt if prices of goods,transportation etc go down nway let me not speak to soon let’s wait and see but so far so good!

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  6. Ba LT you can’t publish your own news just this once…why should we be feed Zed news by Reuters…i’m off to make some international calls and then log on facebook forums to get some hard facts!!

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  7. I expected the 35% mark to be reduced to about 30%.It’s still too high for my liking.The other shifting of figures looks good though.I will need to study it before i can comment farther Guys.I wish Mushota could come back to Zambia.

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  8. PAYE thresh hold has been doubled to two million kwacha meaning all those who get 2million and less will pay zero per cent TAx

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  9. Good report, but why are we first hearing it from Reuters? Isnt our Zed media not capable of a quick analysis?

    When does the 6% mineral royalty kick in? I hope it wont be bogged down by legal hurdles in mine contracts.

    Reuters’ and StanChard’s interest is for foreign investors so they have only covered points relevant to them. Can someone please give us more details that are of immediate relevance to ordinary Zambians – like PAYE?

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  10. Reuters’ audience are teh foreign investors. Fine, no problem. But our local media should aspire to international standards like those of Reuters ie quickly report bullet points of the most interesting bits. Zed media has a long way to go!!!!!!!!!!!!

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  11. What a country Presenting a National Budget minus a Central Bank Governor. Its a Budget day and this is the time Minister of Finance and Bank Governor meet the various stakeholders at various venues and to explain in detail certain hidden items in the budget.BUDGET DINNER minus key implemetors. This is the only Budget Presented to parliament minus a Central Bank Governor. To hell with Satanomics.There is nothing new in the budget, Where are Windfall Taxes.Mining firms will continue banking cash abroad and ouer currency will keep on depreciating.

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  12. PAYEE Tax Rate

    K2,000,000 and below per month 0%
    K2,000,001 – K2,800,000 per month 25%
    K2,800,001 – K5,700,000 per month 30%
    above K5,700,000 per month 35%

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  13. if one is getting k2m or less, no tax, resulting in revenue gain of about 250 pin. the other tax bands almost remain the same meaning that higher income earners will fill little difference.

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  14. Reuters is looking at it from an foreign investor’s perceptive…the analysis on the ground is that this is a pro-poor budget very good news for the low earners <K5m!!

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  15. I must state that the budget presentation was rather unique in the sense that some items such as VAT, excise duty, and other taxes were not mentioned. we are to presume that they remain the same. The loss from the 80 000 who will not be paying tax has not been stated.

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  16. no. 29 did you not hear that the bank tax has been reduced from 45% to 35% to allow for lowering of lending rates by banks?

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  17. A contact from Zed just sent me  a soft copy via email inbox in PDF format, going to analyse it…how about you Ba LT are you scrolling the web for news to copy and paste??

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  18. let us study the whole document (budget) before going off half cocked, from the outlook more money for those earning 2million and less, no further comment as of now

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  19. AS A TAX MAN …I SAY THUMBS UP TO HON.CHIKWANDA…IT IS ALL WELL ON TAXATION AND HE HAS DONE THE BEST THING EVERY WELL MEANING ZAMBIAN SHOULD APPRECIATE ON PAYE, EVEN US FROM THE TAX SYSTEMS OF ZAMBIA-W NEVER EXPECTED PAYE TO GO THAT DONE,ON AVERAGE IF YOU GET k3.1MILLION IT MEANS YOUR NET PAY WILL INCREASE BY K301,000.OO WHO CAN NOT SAY THANK YOU TO THIS..FOR SURE IT IS MORE MONEY IN OUR POCKETS…GOD BLESS OUR GOVERNMENT

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  20. Why didn’t you copy/past part of the Reuters article saying that doubling of royalty will make mines go ballistic? @Jay Jay: To make comments on budget requires some knowledge/skills which lusakatimes obviously don’t have.

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  21. we want to read the whole budget for ourselves, please download for us. We do not want to read other people’s biased analyses

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  22. Very disappointing report ba lusaka times. How can u call urself a competitor wen u have barely touched the bones of the budget

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  23. @34 Rob
    If I was them I would have gone to UNZA and hired 5-10 top students from the School of Economics for just for today to brainstorm and fire-out articles & also make contribution via posting comments on the site, being a Friday those guys wouldn’t have asked for much!!

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    • Or Unza lecturers. That’s what the press does here in UK. Just get some professor so and so. he will be very happy to air his views. People like talking, you know.

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  24. so in sterling the budget is cira 3.73 billion pounds – those of you in the know, please tell me is this adequate to deliver the promised developments? Secondly, is this figure excluding the road contracts?

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    • Its not enough. But then, we are a poor country aren’t we. It’s like the budget of some household in Misis compared to the home in Kabulonga. Sort off. This is why we should stamp ou corruption so that donors can freely contribute funds they currently withhold.

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  25. I thought it is 27 Kazillion kwacha..this figure looks modest..is it med-term budget??…Regarding PAYE, this figures are peanuts for such hugh taxes (25 -30%)..but like they say if you pay peanuts you get monkeys to do the job..it is ‘monkey see monkey do’…no intitiative no creativity ..it is yes bwana…

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  26. i still dont get it, someone help me. if i earn k6m. in which tax base do i fall in? is it 30% band or 35% band? is the first k2m going to be considered part of the k6m. hope s/one understands my reasoning

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  27. If you get K6m, the first K2m will be tax free, then the other brackets follow. What this means is that if you get K6m, you may get something like an extra 300pin (find out what the second K1m was being taxed previously) that is what you will gain. I suspect it may be roughly around K300pin.

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  28. Hi Mambala – You will fall in all the tax brackets and yes the K2m is part of the K6m. Calculation are as follows:
    First K2 million will be zero rated
    next K800,000 will be taxed at 25% = K200,000
    next K 2,900,000 (that is difference of 5,700,000 – 2,800,000) will be taxed at 30% = K870,000
    next K300,000 (difference of K6million and the 5,700,000) at 35% = K105,000
    Thus total PAYE  deducted = K1,175,000 
    Hope this helps

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  29. So you get 75 extra loaves of bread or a full tank if you drive a 30lt tank. he he he he or buy zesco units. Not much but step in the right direction.

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  30. OMG,still after a hefty increase in spending its still a modest US$ 5.5bn budget and just 16% of Angola’s budget and just 40% of kenya’s budget.But it may be so given our large informal sector and our unwillingness to work hard for ourselves to raise our incomes.Instead we swallow Sata’s lies to put more money in our pockets.Anyone,including countries, that looks forward to others to make you rich dies poor and that is the lie that Sata is happy that zedians will take so they vote him in.

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  31. its a great delivery of more money in your pocket Imagine ZMK 2M when MMD was at ZMK1M

    What else can you ask for ? Even SLITY will not oppose may be coz nas a tourist attraction in Petauke she can

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  32. I can not see the difference. This budget is MMDs considering the time PF have stayed in office, they can not manage to come up with a proper plan.

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