Wednesday, July 17, 2024

The UPND 2022 Budget is Ambitious and Does not Appear to be Reasonable at all

A POLITICAL ECONOMY APPRAISAL OF THE UPND ADMINISTRATION 2022 NATIONAL BUDGET

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By Mbita Chitala PhD

The macroeconomic indicators that the UPND want to attain in their 2022 budget estimates presented by Hon. Situmbeko Musokotwane in his budget speech does not remove Zambia from the continued dependency that our country has been subjected to since 1964.

Projected Growth

The projected GDP growth of 3.5% for 2022 as compared to the PF Administration GDP growth of 3.3% for 2021 fiscal year cannot enable Zambia to grow her economy.
This challenge is exacerbated by Zambia’s population growth which over 3.3% annually. A more reasonable approach is to grow the economy at rates above 8% of GDP per annum as is happening in Rwanda and other more serious countries like China.

This is the only way a poor country such as Zambia can deal with poverty eradication challenges successfully in 10-20 years. Without Plans to advance our country to those figures, our country will forever be poor and budgets like this will forever condemn us to be running in circles like yoyos.

Inflation

The UPND budget estimates target the 2022 inflation to be between 6-8%. This is exactly the ambition of the PF Administration in 2021 but which could not be achieved and was explained by the dawn of the devastating COVID 19 pandemic.

This projection is generally good but it will depend on many factors including the war against the Covid 19 pandemic and the capacity of the UPND administration to manage money supply to smoothly track the GDP as the old Monetarist Milton Friedman asserted that Money Supply times velocity equals price level times transactions.

Public Debt

The Hon. Minister Musokotwane informed the nation that Zambia’s external public debt was US$14.71 billion of which the Central Government share was US$12.99 billion. The country also had US$1.2 billion principal arrears and US$600.4 million interest arrears. Furthermore, the country had K189.7 billion government securities and domestic arrears of K46.9 billion which included the US$477.9 million fuel arrears.

To resolve these challenges, the Hon Minister informed the nation that he was negotiating for an IMF bailout of at least US$1.3 billion to help Zambia service the external debt component and use any savings that may arise from the K51.3 billion he had budgeted as external debt service to channel to other needy social services.

Many observers have advised that turning to the IMF for a rescue program will be injurious to the national security of Zambia as we are currently witnessing the events in Sudan. Sudan also asked for a US$2.5 billion IMF facility which was conditioned on the same old demands of freezing public wages and employment, cutting on subsidies to vulnerable citizens and devaluing the local currency among others. The result of this has been the emergence of instability in Sudan which compares to what happened here in Zambia in 1990.

Our country can avoid this route and this has been said many times by many patriots and scholars. The Hon Minister informed the nation that copper exports during the first half of 2021 were US$ 4.0 billion from the total export earnings of US$5.1 billion. This of course was the under reported figure as Zambians do not have exact statistics of copper and other metal exports. Granted that we take the Hon Minister at face value, the Minister could not tell the nation what the country benefited from this because he was aware that Zambia hardly benefited from these exports. The UPND 2022 budget projects that Zambia will benefit K12.8 billion as mineral royalty. There will hardly be any corporate tax from the MTCs because the Hon Minister has even made it worse for Zambia by making mineral royalty deductible for corporate income tax assessment purposes. The MTCs will continue cheating on Zambia by transfer pricing even as he lamely has made some superficial amendments to the Transfer Pricing Regulations as reported by the Zambia Revenue Authority in their Budget Brief.

Many observers have advised successive Zambian governments that the long term solution to stop this capital flight and plunder of Zambia’s minerals by MNCs is for Zambians to own and operate all the mines as happens in all countries such as Chile , Botswana and so on who have made a difference to their economies. This is the only way to end the crime of transfer pricing and allow Zambia to accumulate investable surpluses for expanded reproduction and development.

It is further advised that as we have done with MOPANI Mines, Zambian controlling interest in all other big mines should be effected. This is the only sure way of ending the plunder of our minerals and Zambia would never need a third party such as the IMF to come and start ruling us as a neo-colony.

Controlling the Fiscal Deficit

The UPND Administration would want to reduce the overall fiscal deficit to 6.7% in their 2022 budget estimates from 10.4% of GDP under the 2021 Budget regime and to limit domestic borrowing to no more than 5.2% of GDP.

This is a tall order as the UPND’s major source of revenue in their budget estimates is borrowing. The Hon. Minister announced that they expected to borrow from foreign sources K39.5 billion program loans, K8.5 billion project loans and receive K1.8 billion grants. Altogether, the UPND Administration plan to borrow K49.7 billion from foreign sources which is 29% share of the 2022 budget estimates or 10.7% of GDP.

