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Saturday, August 8, 2020

FDD’s Budget Expectations

Columns FDD's Budget Expectations

By Antonio Mwanza, FDD Spokesperson

Where we are now?

It is no secret that we are going through one of the worst economic turbulence of our time. Our coffers are dry. The country’s debt has risen by 170% from 3.5billion dollars in 2011 to over 9.7billion dollars today.

Zambia has three outstanding Euro bonds totalling over 2.9billion dollars and with an estimated annual interest on the bonds at 240million dollars the amount required to service the interest and repay the principal is about 440million dollars annually.

Considering the fact that all the foreign debt is in dollars, Zambia has to significantly pay more owing to the weak Kwacha that has drastically depreciated from about K5 to a dollar in recent years to about K9 to a dollar as at close of business today. This means that money which is supposed to finance key sectors of the economy such as health, agriculture, energy and education has to be diverted to servicing the debt.

Zambia’s trade deficit has continued rising owing to the dwindling levels of production due in part to the deepening power deficit and high cost of production which have led to massive job losses and in extreme cases closure of companies particularly in the mining and manufacturing sector.
The widening fiscal deficit posses a key challenge on how the ballooning budget deficits shall be financed in the coming months and years as the GDP has continued to shrink from an estimated 7% to a paltry 3.8%.

The cost of living has escalated way beyond the reach of many households owing to a rise in the cost of essential goods and services as a result of high inflation, which has nearly tripled from 7% in 2014 to about 20.5% in 2016 as well as the rise in the cost of production as a result of increased electricity tariffs and fuel prices. This has been worsened by the depreciation of the national currency which has eroded the purchasing power.

Poverty levels have continued to worsen especially among women and youths. Tightening of the monetary policy by the central bank has not helped matters as it has resulted into high interest rates thus constricting spending by denying small and medium scale businesses access to loans to finance and expand their businesses.

What the 2016/17 Budget Should be Focused On

Looking at the challenges facing the country as itemized above it is crucial that deliberate measures be taken to ensure prudent and efficient management of available resources in order to reduce deficits, cut debt, spar growth, create jobs, reduce the cost of living and improve the lives of our people.

The Minister of Finance in his presentation of the National Budget should take into serious consideration the following things:

The Ministry of Finance should come up with stringent regulatory measures to enhance transparency and accountability in the management of public resources and implementation of the budget lines. Government must avoid budget over-runs by strictly adhering to approved budget lines in the disbursement and use of public funds.

Government must reduce unnecessary public expenditure by cutting down on excessive and unnecessary financing of non-productive ventures such as payment of hefty allowances to senior Government officers, buying of SUVs for senior Government officers and holding of workshops. The savings from such austerity measures should be channeled to the productive sectors of our economy to enhance growth.

Government must avoid the contraction of further debt and establish mechanisms which will enhance efficient and prudent management of the existing debt.

The bulk of the money in the National Budget should be allocated to the productive side and not to the consumptive side of the economy.

Not less than 20% of the budget must be apportioned to Agriculture in order to create jobs, create wealthy, cut-down trade-deficits and increase foreign exchange earnings. This should include investing in mechanisation, diversification, agro-processing, fish-farming and animal husbandry.
Government must reduce the cost of production by subsidising power, fuel and agro-inputs.

More money must be invested in the processing and manufacturing sector in order to create jobs especially for the youths.

A significant portion of the budget must be invested in alternative sources of energy such as solar, thermal, bio etcetera in order to end load-shedding and increase access to electricity.
Not less than 15% of the budget must be allocated to the health sector and particular emphasis must be put on the provision of primary health-care, training of medical personnel and provision of clean water and sanitation.

Funds for youth and women empowerment programs must be expanded and the disbursement of the fund must be streamlined and decentralised to ensure accountability and efficient use of the fund.

The budgetary allocation to education must significantly be increased and particular emphasis must be placed on improving the quality of and access to education.

Sufficient funds must be apportioned to empower and formalise the informal sector as a way of broadening the tax base and ensuring that the bulk of our people have social safety nets.

The existing tax regime must be revised particularly in the mining sector; re-introduce windfall tax to ensure that the mines pay a fair share of taxes.


  1. The President does not look like he is committed to cutting down on unnecessary expenditure. What Mwanza is hoping for maybe a far fetched dream

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