The Centre for Trade Policy and Development (CTPD) says the 2020 national budget is full of contradictions as many policy pronouncements are not being supported with spending and tax changes.
CTPD Executive Director Isaac Mwaipopo says CTPD has observed that although, there is an improvement in allocation towards some sectors, the 2020 national budget is full of contradictions.
Mr Mwaipopo said CTPD is concerned that the proposed budget has not carried enough matching measures to support the proposed theme: “Focusing National Priorities Towards Stimulating the Domestic Economy”.
He said Government seems to have only improved its assessment of the current economic challenges and pronouncement of measures to be taken but has not translated these into meaningful policy changes and commitments.
“For example, though government states that it seeks to ensure debt sustainability, the road infrastructure agenda is expected to continue in the 2020 national budget following an allocation of K10.6 Billion and projected increase in debt financing,” Mr Mwaipopo said.
“How will the government create fiscal space when it is clearly failing to muzzle its appetite for spending on projects which has clearly not yielded enough returns towards debt servicing?”
Mr Mwaipopo said CTPD is also concerned that the total budget allocation has increased from K86.8 Billion to K106.0 Billion which is way above the planned expenditure for 2020 in the Medium Term Expenditure Framework.
He said the general increase in the budget does not reflect a commitment to austerity measures and “doing more with less.”
Mr Mwaipopo said the move to start working towards dismantling domestic arrears of about K20.2 is commendable.
“Although, under the macroeconomic objectives, there is no target by which government will reduce the domestic arrears. On the other hand , the allocation of K2.3 billion for the year 2020 is less than the increase in domestic arrears of K4.6 billion, within the last 6 months.”
“Clearly, there is no real commitment to the dismantling of arrears since the pace of accumulation is greater than the proposed rate of dismantling.”
He said CTPD is particularly disheartened that the allocation of K1.2 billion to the sinking fund is insignificant compared to what the country needs to raise annually towards the US$750 million Eurobond principal payment due in 2022.
“The reduced allocation towards environmental protection despite the emphasis to deal with the challenges of climate change is a matter of concern to the Centre.”
“Government’s inability to allocate more resources to education also showed the increased lack of priority since the same budget has increased allocation towards defense and public order and safety.”
Mr Mwaipopo said the budget has also maintained allocation towards drugs and medical supplies and hospital operations, which should have been matched with allocation towards health infrastructure.
He said the health sector does not only need increased buildings and facilities, there is also need for improved service delivery through increased drugs and medical supplies.
“CTPD welcomes the move to maintain VAT and wishes to advise government against the implementation of sales tax, especially to the wholesale and retail sector. This progressive tax change which has been mingled with proposals to increase non-tax revenue through increased user fees and fines charged by government departments will negatively affect consumer’s disposable income and would not result in stimulating the domestic economy.”
“Furthermore, the tax changes targeting climate change mitigation are not sufficient to creating incentives for the private sector to invest in alternative energy sources. Therefore, the 2020 budget is more focused on collecting taxes instead of using tax measures to stimulate the domestic economy.”
Mr Mwaipopo said CTPD will soon launch its detailed 2020 budget analysis paper which will be shared to the general public.
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Just stop buying luxury SUVs for govt officials and you will see how much money will be saved in this country. Just something as simple as to stop buying expensive luxury cars and paying huge bills to senior govt officials for their salaries, allowances, travel, gratuity etc etc by reducing the number of govt officials as well as to reduce their entitlements.
Truth is govt is in a pickle due to its own recklessness. There’s little room to manoeuvre as most of the money has been committed to non-discretionary spending. 2020 will be a difficult year and could prove even more difficult if the kwacha slides. To guard against that, I expect high interest rate regime to continue
while corporate insolvencies likely to be part of the picture too. Put Bwalya Ng’andu in your prayers as he presides over this.
Disparity between theme “Focusing National Priorities Towards Stimulating the Domestic Economy” and the contents?
We always are. These themes are usually not meant as a guiding principle but a way to impress people and that’s all.
Lungu’s GRZ is also contradictory …he says he’s developing the country yet his economic growth has been heading downside.
That’s why sales tax was going to be one of the major solutions to the national treasury. A budget is just a wish someone has. It doesn’t translate in money on its own. I get surprised when people celebrate budget allocations. The difference between Madam Maggie and Mr Ngandu is that the former new what she was doing whilst the current one is being directed by politicians. Its a big lie that sales tax will chase investors. Why are investors still fighting to enter Australia, USA, Canada and India if sales tax chases investors. Where would PF get money to pay back the loans if they don’t tax mines whilst copper is performing well. Thats why Magande introduced windfall tax. Remember what the exchange rate was. Sales tax will solve more financial problems for Zambia than vat. The only…
The only thing to work on the rate. Say something between 5% and 7% would not injure businesses at all. Most of the retailers import their merchandise. Its not true that by the time the third person is selling the goods the tax would have gone through the roof. How many people buy groceries from Shoprite, tutembas, or markets for resale. Most wholesalers from where Tutemba entrepreneurs buy their merchandise import their goods and they are not registered for vat. So the 16% vat is part of the cost of goods. Which fare 16 % or 9 %. Zambians are just lazy in thinking but very active in criticism and talking. Vat has been around for over 20 years when are we going to realise that its not good enough for our country? Why is it that a good number of well performing economies use sales tax?
The opening statements are alright. perhaps there has always been a dire need for closing statements. The opening statement states the budget objective including expenditure estimates. The closing statement states the starting point and ending point. For instance, the Eurobond debts amounts to X Euros. This year’s allocation of Y Euros means that the balance Z will be completed next year 2010 or something to that effect. There is nothing wrong periodic variation in budgetary allocation per Government Ministry as long as a certain limit is of 3%-5% (?) respected. It has everything to do with renewed focus on particular focus area, such Electric Power or Fuel or Universities or Railway Lines or Tarred Roads or Housing or Police equipment.
When copper prices go down the mines will threaten closure, when taxes are put on concentrates the mine will threaten cutting jobes, when ZRA finds mines wanting and assessment are done in millions of dollars like FQM, silence is the result. So what is really the issue with mines. Cobalt is one of the most expensive metal in the world and its heavily mined in Zambia but only copper is recorded and talked about. When FQM, KCM, Mopani etc sales minerals, money never comes to Zambia. We don’t even know how much these mines are paid by their customers. Any budget that can not clearly state where money will come from to cover items mentioned is a waste of time.
Also in future finance ministers should stop budgeting on donor funds because that changes most of time.