Furthermore, the UPND Administration plans to borrow from domestic financing another K24.5 billion which will further crowd out the private sector.

Altogether, the UPND plans to borrow K84.2 billion out of the K173 billion budget estimates.

Many observers would shudder at such a situation as the effect of the borrowing will no doubt deepen not only our dependency on international finance capital but also continue making our economy vulnerable and unstable. The borrowing will no doubt be unsustainable and our country will sink into a deeper debt overhang.

Unfair Tax Increases

The 2022 budget estimates also plan to raise K77.8 billion from taxes (company tax K16.4 billion, PAYE K17.3 billion, Withholding taxes K8.6 billion, VAT K22.9 billion, Customs and Exercise K12.5 billion, Export duties K133 million) as well as Non-Tax revenue of K20.6 billion and other revenues of K343.7 million. The UPND’s desire is to increase domestic revenue to not less than 21% of GDP. This is a good ambition but they are doing it at the expense of the people who have to bear a heavier tax burden. The right approach is to increase on business investment and net exports which has not been adequately addressed in the 2022 Budget estimates.

Altogether, the UPND 2022 budget estimates of K173 billion representing a 44.4% increase from the PF’s 2021 budget estimates of K119.6 billion appear to be overblown. The UPND budget estimate is projected to be 37.1% of GDB. This is ambitious and does not appear to be reasonable at all

Gross International Reserves

The Hon. Minister further informed the nation that they wish to have gross international reserves of not less than three months of import cover in 2022. This compared with the 5.5 months of import cover that the PF had in August, 2021thanks to the US$1.33 billion grant that the country received from the IMF in the wake of the Covid 19 pandemic.

Future prospects

What is shocking is that our successive governments since 1991 appear not to appreciate that for any country to develop and eradicate poverty successfully, it must ensure that in its budgets, it places more emphasis on business investment and expand net export earnings. Even as all our Hon. Ministers of Finance know the most famous equation in macroeconomics: GDP=C+I+G+NX, they lamentably fail to apply this basic formula to our plans. The equation represents the components of Gross Domestic Product of consumption, business investment and net exports which are widely accepted measures of economic activity in a given year.

The 2022 UPND budget estimates has allocated more than 70% of budget expenditure to consumption. This includes the General Public Services Expenditure which will take K86.3 billion i.e. 49.9% of the budget and other expenditure items such as Defence K7.6 billion, Public Order and Safety K3.4 billion, Socio Protection K6.2 billion, Education K18.07 billion, Health K13.9 billion, Housing and community services K2.3 billion and others taking over the big chunk of the budget estimates.

It is advisable that those who are governing us reflect on this and start allocating more resources to business investment and the export sector.

Very little is allocated to the growth areas in this budget. In fact, even the K33.7 billion allocated to the Economic Affairs section, most of the expenditure there too are consumption-oriented. This is true for the FISP that will take K5.3 billion, The Constituency Development Fund (CDF) that will take K3.855 billion instead of the K3.2 billion as wrongly reported in the Budget speech, and so on.

The Empowerment funds for SMEs are allocated a meager K350 million and yet this should be the source of growth of the economy and road infrastructure a paltry K4.9 billion.

Yes, indeed the Hon Minister announced some populist and appeasement programs to please the electorate which are largely good for Zambia such as abolishing school fees, employing more teachers and medical staff, and increasing the quantum of CDF.

These are progressive initiatives and observers will be interested in whether these laudable initiatives will be managed effectively, efficiently, and transparently.

46 COMMENTS

  1. What then is ambitious – you? Thereafter tell us what achievements have been, we already know abt u being a professor for your own stomach. What else?

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  2. I ll answer the questions for u, the same way u are a professor for your own stomach, is the same way CDF will do to our villagers.

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  3. Ba Derrick you failed lamentably during your time in government under the MMD thieving administration. You were very quiet when the PF and their cohorts raped our economy.Zambia now belongs to the millennial.. let HH7 and his able team right the course of this nation without any unsolicited advice from you.

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  4. Says the chap who was ZESCO chairman until Dec last year when it was recording huge losses…this is the same man who was endorsing Lazy Lungu only this year in 4th August he was endorsing a reckless, corrupt regime…I have no time to read this selfish corrupt man’s article.

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  5. This is not different from the recent PF.
    More kaloba and then kaloba.
    But anyways why should we care if that’s the only way Zambians can benefit from their resources?.
    Let tomorrow worry about itself.

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  6. SUDDENLY ALL THESE ECONOMISTS ARE CRAWLING OUT OF THE WOODWORK
    WHERE WERE THEY WHEN PF WAS DESTROYING THIS COUNTRY ??
    SOUR GRAPES OR THEIR POCKET MONEY TAKEN AWAY ??

