2018 Budget measures unlikely to reduce high poverty levels

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By JCTR

On Friday, 29th September, 2017, the Minister of Finance presented the 2018 fiscal year budget under the theme: “Accelerating fiscal fitness for sustained inclusive growth without leaving anyone behind”. The budget was presented at the time when according to the 2015 Living Conditions Monitoring Survey (LCMS), Zambia’s national poverty levels is at 54.4% and rural poverty at 76.6%. The poverty connotation is associated with citizens lacking access to essentials required for a dignified standard of living such as health, education and a decent standard of living. The cost of living has consistently been increasing in the last two years making it difficult for many households to access basic needs. The budget was also released at the time the economy is trying to fully recover from economic turbulence of 2015 and 2016.

The budget is well premised on a very important theme of fiscal sustainability which has been a perennial problem with the PF government. The 2018 budget also seems to be well aligned to the seventh national development plan. On the Pillar of enhancing human development, the budget seems to have sustained the drive of promoting human development. Allocations as a share of the budget to both key sectors of Education (16.1%) and Health (9.5%) compared to 2017 allocation of 16.5% and 8.9% respectively have remained high reflecting the importance that the budget attaches to human development.

These have been proposed to be spent on various aspects of education and health including construction and rehabilitation of education and health facilities at all levels, equipment and material acquisition, staff recruitment and financing mechanism for tertiary education level. Of concern to the JCTR is that like in previous years, over 50% of the allocation goes to administrative expenses. This pattern which seems to have continued in 2018 will hamper the realization of the aspirations of 2018 budget in the area of human development. Of the total education allocation of K11.56 billion for instance; only K1.8 billion will go to primary and secondary school infrastructure, student loans and scholarships, university and college infrastructure as well as skills development. The pattern is the same in health. Despite the total allocation of K6.78 billion to the health sector, only K1.5 billion has been allocated to health infrastructure development, drugs and medical equipment acquisition. It seems the larger share of the allocation is to administrative expenses which have remote benefit to the patients.

Also, of concern is the allocation in the Water and Sanitation sector. Key on the projects will be the Kafue Bulk Water Supply Improvement Project under the Millennium Challenge Account aimed at increasing water in Lusaka but also unbundling the arrears owed to the contractors and suppliers. Of the total amount allocated of K816.26 million, K564.51 million is meant for water and sanitation. Out of which K239 million (42.3%) is meant for the Lusaka Sanitation Project. This leaves an amount of K325.51million to deal with the problem of water and sanitation in the 9 provinces (109 districts) of our country. This amount is insufficient to help rectify the challenge of clean and safe drinking water by most citizens in the 9 provinces. Zambia’s water problem is bigger than Lusaka water problem.

Poverty and vulnerability reduction pillar has also received fair attention from the 2018 budget. Under the Social Protection Programmes, measures that include implementation of the social cash transfer scheme and food security pack are being proposed. However, of concern to the JCTR is lack of coordination in the implementation of social protection programmes. The issue of wrong targeting where people who are not in real need are given social cash transfer should also be addressed. Social cash transfer should be targeted at the very poor echelon of our society.

Of major concern also is the silence of the 2018 budget on the needs of workers who bear the heavier burden of financing budgets through pay as you earn. The tax free threshold has remained stuck at K3, 300 while the highest tax band has remained at 37.5% and as if this were not enough, the allowable pension contribution of K255 will now be subjected to tax. This is indeed at variance with the budgets spirit of not leaving any one behind. In the light of increased cost of living and minimal salary increment; workers have little to smile about in 2018 but to continue tightening their belts. Government should have given workers some tax relief by reducing allocations to defence and public order and safety. Zambia is one of the most secure and orderly countries to warrant such continued high allocations. This is not to trivialize the work of maintaining safety and security of the country but a country that is not at war cannot justify allocating almost 10% of the budget to defence and safety and security combined.

Government’s chances of realizing its lofty intentions can only be assessed through its measures to raise revenues and pillar five of creating conducive governance environment for a diversified and inclusive economy speaks to that. The share of the budget to be financed from domestic resources of 68.5% still falls below the level of 70% reached during the previous MMD government and it seems the country continues to rely heavily on debt financing. While the projected external financing in the 2018 budget has fallen by almost 50% compared to 2017 budget, JCTR is alarmed at the proposed increased domestic borrowing of almost three times the 2017 level.

A budget that is premised on job creation through the private sector cannot afford to borrow this much as this will crowd out the private sector who is supposed to invest and create jobs. Government increased domestic borrowing is also likely to push up lending interest rates by banks which will increase cost of doing business and ultimately counter the well-intended target of job creation. The JCTR also notes that continued increase in the allocation to loan repayments; both external as well as domestic is indicative of how serious the issue of debt is to the country.

