By Chimwemwe Mwanza
Dr Situmbeko Musokotwane’s initial but short stint as Finance Minister during MMD’s reign thrust him into spotlight as a fiscal hawk. Rightly so, he reigned in on excessive government spending while managing to place the economy on a firm growth trajectory.
In fact, it was Musokotwane working together with Felix Mutati as Commerce and Industry Minister in the then economic cluster that presided over a consistent 6% economic growth streak in the country’s Gross Domestic Product (GDP) – last experienced during MMD’s latter years in power. While his predecessor Ng’andu Magande is credited for laying the fundamentals for economic growth, it is Musokotwane that picked up the baton to successfully navigate Zambia’s path to debt consolidation.
Slightly a decade later and after the MMD was ousted from power, Musokotwane was back in parliament last week Friday to continue from where he left – albeit to present a budget for a different government. During his previous reign, economic fundamentals were strong. The mining sector was experiencing a stellar growth run largely helped by a commodities boom.
Last week Friday – on his second home coming, Musokotwane was staring down a radically changed economic environment. The country’s huge foreign reserves which he bequeathed to his successor in the PF government, Alexander Chikwanda have all but been wiped out leaving him with little margin for error. The mining industry is limping and the intermittent power cuts that lasted through to August 2020, decimated several small to medium size businesses.
Faced with a shrinking tax base, rising inflation and an insurmountable mountain of debt servicing obligations, a fiscally prudent budget would have been a natural default option for Musokotwane – and more so given the UPND’s electoral commitment to reign in on excessive spending. Instead, he opted for a populist budget – one that will see Zambia’s debt position shoot through the stratosphere.
Let’s put this into context, Zambia’s external debt currently stands at K249bn against a projected K170bn earmarked for spend in the UPND’s maiden budget. Off significance, tax collection agency, the Zambia Revenue Authority (ZRA) is projected to contribute roughly K97bn to the fiscus with the balance expected to come from foreign financing agencies including the International Monetary Fund (IMF). This is a huge statement of intent. By implication, Zambia is going to continue a on a borrowing trajectory.
Even more worrying is the fact that government has allocated nearly 68% of the budget estimate to expenditure consumption – a tacit indication that the state will soon be raising its begging bowl to its donors asking them to fund its pro-consumption budget. While encouraging that 44 000 new jobs spread across the broad spectrum of the economy will be created, it’s worrying that this will be achieved by bloating and an already overstretched wage bill – a classic example of the more things change, the more they stay the same.
For example, how does one reconcile the fact that government intends to spend K170 bn in a single fiscal year yet the return on spend is an envisaged 3.4% growth to its GDP? Here is a challenge though, government can’t keep borrowing to fund consumption – and this is something that President Hakainde Hichilema kept harping on while the UPND was in opposition. Did it even make sence to allocate the bulk of this budget estimate to non-productive sectors of the economy?
A case in point, why should defence be allocated K7.6bn? While this may seem like an overly simplistic question, Zambia is not a country at war? Government can’t spend its way out of an economic morass through recklessness. Even more alarming is the fact that we have been through this path before which largely explains the US$14.7 bn debt that the former government has saddled the treasury with. Accepting that the new government is in a hurry to implement some of its election promises including the controversial promise ‘to adopt free education’, this is not reason enough to discard fiscal prudence.
Most important though, the level of transparency and detail in the information provided in the budget is a marked departure from the past – a breath of fresh air which perhaps explains why critics may have found it easy to poke holes to this presentation.
It’s perhaps consoling that a budget is just a statement of intent, the real work is in the implementation. We eagerly await outcomes of the new government’s maiden budget.
About the author: He is an avid reader of political history and philosophy. The only thing he supports is Kabwe Warriors and Liverpool. For feedback, contact: [email protected]