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  7. SUDDENLY ALL THESE ECONOMISTS ARE CRAWLING OUT OF THE WOODWORK
    WHERE WERE THEY WHEN PF WAS DRAGGING THIS COUNTRY DOWNWARD ??
    SOUR GRAPES OR THEIR POCKET MONEY TAKEN AWAY ??

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  8. Derrick Mbita Chitala’s ambitious budgets during the reign or should I call it ruin, during the MMD Government never helped this country either. For now, Mr. Chitala, sit down please. Give your colleagues time. This is only their first budget.

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  9. Mr. Mbita these upnd chaps are overzealous for nothing. I don’t understand how a well educated person would thank a budget I would refer to as political sentiments.

    A campaign budget.

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  10. Thanks for being objective and honest in your assessment sir. We can tell from the comments above that the upnd diasporans lack any knowledge of such issues. They have failed to tackle the concerns your raise and have instead found it easier to attack you on personal grounds. In other words their small illiterate brains cannot process your views sir. That is why I tell you that most of them are just toilet cleaners there abroad

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  11. Stupid PhD, you cannot grow an economy that of a country such as Zambia by 8%, in just the first year in office. An economy that was contracting for successive years needs more time to be fixed.

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  12. TOILET CLEANERS MAYBE ? DOING AN HONEST DAYS WORK
    NOT LIKE SOME ON THERE GAINING MONEY THROUGH FALSE PRETENSES
    AND UNDECLARING THEIR EARNINGS AND ASSETS THEREBY DENEYING Caesar, WHAT Caesar IS DUE

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  13. Tanzania has become food secure with out going to IMF to borrow money.
    What is the problem with our new government leaders who only think IMF is their problem solver.
    No confidence in what we have.

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  14. chitala is now old and has never contributed anything progressive and has continued to behave like stray and political dog in ancient babylon. he has saved as a key person in various economic position and in all area he only caused losses because he is a professor of his stomach. chiitala was peviously als involved in the drafting several budget which ended up into disasters. so chitala is a fail and shoul let national progressive people do their work to turn round the economy whiich he failed, but to make use of your education which you received through free education 1 advise you to continue working as a lecturer but confuse students, we knows how riotous you were at unza.And this what you are …………. oh its new dawn and zambia forward!

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  15. Tikki.
    You are wrong to talk about what is gone, you have to talk about what you can influence to change to the better.
    UPND have chances of changing to do what is needful, you can un do those streets and bridges and schools.
    Tikki
    talk progressively and not what is behind us.

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  16. You can’t reverse those roads, universities, hospitals, bridges and and many more works by your predecessors.

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  17. Where was this chakolwa “expert” when the PF were ruining all economic pistons of Zambia for 10yrs? Now he comes here with his “know-it-all” attitude just when UPND is making things work properly again?

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  18. This man is just a PF apologist, you and many morons and ‘low life’ people contributed to the collapse and raping of our Economy by the criminal and Gangster Pf. In your socialist article above, you fail to tell Zambians why ZESCO continued to record losses when you were at its helm,with your PHD. You have failed to remind Zambians that your corrupt, theiving and violent Lungu took over from MMD in 2011 an Economy that was growing at 7% per annum GDP and reduced it to -3 (negative 3) per annum. This is a meaningless article, I only read it to see the extent of its uselessness. You are just a praise singer for lazy Lungu.

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  19. Honestly, I did not bother to read. Chitala does not need to write. Why can`t he write a case study of how he turned around ZESCO? But guess what he cannot, because he left ZESCO in a mess. Very lazy guy has depended on tax payers for survival.

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  20. They are now coming out of the woodwork because now reality is coming to bite them that their thieving friends in the PF are no longer so there is no easy money being placed as stooges on Govt company boards…this moron Chitala who has a face like he is sucking on a lemon enjoyed himself whilst the economy collapsed.

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  21. This one and Eric Silwamba SC …they are in the same WhatApp Group; maggots they are them two they have been eating since 1991 they are smart they never get buried with the host like fleas they simply hope on to the next victim.

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  22. “….GDP=C+I+G+NX, they lamentably fail to apply this basic formula to our plans…..”

    One of those who just ponta theories and bla bla bla………

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  23. Let’s face it this budget had already been constructed by PF ready to be presented to parliament as soon as PF had “won” the election and retained the status quo! It shouldn’t have been a surprise that it had to be the incoming Minister of Finance to be appointed first as to review the “PF 2022 Budget” and try to align it with the UPND manifesto especially for critical areas as to have it ready for presentation within the stipulated period that the budget has to be before parliament! It’s not a 100% UPND Budget, however UPND has to own it despite some criticism being laced with bitterness! It is always better to ambitiously think big for one can move mountains if not totally at least they would have been brought to a state easy to climb!

