By Nalucha Nganga Ziba Country Director – ActionAid Zambia
As the finance Minister Dr Bwalya Ng’andu presents the 2021 national budget in parliament on September 25, 2020. We share our expectations.
Both covid-19 and high public debt levels presents a fiscal challenge for the provision of public services. 2021 national budget must, therefore, clearly identify priority expenditure. With limited resources, the 2021 national budget must demonstrate the need to ensure sustainable spending specifically on key and strategic sectors which will assure both citizens resilience to the socio-economic impact of Covid-19 and economic recovery. This is in line with observations made by the President in His State of the Nation Address on 11th September 2020, that “economic recovery post Covid-19 era must be a national priority”
We would like to see a significant allocation towards education, health, social spending and economic recovery. We believe that income security in social spending promotes dignified life more especially during the Covid-19 pandemic. We would, therefore, like to see an increase in the budgetary allocation towards social protection from an average of 2.8% in the past ten years to at least 5% of the total 2021 National Budget.
Though Zambia has not been hit as hard as other countries, we, however, observe that COVID-19 has exposed starkly the underfunding of the health sector in Zambia. With Covid-19 we have seen how the provision of other health care services haves suffered due limited number health personnel and inadequate health facilities.
In the past ten years national budgetary allocation towards the health sector has not only be short of the 15% Abuja declaration commitment but it has also been declining since 2013. We wish to remind the government amidst the battle against Covid-19 which is far from over, the 2021 national budget should seek to secure adequate funds for the health sector to assure the country’s ability to respond/mitigate possible surge in the Covid-19 cases and continuation of the provision of other health care services. We expect the 2021 national budget to at least meet the 15% Abuja declaration national budgetary commitment.
The 7NDP has identified agriculture as the main vehicle for achieving economic diversification and job creation. We, however, note with dismay that budgetary allocation toward this critical sector has not only been insignificant but that also it has dwindling in the past five years. In 2020 the agriculture sector only received 3.7%; this is usually couple with erratic disbursement.
We also observe that major part of the agriculture budgetary allocation usually goes to activities such as purchase of Maize under Food Reserve Authority (FRA) and the politicized Farmer Input Support Program. Indaba Agriculture Policy Research Institute (IAPRI) observes that in the 2019 Agriculture Budget 50% of the allocation went to FISP, 23% FRA, 16% Personnel Emoluments, 7% other and 4% Operational Funds (RDCs). With FISP Program there have been several challenges observed such as poor targeting. Consequently, despite the Program running for many years the benefits have been minimal.
It is our considered view that the allocation to the agriculture sector should focus more on: Research and Development, Irrigation Development, Extension services. Expenditure in these areas will transform the Agriculture sector in terms of improved productivity in the context of climate change.
ActionAid Zambia also expects serious and/or signification reduction in the budgetary allocation towards, Road Infrastructure and Public Order Management in the 2021 national budget. Many stakeholders including ActionAid have observed that Zambia is generally a peaceful Country as such high budgetary allocations to Public Order more that than the allocations towards Social protection is not only questionable but also unrealistic as this can be attributed to the deteriorating human rights situation of the country in line with state brutality.
Covid-19 presents a mammoth challenge for resource mobilization for the government. It is, however, suffice to note that the pandemic also presents a compelling need and/or demand of adequate provision of public services. ActionAid Zambia, therefore, expects the 2021 National Budget to underscore progressive fiscal reform to enhance domestic revenue mobilization while offering macroeconomic stimulus to regain economic growth.
We are of the considered view that in order to expand the fiscal space which will enable us to provide the much needed public services and the sustainable financing necessary for long-term socio-economic resilience, there is need first to urgently fight aggressive tax evasion and tax avoidance, including illicit financial flows. Zambia is signatory to many detrimental tax treaties such as the recently cancelled Mauritius tax treaty which have proved to be the major contributor of tax avoidance and/or evasion by most multinational corporations.
Zambia is also still giving tax incentives to various investors without any significant economic benefit. We, therefore, expect the government to suspend and/or cancel all the tax incentives and treaties proving to be of no economic sense and redundant in the 2021 national budget. This will expand the revenue base for the country in the wake constrained fiscal space.
We also expect the government to introduce the long-awaited capital gains tax and categorical net-wealth tax to further expand tax and/or revenue base. Personal Income in PAYE is largest contributor to Zambia tax revenue. The current personal Income tax largely targets working and middle-class taxpayers leaving out the higher earners who typically make most of their money from investments and property holdings. Net wealth tax, will, therefore, not only increase government revenue but also make the tax system more progressive and fairer.
Additionally, though Covid-19 has been a thorn to the Zambia economy and the majority people not only in Zambia but around the globe, some industries and/sectors have, however, benefited significantly from the pandemic. ActionAid, therefore, expected the introduction of variable Profit Taxes or an excess profits tax in the 2021 national budget for the most profitable industries during the COVID_19 pandemic period.
Finally, in the wake of Covid-19 most businesses including SMEs have severely impacted, we therefore, expect the 2021 national budget to offer tax relief and/or waiver to the most hit sectors. This will enable businesses time to recover from the impacts of COVID_19 hence triggering economic recovery. Any tax relief, however, must be targeted, cost effective and temporal.