Felix Mutati
Felix Mutati

FINANCE minister Felix Mutati says Zambia’s economy will this year face numerous risks, among them adverse climatic conditions that threaten the the agriculture sector and power supply.

And Mutati says Zambia cannot depend on others for its day to day operations. Meanwhile, Consumer Unity and Trust Society (CUTS) coordinator Chenai Mukumba says while domestic resource mobilisation is necessary, the government needs to ensure that “those who are most vulnerable are not unfairly burdened.”

Speaking when he met various economic stakeholders to discuss the 2017 economic performance and outlook for 2018 at Hotel InterContinental in Lusaka on Friday night, Mutati indicated that economic reforms that the government initiated had began to yield some results.

“One, GDP is solid and growing; we are achieving greater stability in the foreign exchange, inflation is low and stable. Because inflation has continued to be in the range of six per cent…it has enabled the central bank to reduce the statutory reserves and policy rates. [But] we had challenges, in particular regarding the cost of money – the interest rates. We also had challenges in terms of the extension and growth of credit, particularly for the private sector. So, overall, [in] 2017 most of the targets were met,” Mutati explained.

He, however, was quick to mention that “but we are also conscious that many risks lie ahead.”

“Particularly in 2018, one of the major risks that we see is climate change as it will impact on agriculture and also on power supply. So, regardless of how robust we build our economy, we need to take account of this critical element,” Mutati cautioned.

“A second risk that we see is the shifts in the things that impact us significantly at the global level such as oil prices, such as the cost of international money and if the positive… that is accumulating on the prices of copper were to slow down, it is going to affect ZRA in their domestic resource mobilisation. So, strong as you may have an economy, these are the significant risks that we see for 2018 and going forward.”

He added that there was also a latent economic risk if the government developed fatigue in the implementation and momentum of reforms.

“We should continue with the reforms right across government and the economy. Together we can make a change! If as a people we believe that the answer to our challenges and difficulties lie in our hands…. After all, the support that we got from cooperating partners, all aggregated, is not more than 4.7 per cent of our total revenue. It’s a small percentage,” Mutati noted.

And Mutati noted that among the key things that the government would do this year was improving domestic resource mobilisation.

“The only sustainable way to improve pro-poor and development expenditure is via domestic resource mobilisation. You cannot depend on others to pay for your living. You need to depend on your own efforts. So, together with ZRA (Zambia Revenue Authority) in 2018, we are going to focus on three things. We’ll focus on the issue of improving systems – making tax systems more fairer as a mechanism to collect taxes, including the appointment of tax agents. Number two, we’ll focus on customer education to be able to tell our people that unless we are able to collect taxes, don’t point at unfinished buildings and ask a question ‘why is the road not done?’ It will only be done if we walk together,” he said.

“The third pillar for Zambia Revenue Authority will be compliance as a first level…. We believe this trinity for Zambia Revenue Authority should be able to tackle low compliance rates in this country. Our compliance rates are around 60 per cent – among the lowest in the region. [But] we have said we need to elevate this compliance rate to close to 80 per cent and it can be done. We have authorised Zambia Revenue Authority to recruit this year at least a 120 new officers to be able to deal with those that are creative in dealing with tax affairs.”

Mutati further said the government this year would concentrate on public expenditure management – the key to fiscal fitness.

“Dealing with issues, among others, those that have been raised by the Auditor General; you can’t grow an economy if you subtract from yourselves. Part of this will be the implementation of the public finance and management Act which has a framework of penalties to deal with those that are gifted to take what doesn’t belong to them. In addition, we are going to address issues around systems – ensuring that expenditure is properly channelled. We are also dealing with procurement; most of you have condemned government, particularly in the area of procurement. But one of the central defects has been the legal framework that supports the procurement processes. Unless you fix the law, the angels that take away will continue to fly! So, we need to fix the law. Public procurement remains a key pillar,” he explained.

“The third issue will be boosting confidence, whether it’s investor or people confidence…. Restoring hope, getting to the ‘I can do it’ effect. Typically, most of us when we wake up, the first thing we say [is] ‘the problem is….’ We don’t look on the positive side.”

On debt accumulation, the minister noted that the pace needed to be reduced whilst at the same time improving its management.

“Debt is an important source of development, poverty reduction. No dispute! There is also no dispute that all countries borrow for investment and development. All of us are borrowers, including yours truly Zambia PLC! But what is more important is how you borrow, what you borrow and how you employ what you have borrowed, bearing in mind the ability to be able to pay [back]. Since independence this country has never defaulted and it’s not within our DNA to be the generation that creates opportunity for defaults. We’ll make sure that our management capabilities of debts, using appropriate tools, ensure that there is no default. We don’t want to default!” explained Mutati.

Speaking at the same event, Ministry of Finance permanent secretary in charge of economic management and finance Mukuli Chikuba revealed that “consistent with the borrowing that the Republic had been doing, the external debts closed at US$7.9 billion.”

“[Those are] preliminary numbers, we are still carrying out final reconciliations at the end of 2017. That (US$7.9 billion) was up from US$6.9 billion that was recorded at the end of 2016. Now, the issue that is there in the eyes of the public is…. Yes we did sign so many loans [but] where are they being reflected in the numbers? The challenge that we have is the standard of reporting; there are standards of reporting in terms of debts internationally and what we follow is what is called debt outstanding and disbursed,” he explained.

On the government’s engagement with the International Monetary Fund (IMF), Chikuba highlighted that the reform programme had continued “in earnest.”

He, however, explained that as at the end of the last quarter of 2017, the Zambian government and the IMF had not agreed on what borrowing path to be taken.

“Yes, we are focusing on IMF but let us not forget that we started engaging IMF on our own terms, on our own programme. We have made progress [and] we have continued to make progress in this area and government is continuing into 2018. The reform programme has continued and it has continued in earnest; it has been well supported by the political leadership…” said Chikuba.

Meanwhile, Mukumba pointed out that although Zambians might see improvements at the macro-economic level, “you cannot eat economic growth”.

“So, our concern as a civil society is more importantly ‘are we translating this improved economic growth at the macro-economic level to the micro level?’ As a country, more than half a population, 54.4 per cent, is currently in poverty and all of this is exacerbated by the inequality that we have actually seen worsen over the years,” said Mukumba.

1 COMMENT

  1. If u cant rely on others to pay for your living then why do we want the IMF loan and why are we inmdebt for at least $7.9 billion. Wi the new zra agents collect outstanding taxes from znbc, zesco and other parastals.
    You are targeting the minions to pay for sins of the privileged

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