[The Curious Case of Zambia, its Budget and Challenges]
Zambia’s financing model of its life needs to change. This change must ever be inspired by its pursuit of national self-reliance.
There is no two ways about it, Zambia just must grow its resource envelope. And the case for fiscal discipline has never been greater.
And, at a glance, the recent purchase of fire tenders does not pass the cost-benefit test which must always precede such an undertaking, and every government project.
The budget presented by Minister of Finance Felix MUTATI is a curious one.
What is clear about it, and which forms the basis of its praise, is his desire to raise government revenue in the midst of the myriad of expenditure demands that he and the country is faced with.
Felix MUTATI cannot spend without money regardless of how much pressure is exerted on him by his supervisor, President LUNGU.
Felix MUTATI is in a bind.
He has less money than he is expected/required to spend.
And what knots his abdomen is that some of the money, 30% of his budget, is NOT in his hands.
To address this predicament of his he contrived this budget, which for its dire austerity nature, is a dangerous one.
Felix MUTATI has started to over-fish.
The pool from which he is expected to raise the requisite revenue is way too small.
He is now in danger of killing the same people he is employed to keep alive.
Here is why:
…the cost of fuel is likely to rise following the removal of VAT refunds
…the cost of production which is already high, comparatively higher than some SADC states, will rise further, worsening Zambia’s competitiveness
…in turn, the price of essential commodities, especially the non-seasonal ones, will also rise
…and remember that the cost of money in Zambia is already high
…further, the increase in PAYE reduces the purchasing power of the affected citizens in the midst of a depreciating currency and fluctuating inflation
…the cost of air-time and Internet will increase further
…the price of spare parts will rise […parts’ shops will see a decline in business and the number of not-roadworthy vehicles and dangerous machines will increase]
…and you and me know that the high price of electricity is already causing small solace meetings in the compounds
In a nutshell, the Zambian will get poorer.
You see, there are limits to taxation.
Taxation only makes sense when you tax people that are doing well. And Zambians, according to Pressident Lungu himself, are not doing well […over 60% live in abject poverty].
When you tax citizens beyond a certain limit, beyond what is technically called their carrying capacity, the burden you place on them will break their backs.
But as is usual, before the backs of citizens break, anywhere in the world, they tend to make noise and become unruly.
It follows then that Felix MUTATI should have an antidote ready for the social unrest that might ensue from his passion and desire to right Zambia’s economic boat.
What complicates his work further is the current behaviour of donors, the so-called Cooperating Partners, who are now not cooperating at all.
They have began to wean themselves off supporting Zambia.
To put it bluntly, they have began to withhold their aid, which aid includes the vital budget support that we need.
Donors can be evil.
Aid can fool.
But for now let us leave it at that.
Aid refocusing is what donors, for power and governance reasons, do not want and perennially resist, but that is what its recipients like Zambia must insist upon.
Aid must not be consumed.
It must be invested.
A country that cannot fully finance its budget cannot be said to be sovereign.
This lesson has taken way too long for Zambia to learn.
What is sad and even somewhat scandalous, and is a veritable matter of national security, is that a significant fraction of our social services are funded by foreigners.
Take the social cash transfer and ARVs for example […note that nearly 1 million Zambians are on ARVs].
These safety nets for citizens are consumptive and must never be funded by foreigners.
What is even worse is that there has been unrelenting donor pressure to increase the consumption base of these services which has the resultant effect of having a large proportion of citizens being dependent.
Anf then suddenly the same donor comes and pulls the financing rug under our feet, claiming we are now a lower middle income country, and can manage by ourselves.
Careful management of the withdrawal of their support is required, or else their conduct will undermine the integrity of the State.
It borders on treason.
Zambia still owes the world a lot of money, and these loans have to be paid.
With a depreciated currency, an economy that remains small and is import-dependent, the challenge of servicing these loans is even greater. And now they are due.
Zambia, like a certain poor Reverend I lent money to, now runs the risk of defaulting and incurring penalties, for the wrath of the money-lender is always in black and white.
Dr Caleb FUNDANGA is right.
Zambia cannot survive without borrowing […only 69% of our budget is serviced from domestic sources].
Zambia must continue to borrow, and with the marginal improvement in its credit-worthiness, we must borrow less expensive money.
China remains an easy cushion.
And when we borrow we must borrow only to generate profit out of the borrowed money […through inspired investment in agriculture, energy, human resource exports, arts, tourism and mining].
Clearly, as we pursue fiscal discipline, Felix MUTATI will have to avoid buying motor vehicles at USD 1 million each to put out fires that often die by themselves, and whose total damage is less than the cost of one such car.
For now, there is need for citizens to brace themselves.
Tough times are coming.
Yes, it is not uncommon, when a pond is small and the hunger is extreme, to over-fish.
In the end, one ends up with no fish, an empty pond and still dying of hunger.
Khale maso folo.
For a resource-limited country like ours, surely its income-generating and expenditure behaviour is a source of concern for the discerning, and many black people the world over.
We must pray.