Friday, April 12, 2024

2019 Budget lacks clear, specific measures to cut budget deficit-ZIPAR

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Dr. Pamela Nakamba Kabaso - Executive Director ZIPAR speaking at the 2019 National Budget Analysis Breakfast Meeting at Intercontinental Hotel recently
Dr. Pamela Nakamba Kabaso – Executive Director ZIPAR speaking at the 2019 National Budget Analysis Breakfast Meeting at Intercontinental Hotel recently

Leading think tank, Zambia Institute for Policy Analysis and Research has observed that the recently announced 2019 Budget does not have any clear, specific measures to reduce the fiscal deficit to 3% of GDP by 2020, as targeted in the Medium Term Expenditure Framework.

In its detailed analysis of the 2019 budget entitled, “The Elephant in the Room,” ZIPAR states that the deficit and the debt will remain as large elephants in the room in 2018.

It said to reduce debt distress and return to lower levels of risk, the Government will implement a Debt Strategy 2017-2019 and will revise the Loans and Guarantees (Authorisation) Act in 2018.

Fiscal fitness or consolidation measures will be applied on both revenue and expenditure, with: a slower increase in spending in 2018 (K7.2 billion) relative to 2017 (K11.4 billion); and a significantly larger revenue increase in 2018 (K6.1 billion) compared to 2017 (K800 million).

It however points out that policy risks from unanticipated spending pressures, particularly inflated procurement costs, still remain and could readily derail the fiscal discipline agenda.

ZIPAR also states that key fiscal legal instruments – Public Finance Act, Loans and Guarantees Act, Public Procurement Act and the Budgeting and Planning Bill – need urgent revision and enactment to ensure accelerated fiscal fitness.

“In the 2018 Budget, the deficit and debt situations are essentially the elephant in the room. Zambia’s fiscal deficit has been on the rise since 2013 due to ambitious infrastructure development programmes. Consequently, the national debt stock has mounted, reaching 47% of GDP in 2017,” the report reads.

“In 2019, K20.1 billion or 28.1% of the budget will be financed through domestic and external borrowing. Debt servicing is expected to be around 20% of total Budget expenditure and of this, external debt payment will total K7.3 billion while domestic debt repayment will amount to approximately K7 billion. Clearly, the deficit and the debt will remain as large elephants in the room in 2018. To reduce debt distress and return to lower levels of risk, the Government will implement a Debt Strategy 2017-2019 and will revise the Loans and Guarantees (Authorisation) Act in 2018.

It added, “However, the 2019 Budget does not have any clear, specific measures to reduce the fiscal deficit to 3% of GDP by 2020, as targeted in the MTEF. Moreover, an essential element that should be incorporated into debt management legislation is a provision for the setting of fiscal rules or legally binding, long-standing quantitative restrictions on some budgetary or fiscal aggregates.”

It noted that the age-old big push for infrastructure expansion is set to continue in 2018, positioning infrastructure spending as a sacred cow in the Budget.

“Ironically, the sacred cow syndrome is perpetuated at a time when the country needs fiscal discipline in order to attain fiscal fitness. With the planned spending specified in the 2018 Budget and possible pressures for unplanned infrastructure spending, the unrelenting drive for infrastructure development pose a significant risk for Zambia to accelerate its fiscal fitness.

ZIPAR Executive Director Dr. Pamela Nakamba Kabaso with Finance P.S Mukuli Chikuba during the 2019 National Budget Analysis Breakfast Meeting
ZIPAR Executive Director Dr. Pamela Nakamba Kabaso with Finance P.S Mukuli Chikuba during the 2019 National Budget Analysis Breakfast Meeting

Meanwhile, ZIPAR has noted that some important budgetary commitments were mysteriously deferred to 2018 (from 2017) or dropped from the Budget.

It says these shifting and vanishing pledges threaten the integrity and credibility of the Budget.

“For instance, the 2017 Budget pledged to “support the creation of at least 100,000 decent jobs”; this simply vanished in the 2018 Budget, leaving the country wondering what happened to the 100,000 jobs. Similarly, the total proposed Budget for 2018, at K71.7 billion, is nominally 9.5% larger than the MTEF projected Budget for the same year (K65.4 billion). The proposed 2018 Budget was also larger than the projected 2019 MTEF Budget (K69.1 billion). Thus, MTEF projections are not good predictors of final budget allocations, even over time horizons that are as short as one month.”

“Ultimately, the shifting and vanishing pledges risk undermining fiscal governance. On the whole, the 2018 Budget has charted a course for accelerating fiscal fitness and putting Zambian back on the path of robust sustained and inclusive growth and development that leaves no one behind. However, the Budget will only be worth its salt and will only achieve the accelerated fiscal fitness it desires if the Government can must the will, persistence and discipline to stay true to the policy, strategic and numerical commitments it has stipulated.”

Mr. Mukuli Chikuba-PS Economic Management and Finance, Ministry of Finance during the 2019 National Budget Analysis Breakfast Meeting at Intercontinental Hotel recently
Mr. Mukuli Chikuba-PS Economic Management and Finance, Ministry of Finance during the 2019 National Budget Analysis Breakfast Meeting at Intercontinental Hotel recently

19 COMMENTS

  1. This budget was written over a bottle of whisky. PFooLish regime thinks it can run a Govt by perpetual borrowing.
    There comes a time to repay & when no one is willing to borrow to you or will borrow to you at ridiculous interest rates.
    Lungu is Zambia’s greatest tragedy, not even British colonialists come close.

  2. This budget was written over a bottle of whisky. PF00Lish regime thinks it can run a Govt by perpetual borrowing.
    There comes a time to repay & when no one is willing to borrow to you or will borrow to you at ridiculous interest rates.
    Lungu is Zambia’s greatest tragedy, not even British c0l0nialists come close.
    Modern slaves are not in chains but in debt.

  3. Lungu is busy buying luxury jets he’s not concerned with budget deficits that’ve grown from 6.7% in 2017 budget to 7.1% this fiscal year.

  4. Behaving really bad like Chiluba

    His wife hit the country giving gifts in rural areas in compaign

    First president even to invest in brick and mortar building personal property in town where ever there is SPACE.

    Meanwhile national economy is sluggish

    Let us unite and save zambia from abyss of destruction

    • RB with Ngandu Magande were getting the economy under control but you characters with your HH decided to stab him in the back. To say that RB’s government was corrupt is to miss the point of looking at the larger picture.

  5. It’s another good-for-nothing NGO, why not come out strongly during the Budget formulation process? If you’re looking for faults you’ll surly find them, even Christ was said to have woken up Lazarous from the grave because he his mulamu. If Lazarous didn’t have beautiful sisters I wonder if that miracle could’ve materialized. We are not infallible…

  6. “On the whole, the 2018 Budget has charted a course for accelerating fiscal fitness and putting Zambian back on the path of robust sustained and inclusive growth and development that leaves no one behind.” Is the article on the proposed 2019 or the 2018 budget?

  7. ZIPAR is utterly incompetent in executing its mandate. So ZIPAR are now procurement specialists accusing GRZ of inflated procurement. Really!! Did that show up in their modeling?

    A third-year student at UNZA in Humanities can write a better essay than this crap they call thinking from a Think Tank. Why is the Ministry taking so long to fix this malaise? They need well thought out ideas to augment their strategies. Instead, they are spending big on their institute getting crappy essays.

  8. Impulsive reactions with mixed feelings from the comments. To be honest the information presented is mixed up. I know because I have read the actual ZIPAR reports.

    This kind of journalism should be stopped. If you want conherent facts, visit the ZIPAR website (www.zipar.org.zm).

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