The Centre therefore demands that Government urgently shares its Medium term Debt Management Strategy which the Minister of Finance announced that it was adequate to deal with the issue of public debt with citizens to acquaint themselves with it in order to hold government accountable. JCTR further urges Government to quickly table the loans and guarantees act before Parliament for amendments to allow Parliament have oversight on the country’s borrowing in line with the provision of the amended constitution as announced by the Minister of Finance. This exercise is long overdue. At the rate we are accumulating debt, this exercise is too important to be left to the whims of the Executive who has demonstrated unbridled appetite for borrowing. Above all, JCTR urges government to invest borrowed resources in projects with high economic returns such as roads that open up rural areas and connects them to markets.

The introduced excise duty of K2 on cement also seems contradictory to the budget’s desire of creating jobs and leaving no one behind. The construction sector is one of the sectors that has been growing fast and contributing to the economy. The introduced duty will unnecessarily increase the cost of construction especially to ordinary people who are building houses.

Overall, the proposed revenue measures seem to fall short of the high intentions of reducing poverty, inequality and creating jobs so that no one is left behind. While JCTR acknowledges measures such as removal of tax holiday of five years offered to foreign firms, the total financing measures proposed are inadequate to deliver the good intentions of the 2018 budget.

The budget is almost silent on effectively taxing mining companies. The informal sector is another sector that has been almost let scot free. The challenges facing collection of informal sector taxes go beyond the upward adjustment of informal sector tax such as base tax which the minister announced but administration of the informal sector taxes.

The budget should have also provided more incentives for local industrialization. Other than creation of industrial economic zones and parks, the budget has not offered much on how it will industrialize the economy and create jobs. The budget also has no relief to workers as they continue to bear the burden of generating tax revenues through pay as you earn.

10 COMMENTS

  1. +6
    -2
    vote

    Jctr that’s not exactly the point of the budget is it ?

    Get out of here. My fiancé thinks Zambians are dull and I believe him.

    Thanks

    BB2014,2016

    • +2
      -4
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      JCTR is speaking reality of prevelaing poverty levels in Zambia.
      In 2015 the Living Conditions Monitoring Survey~LCMS~shows that poverty levels were at 76.6%~ rural & 54.4%~urban, areas respectively. Worse off, the HDI & FSI reports of 2017 indicate Zambia’s poverty line is almost 90% overall. This means that only 10% of the population are stable, ie PF bandits only!
      Visionless Lungu & violent PF bandits have incapacitated all institutions in the country. The PFudiciary, PFourts, PFarliament, PFolice or PFedia are all dysfunctional to PFs mediocre leadership. Health, Education & Agriculture services are dead bcoz PF is as bad as a used tissue paper. PF bandits act like a loner who throws cigarette butts into a river to see if the fish can eat.
      Only PF converted cheese eating monkeys…

    • +1
      -4
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      …… will be entertained by this uncaring 2018 Budget.
      The major problem with PF is that, any development & anything else is done by the most expensive & questionable bidder. Remember~Printing of ballot papers, Solar hummer mills, fertiliser or this $42 million second hand fire trucks all done by dearest bidders. Meanwhile patients at UTH are sleeping on the diseased floors~shame on PF bandits. The budget is far out of whack!
      The Skeleton Key
      ~206~

  2. +2
    -1
    vote

    Budget never reduce poverty, people must erradicate poverty from their minds. Dipendance syndrome is order of the day in Zambia. Get up and work…..if you plan to STEAL , YOU WILL GET JAILED AS GOVERNMENT DOESNT LIKE COMPETITION.

  3. vote

    Lungu’s budget is not for the poor, it is infrastructure driven at all cost even if it means getting loans even from loan sharks at katondo street. All he wants is that commission on that over priced single sourced tender.

    • vote

      Without infrastructure you can’t eradicate poverty though I’m mindful of what our people are going through. How do realize the industry that was sold off in the 1990s without apportioning blame. ..this should be the the driver. It’s not a secret that a Zambian can only survive on employment not on any other way. Jobs with decent jobs is quickest way of solving our problems because government cannot forever

  4. +1
    -1
    vote

    This Budget is customized for the benefit of pockets in PF. just like the constitution, ACC ,Police, Parliament , ECZ, Judiciary are customized for lungu’s stay in power.

  5. +1
    0
    vote

    Zambia is poor because we embrace and love the culture of poverty and we think in a manner that breeds poverty.

  6. vote

    i think people should also look at how developed western countries protect the poor, its hypocritical to say are too Zambians are dependent on the government.
    Most people who are abroad including Musota are there because local people would rather live on government help than do the jobs foreigners are doing. Plus the government provides better public services to its people and foreigners.

    Poor people in developed countries are still more dependent on government than in poor countries like Zambia. Zambian government should do more to protect the poor and create an environment that will stimulate economic growth through investments and that inturn will reduce poverty. Thus it is the responsibility of the government to reduce poverty..

    Even if an individual argues that, its the…

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