2017 National Budget progressive, but does not address pertinent fiscal issues

Three Civil Society Organizations have commended government for taking on board some of the recommendations from the Civil Society submissions in the 2017 National Budget.

In a statement, the Civil Society for Poverty Reduction (CSPR), the Jesuit Centre for Theological Reflection (JCTR) and Caritas Zambia commended government for putting in place austerity broad based social safe guards and targeting social protection programs.

The organizations is of the view that the budget is progressive and attempts to create a balance between stimulating economic growth and the social and human development.

“Civil Society for Poverty Reduction (CSPR), Jesuit Centre for Theological Reflection (JCTR) and Caritas Zambia commend government for taking on board some civil society budget submissions and specifically putting in place austerity broad based social safe guards which include increased allocation to social sectors but also targeted social protection programs like the social cash transfer.

“The 2017 budget which is themed “Restoring Fiscal Fitness for Sustained Inclusive Growth and Development” is progressive and attempts to create a balance between stimulating economic growth but also social & human development.

“We acknowledge that this budget has tried to address some of the critical issues faced in the Country, however we need not remind the government that we lost our fiscal fitness as the theme states and 2017 National budget is silent in addressing pertinent lessons learnt from the last five years. As Caritas Zambia, CSPR and JCTR, we are disappointed that this budget does not outline the reasons that led to the loss of fiscal fitness,” reads the statement in part.

The three organizations however expressed concern at the lack of measures to mitigate the high levels of poverty in the country.

They noted that the increase in crucial areas of fighting poverty is less significant due to the prevailing inflation rate but was quick to welcome the progressive steps taken to ensure that citizens had access to essential public services.

“We believe poverty in 2017 will continue to be a daunting challenge because the 2017 budget has not done enough to mitigate it. However, we note that although the increase is less significant in real terms considering the prevailing inflation rate, the nominal increases in social sector budget allocations of Health, Education, Water and Sanitation and Social Protection are progressive steps in ensuring citizens have access to essential public services. Further, the limiting of new staff recruitment to frontline staff in health and education will lead to improved public service provision as the country has a huge shortage of frontline staff but will also match up to increased infrastructure development in these sectors especially in rural areas.

“We acknowledge the increase to Social protection from 2.4% of the 2016 budget to 4.2% in 2017 and specifically the Social Cash Transfers which has been scaled up both in transfer value by 28% and coverage from 242,000 to 500,000 households amounting to 552million. Another observation is the slight increase in the number of beneficiaries of the Food Security Pack (FSP) from 30,000 to 40,000 beneficiaries in the 10 provinces. We urge government to continuously scale up social protection programs for sustained impact and provision of safeguards against shocks induced by economic recovery plans especially those leaving in absolute poverty who make up 40.8% of the Zambian population. CSPR, JCTR and Caritas Zambia also call for government to keep all stakeholder informed on the modalities of the proposed Health insurance scheme will take,” the statement further reads.

Government was also commended for trying to limit the domestic debt to 2% of GDP saying it will allow increased access to credit by the private sector and SMEs.

“On the revenue side, government’s aim to limit the domestic debt to 2% of GDP in 2017 is welcome as this allows for increased access to credit by the private sector and SMEs. The revision of the Loans and Guarantees (Authorization) Act can ensure sustainable debt levels that do not hamper growth through reduced revenue. In addition, maximizing the potential of Public Private Partnerships in infrastructure development is commendable if evaluation procedures and contracts are transparent and costs are not inequitably transferred to consumers as the private sector recoup their investments.

“However, Government has not owned up to the failed Private Public Partnership (PPP) programmes in Zambia, which have been running for the past 10 years and where a lot of funds were wasted due to poor implementation. Thus, it would be prudent if the government deals with the policy, legislative and administrative challenges that have led to the past failures of PPPs in Zambia. In addition, a deliberate policy towards the domestic private sector will lead to a sustained growth and revenue for the country,” the three organizations added.

The three organization also wants government to make progressive steps in taxation in the mining sector to raise revenues as opposed to the continued burden carried by the formal sector.

“CSPR, JCTR and Caritas Zambia commend government on adopting calls from civil society to increase the Pay As You Earn (PAYE) income tax threshold in the 2017 budget to K3, 300 from K3, 000. Though this may not be sufficient as the prevailing harsh economic conditions and high cost of living continue to be a challenge for the common citizen. The Lusaka Basic Needs Basket was at K5, 036.8 in October 2016 and is expected to with price increases in fuel an electricity. We expected that the government will also make progressive steps in taxation in the mining sector to raise revenues instead of over burdening the meager formal sector.

“It is evident that there are illicit financial flow in this industry however Government and the Revenue Authority have not yet identified ways of sealing the loopholes to ensure proper taxation of this sector and minimizing revenue loss. We expected that strategies that would be developed to address this the 2017 budget however this is not the case. A lot of revenues goes unrealized in other minerals being exploited like emeralds and diamonds.”

The organizations continued “The three organizations urge government to ensure that the evaluation of the state owned enterprises mentioned in the 2017 National Budget and the decision to dispose of them as well as their final valuation must be an open process in line with the tenets of transparency and accountability.We further realize that for Zambia to attain its economic recovery plan, budget integrity and a reduction of waste including the fight against corruption will have to take center stage. It’s for this reason that we call for enhanced transparency and accountability around the budget and the immediate implementation of the proposals on the review of the Public Finance Act to promote punitive measures for erring officers and the Planning and Budgeting Bill for promoting budget adherence so that we reduce unplanned expenditure. The three organizations also call for swift action on the numerous incidences of abuse of public resources highlighted by the Auditor General’s report. In addition, we call for the enactment of the Freedom of Information Bill to enhance transparency and accountability.

“As one reads the budget, one key element that comes out through the entire proposal is the number of Funds initiatives in almost all the sectors. However we question key objectives of these initiatives and they are normally a source of wasteful expenditures. The Ministries concerned should to give proper breakdowns and Implementation plans that include expected outcomes for each proposed initiative. Government should also prioritize these initiatives based on the required needs and focus on critical areas first, implement the initiatives then move forward to the next initiatives. These proposals should be analyzed and categorized in terms of how they would affect lives, and expected outcomes.”

They added “Caritas Zambia, JCTR and CSPR wish to see financial system reforms mentioned in the budget speech for efficient budget execution from Ministries, provinces and spending agencies being implemented in readiness for the roll out of Output Based Budgeting in 2018.”