Lusaka, September 23, 2019
As a country we find ourselves in a difficult position financially, whereby after accounting for per-sonal emoluments and debt interest payments, we have less that 10 percent of domestic revenues for all government expenditures. The national budget therefore will need to play a key role in communicating how the government seeks to address the challenges we are currently facing as a country as well as how it will seek to protect the most vulnerable and marginalized in our society during this process.
Against this background, the most important expectation that we have for the national budget is a clear roadmap on how the government expects to deal with the country’s debt situation. At over 70% of the country’s GDP, Zambia’s debt has now reached unsustainable levels and concerted ac-tion needs to be taken to address it. Several stakeholders including civil society organisations, think tanks and private sector actors have already made several recommendations on how Zambia can mitigate its debt situation however what remains is the commitment to and implementation of these strategies. With debt occupying such a significant amount of the country’s national budget we have dwindled resources available to invest in crucial social sectors as well as growth-stimulating areas of the economy. These two areas should be the priority areas of expenditure on the part of the gov-ernment this year.
In previous budgets we have seen a redirecting of spending from social sectors towards debt inter-est payments however this cannot continue. It is imperative that social sector spending be ring-fenced. Low income consumers are the largest beneficiaries of social services as provided by the government and with poverty rates at almost 60% it is imperative that the government maintain pro-grammes targeted towards the poor as well as re-engage cooperating partners in continuing to sup-port social sectors.
Redirecting all other spending towards growth-enhancing areas of the economy is also crucial to helping us begin to move the economy in the right direction. This includes steps such dismantling domestic arrears so as to create a conducive enabling environment for the private sector. The cur-rent economic environment whereby we are seeing factors such as the depreciation of the Kwacha and low investor confidence is creating an untenable environment for businesses in Zambia. To reinvigorate our economy the private sector is the most important actor particularly as we seek to enhance our domestic resource mobilization efforts. Ultimately if businesses are not able to thrive not only will we see a further decrease in economic growth but at the end of the day, it is consum-ers who have to carry the brunt of the effects of a bad business environment through increased prices of goods and services.
To this effect we hope that this national budget will see the reversal of the decision to implement sales tax and maintain VAT. The policy inconsistency and overhauling of a system that has been one of our largest contributors to the country’s resource envelope will have a negative effect not only on the country’s business environment but further to this, it has been shown that consumers would largely be the most negatively affected. This will be due to the cascading effects of sales tax which would see an increase in the price of goods and services.
Another expectation we hope to see in the budget are clear action steps to combat the issue of cli-mate change that the President raised in the State of the Nation Address. Not only have we seen farmers losing their crops, and consumers having to pay high process for food, but the drought that the country experienced in the recent months has also contributed to a loss of our GDP growth of over one percent.
A key programme that would help farmers diversify their crops that could combat this issue is the e-voucher programme that in the previous budget the government indicated it would scale up once implementation issues had been addressed. We were disappointed to see the Ministry of Agriculture further scale back the e-voucher programme this year despite the fact that research has shown that not only is it the preferred FISP distribution method by farmers but it also has the benefits of pro-moting diversification, creating jobs, saving costs for the government and tackling climate change.
We also expect to see clear steps that the government is undertaking to tackle the current energy crisis. In recent weeks we have seen discussions about increases in the cost of both fuel and elec-tricity. The increase in the prices of products that are key inputs into production processes results in the increase of the cost of production which business almost always pass on to consumers. Con-sumers are already feeling squeezed in this economy and this will only render, particularly the poor and vulnerable, worse. While it is understood that consumers may have to bear part of the cost of importing electricity this must be done in an equitable and transparent manner and be accompanied by reforms of key institutions such as ZESCO. Without these accompanying processes, we are strongly opposed to price increments that will see consumers having to carry the cost of inefficien-cies within institutions such as ZESCO.
Consumers are already feeling the brunt of the country’s economic situation and with inflation hovering at above 9 percent the cost of living is increasingly becoming untenable for consumers. The national budget is a key opportunity for the government to communicate how it will seek to address the challenges we are currently facing but also how it will intend to protect the most vulner-able with Zambia as we walk through this process. Key to achieving this would be for the govern-ment to enact key pieces of legislation that will safeguard the integrity of the budget as well as put in place measures to curb unbudgeted and inflated expenditures. These include the Planning and Budgeting Bill and the Public Procurement bill, as well as the Loans and Guarantees Act. These three pieces of legislation have appeared in several budgets in prior years, yet they have not been enacted.
By Chenai Mukumba, Centre Coordinator
For further information please contact: The Centre Coordinator, Consumer Unity and Trust Society (CUTS), House No 32, Plot 407, Kudu Road, Kabulonga, Lusaka. Email: email@example.com or phone: 097 8055 293.
The Consumer Unity and Trust Society (CUTS) International, Lusaka in an NGO that was estab-lished in 2000 to function as a center for action (policy) research, advocacy and networking on is-sues of trade and development, competition policy, investment regulation and consumer protection. The mission of the center is to function as a resource, co-ordination, as well as networking center, to promote South-South cooperation on trade and development by involving state and non-state actors (NSAs). CUTS implements four different strategies in its work: Research, Policy Advocacy, Capacity-building and Networking.