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  24. Why where you not writing these articles meaningless as they are when your lazy Lungu and Pf were bankrupting our Economy, no you couldn’t because you were eating with them.

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  25. So we borrow again. Birrowing is the name of the game. Govts cannot run away from it. Without borrowing we cannot archive anything

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  26. Zambian Citizen – How can a compromised man like Chitala have credibility? Really laughable…you seem to comment Monday – Friday only do you work in GRZ offices? Those days of laziness you were enjoying under Lazy Lungu are gone do some work….

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  27. Did you Prophet Doom chitala look in the mirror as board chairperson of ZESCO when zesco was bleeding till YOU GOT FIRED. Shame.

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  28. It is sad as Zambians we dont have a strong reading culture; Most people who have comments on this article have not read the article but went ahead and made comments based on some preconceived ideas.. Chitala this and that, UPND bra bra..PF bra bra. This article is not about none of these issues; this article is about figures. If we can be decent and rational we can have an intelligent discussion. At the moment …i dont think so

    It appears most of us are keyboard warriors and cyber heros who are not willing to learn or listen to others.

  29. Does it mean upnd bloggers are unable to engage in any meaniful intellectual discussion except insults?
    This is a democracy and not a kingdom. Zambia does not belong to upnd but to ALL zambians. People are free to express their opinions and if one does not agree, you simply put forward your thoughts but not insults and personal attacks.
    Didn’t upnd accuse PF of being intolerant and arrogant? Well, what we are seeing and reading now is total intolerance and arrogance. No one has the monopoly of wisdom and all voices should be heard, no matter your political affiliation. That’s democracy, unless we want Zambia to be something else.

  30. Sadly these are the majority economists zambia has…………

    Full of theories, zero practical implementation foresight…………

    In the real world , not everything acts like the theories they know……….

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  31. Issacher
    You are more mature and wiser than most of these partisan characters especially those from the now ruling party, Who have turned into demons tormenting Zambians and cannot contribute to the sound discussions on this blog .
    It is a pity that Zambia can sink so low into primitivity , our government is so unreasonable in what it is feeding the Zambian people’s minds feeding them with a lie will take us no where , really how can someone make such a budget when he knows that he only has empty coffers ! Do you make a budget from an empty coffers ! and what he can only talk about are the debts he has to settle from empty coffers and which fool can lend you money for free! , it doesn’t make sense ! No it doesn’t make sense ! We are living in world where you should…

  32. Rob Peter to pay Paul…..@33 PanAfricanist I agree…notice how intelligent bloggers like BR Mumba sr, MMD chief bootleggers, Distant Drums,Nine Chale have all disappeared..it’s because of UPND insults

  33. Saulosi – Majority left because they are too ashamed to show their faces after the govt they were supporting was voted out!!

  34. Thanks chitala, for me that’s like the final nail in the coffin.
    But let’s face it, like Chikwanda, Musokotwane is a used and tired guy to make a national budget.
    I like it when you hit the nail on the head by stating that it’s an appeasement budget.
    This is how politics destroy economies.
    What a used personality this Musokotwane.
    We’re watching this space nevertheless.

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  35. Dr. Chitala must be forgiven as he couldn’t comment while he was chair of ZESCO where he oversaw ghost workers, purchase of landcruisers meant for cadres and loans acquired for sharing among the politically come ted etc. We cannot grow at 7 or 8% within the first year of a budget meant to reign in the callous over pricing, stealing and rampant mismanagement. I suggest you keep quiet and let them govern with integrity. What was your issue in Libya again?

  36. @36 I agree with you. We have useless tribalists who miss the whole point of commenting on a blog. Instead of debating issues, they attack the writer especially if the writers does not come from their regions, 1905 kind of thinking. If PF made a mistake, lets debate them on principle. If Upnd made a mistake, lets debate them on principal. But see how cold this tribalist Tarino always debates,senselessly and only knows how to attack other commentators…WHAT A SHAME! I wish we did not have such people like him on any of these foras. See how stupid a post is @34. Dr Chitala you on point on some of the issues because these affect us a country and not just one politacal party

  37. The PanAfricanist is saying Chitala’s article about figures, let’s go that way. Pf took over from MMD in 2011 an Economy that was growing at 7% GDP per annum now it is at negative three (-3% ) not my figures but from GRZ and BOZ. PF wiped out all fundamental macroeconomic Indicators, so let’s start from there. This article is about a ” kandile’ who has lost his source of food.

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