copper budget briefcase

FINANCE minister Felix Mutati today walks down the ‘Parliamentary aisle’ armed with a copper briefcase while his ‘divorce certificate’ from the ruling PF cabinet hangs over his head. Mutati is not only presenting Zambia’s 2018 national budget amidst economic uncertainty, but most gravely is an aura of negativity surrounding his continued captainship of the Treasury.

Granted, the PF regime attracts all manner of toadies, suck-ups and flatterers seeking the President’s favor, but never had any ruling party supporter demeaned, degraded and humbled any Cabinet minister without support of the President.

Like economists would say, perception is more vital than the truth.

“…the Minister of Finance is a statutory position and he looks after the overall economy. It’s always best to have as much stability in the economic management of the country, particularly at the crucial stage where you are dealing with donors or financing partners such as the IMF [International Monetary Fund],”

says Zambia Institute of Chartered Accountants president Jason Kazilimani.

Expenditure plans

The government has proposed to spend K65.4 billion in the fiscal year 2018 with a focus on cutting down borrowing while attempting to finance over 80 per cent of the budget through domestic revenues. The planned expenditure for next year is a slight jump from K64.5 billion initially planned for 2017, although preliminary estimates indicate the government spent more than the budgeted figure.

According to the “Green paper” 2018 – 2020 Medium Term Expenditure Framework, Zambia’s focus in the next three fiscal years will be to achieve fiscal consolidation by stifling appetite for borrowing, improving value for money as well reducing spending in non-priority areas.

But how do you explain the current justifications for the purchase of one fire tender at US $1 million when the country is not on fire? This is a country where everyone accepts that it’s normal to construct a kilometre of road for a minimum US $1 million per kilometre. It seems Zambia’s penchant for US $1 million is simply unbelievable. Under the current regime, politics is not only seen as a zero-sum battle for survival; it’s also a cash-cow etched in some agreement to share wealth fostered through corruption. As for the PF, with or without money, expenditure has to go on.

Stalled International Monetary Fund negotiations

A stand-off with the International Monetary Fund and the Ministry of Finance over the terms and future of Zambia’s bailout is clearly in public domain.
Zambia missed out on an estimated US $1.3 billion IMF bailout package last July amidst speculations the IMF board feared the country’s debt is currently unsustainable and on an explosive path as the government had continued to accumulate new debts outside the agreed framework. Zambia’s fresh debts are often contracted secretly. The IMF’s board usually operates on consensus, with its deliberations held behind closed doors, making it very difficult to count the failure points of Zambia.

The incarceration for treason of UPND president Hakainde Hichilema over a traffic offence did not help in marketing Zambia to the IMF board as we appeared more engrossed in petty political squabbles than dealing with real challenges facing the economy.

“While it is too early to conclude that the stalled conclusion on the IMF economic recovery package for Zambia could partially be explained by the political impasse in the country, not excluding the declaration on threatened emergency, the exhibition of tolerance and accommodation of diverse political views, complimented by a strong adherence to the rule of law, should undoubtedly enhance the country’s image,”

said Professor Oliver Saasa.

Existing indications point to Zambia striking an aid package with the IMF next year.

 

Tax relief

Credible evidence shows that Zambian workers are among the most taxed on the continent and provide the highest contributors to the national Treasury averaging 25 per cent of the total tax revenue in the last three years compared to seven per cent contribution by corporate entities in income tax.

Zambian workers’ pay as you earn is as high as 35 per cent of their gross income. While genuine expectations by workers that Mutati will deliver some tax relief may be pure fantasy, reality is that Treasury will seek further means of augmenting revenue collection to fund expansionary expenditure in the road and other infrastructure construction drive dominated by PF party elites and their associates who are often aided by a ghastly sight of public officials using the tender process to line their own pockets. Construction is largely expected to contribute robustly to the gross domestic product.

Macroeconomic stability

Between fiscal year 2018 and 2020, the Ministry of Finance targets to grow the country’s economy by an average of five per cent, maintain single digit inflation in the range of six to eight per cent, increasing international reserves to at least four months of import cover; increasing domestic revenue mobilization to not less than 18 percent and contain fiscal deficit to no more than three percent of gross domestic product while at the same time prioritising dismantling of arrears and curtail further accumulation.

Without doubt, Zambia’s economic crisis in the last three years could be explained in the hostile weather patterns which depressed maize and electricity production, and a fall in copper prices on the international market, the real crisis came through a series of steps whose progression was clear in retrospect, and some of which initially proved popular. Most analysts would be watching with keen interest how Mutati will rein in huge and mostly stop unplanned expenditure which had aided to put him at odds with the ruling party who see infrastructure spending as a trump card for President Lungu’s possible victory in the 2021 presidential and general election.

While the Bank of Zambia has managed to bring inflation under control as well as stabilising the foreign exchange rate which not too long ago spiraled out of control almost rendering kwacha nearly worthless, the monetary policy engineering crafted by Dr Denny Kalyalya and his team at the Central Bank did not stem rapid inflation and helped achieve economic macroeconomic stability in isolation. It has come with it collateral damage. Zambia is today one of the countries in the region with the highest costs of lending. It should not shock anyone that everyday, we are experiencing friends and relatives giving up properties to lenders – be it commercial or otherwise.

Agriculture

Simply put, the PF does not understand the art of farming. Yes, Mutati will today talk irrigation, animal vaccinations; he will probably talk about the dream of exporting goats to Saudi Arabia, various interventions to halt animal diseases, etc, but the party can’t just get its act together in this area. They know agriculture to be maize growing.

Look at the current mess in the maize marketing programme? Look at the circus around the electronic voucher method of distributing farming inputs? The last time I checked, President Lungu had called for the removal of the electronic voucher system from the Farmer Input Support Programme. I can’t remember when he changed his mind, or is it policy? By the way, even Grandview International is among the active players on FISP. How do you they explain the reduction in funding to a sector they claim is priority? Maybe we will use the 42 fire trucks to implement our irrigation programme!

Mining

The local mining sector has in the past three years been hurt by two key challenges – low metal prices and power shortages. Ordinarily, one would have expected a flourishing mining sector after a healthy rainy season that improved power generation, and current rally in international copper prices, but the situation on the ground is gloomy. Mining firms are not hiring new employees while bickering over power tariffs and mining policies still dog the country’s lifeblood. I am not reluctant to say the mining sector is one key area the PF has failed to keep its grip on.

Today, Mutati will announce that he is the “bearer of the message” from President Lungu that members of parliament favourably support the planned revenue and expenditure estimates of the government for next year, but how many will believe he got the message genuinely and with full blessings? How many will believe what Mutati will say today is something to hinge one’s hope on next year?

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2 COMMENTS

  1. Mutati after presenting the Budget in Parliament is now irrelevant to PF.My advise to Mutati is that he should just officially join PF.If he does not do that,i fear he may find himself homeless.His position in MMD is questionable.The legality and validity of the Kabwe gathering they called ‘convention’ is under dispute in court.From a layman’s view Mutati hasn’t got a strong legal footing bearing in mind that he is NOT MMD after being expelled and the courts upheld his expulsion.His other counter-parts were on suspension and later on expelled.The legal MMD mandated body to fix or call for the date for the Party Convention is the immediate out-going NEC
    .But the Mutati/RB group went for that gathering without the blessing of the out-going NEC.So he better just officially join PF.

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