GOVT TO SPEND CLOSE TO 40 PERCENT OF THE BUDGET ON REPAYING NKONGOLES, WHILE TARGETING 1.8 PERCENT GROWTH IN 2021, AS NG’ANDU UNVEILS 2021 BUDGET

By Agness Changala
The government will spend 38.7 percent of the 2021 budget on repaying loans (nkongoles), meaning only 61.3 percent will be available for domestic use.

To add to that only 68 percent of the K119.6 billion National Budget will be sourced from domestic sources, while the other 32 percent will be sourced from co-operating partners, whose input may be guaranteed or not guaranted at all.

“Mr. Speaker I propose to spend K57.8 billion in General public services, of this amount domestic debt interest will account for K18.3 billion while external debt service will be K27.7 billion. In addition, K598.1 million is for the 2021 General Elections while K1.2 billion has been allocated for the Local Government equalization find,” Dr Ng’andu read.

However, despite the debt repayments accounting for close to 40 percent of the budget, the allocated amount is well short of the $11 Billion (K220 billion) external debt owed to foreign lenders.

And Dr Ng’andu has raised the exempt threshold for Pay-As-You-Earn to K4,000 from K3,300 per month.

He said government was committed to creating a prosperous Zambia and that the 2021 budget has been developed as a step towards restoring economic growth and enhancing the welfare of the people.

Presenting the 2021 budget in Parliament today, whose theme is “Stimulate Economic Recovery and Build Resilience: To safeguard livelihood and protect the vulnerable,” Dr Ng’andu said K68.0 billion which represents 18.5 per cent of GDP. Will come from domestic revenues and grants.

“Mr. Speaker, Government proposes to spend K119.6 billion in 2021 which translates to 32.6 percent of GDP. Of this amount, K68.0 billion, representing 18.5 percent of GDP, will come from domestic revenues and grants. The balance of K51.6 billion will be raised through financing,” Dr Ng’andu said.

And the Minister said to increase disposable income of employees, he had proposed to raise the exempt threshold for Pay As tYou Earn to K4, 000 from K3, 300 per month adding that this will adjust the tax bands accordingly.

“This measure will result in K455.6 million additional income in the pockets of the Zambian workers.

Dr Ng’andu said in order to encourage employment of differently abled persons, he proposed to increase
the amount allowed for deduction by an employer for employing a person with disability to K2,000 per annum from K1,000 per annum.

He added that in order to cushion the suffering of the differently abled persons in society, he was also proposing to increase the tax credit for individuals to K500 per month from the current K250 per month.

He also said to provide relief to the horticulture and
floriculture subsectors, he proposed to increase the number of years for claiming the 10 percent development allowance to 5 years from the
existing 3 years.

“This allowance is applicable to persons growing rose
flowers, tea, coffee, banana plant orcitrus fruit trees or other similar plants or trees,” he said.

He added that to harmonise the presumptive tax structure for the gaming and betting industry, he
proposed to increase the tax rate on betting to 25 percent from 10 percent of gross takings saying the measure will generate an extra K59.3 million.
To support the scaling up of agricultural productivity through mechanisation, he had proposed to zero rate all tractors for Value Added Tax purposes.

He said currently, only tractors up to 90 Horse Power are zero rated.

Dr Ng’andu said to combat the spread of COVID-19, he had proposed to zero rate equipment used for full body sanitisation for a period of one year.

“This measure will take effect from midnight tonight,” he said.

The minister said the Value Added Tax measures would result in a revenue loss of K5.1 million.

The minister said to revamp the horticulture and floriculture subsectors and to promote other non-traditional exports, he was proposing to suspend import duty on biological control agents, remove import duty on greenhouse plastics, reduce import duty to 15 percent from 25 percent on selected bulb plants and seedlings and reduce import duty on secateurs and pruners to 5 percent from the current 15 percent and 25 percent respectively.

He said he will also remove import duty on selected agricultural clippers and remove export duty on crocodile skin.

Dr Ng’andu said to stimulate economic activity in other sectors, he was proposing the removal of import duty on copper ores and concentrates to encourage
local processing, suspension of import duty on importation of refrigerated trucks to support the domestic and export markets.

He said other measures are to reduce import duty to 5
percent from 25 percent on selected trimmings to
promote the local garments and textile
industry; and lower import duty to 15 percent from 30 percent on electric motor vehicles to reduce the use of fossil fuel.

To support local production, build resilience, the minister proposed to increase import duty to 40 percent from 25 percent on agro products such as
beef and beef processed products, pork and pork
processed products, chicken and chicken
processed products as well as fish imported from
outside the SADC and COMESA regions.

He called for thr introduction of excise duty at the rate of K1.50 per litre on reconstituted milk, Harmonize import duty rate on reconstituted milk with other forms of milk at 15 percent, adjust the specific excise duty rate on cigarettes to K302 per mille from K265, introduced a surtax at the rate of 20 percent on
imported un-denatured ethyl alcohol of an alcoholic volume strength of 80 percent or higher.

The minister also talked of introducing excise duty on
plastic flat bags at the rate of 30 percent among other measures.

And Dr Ng’andu said execution of the 2020 Budget has been challenging mainly due to the impact of COVID-19 pandemic.

The minister said revenues and grants amounted to K42.8 billion during the period January to August 2020 which was 7.7 percent below the target of
K46.4 billion.

“The underperformance is on account of subdued economic activity. Revenues and grants are now projected at K65.9 billion by the close of 2020, which is 12.0 percent below the target of K75.0 billion,” he said. “Mr. Speaker, for the period January to August 2020, total expenditure, including amortization,amounted to K72.1 billion and was 27.2 percent below the target of K99.0 billion. This outturn was due to the underperformance on revenues and lower disbursements on foreign financed projects.”

Dr Ng’andu said by the end of year, total expenditure was projected to be K111.9 billion, representing 5.6 percent above the target of K106.0 billion.

He said the higher than programmed expenditure mainly attributed to COVID-19 mitigating measures and agricultural related expenditures.

The minister said due to the fall in revenues and grants and the increase in spending, the fiscal deficit, on a cash basis, was expected to rise to 11.7 percent of GDP by the end of 2020 against the target of 5.5 percent.

On debt position, Dr Ng’andu said the external public debt stock increased to US$11.97 billion as at end-June 2020 from US$11.48 billion at the close of 2019, representing an increase of 4.3 percent.

“This increase is attributed to disbursements on existing loans which are financing various projects in the energy, education, road and health sectors. Tlhe stock of Government guarantees, on a net basis, was US$1.58 billion as at end-June 2020,” Dr Ng’andu said.

He also said the stock of Government securities increased to K114.3 billion as at end August 2020 from K80.2 billion as at end-December 2019, and this includes the COVID-19 Bond. The increase of 42.5 percent was on account of the need to finance key expenditure areas such as Farmer Input Support Programme (FISP).

The minister said the COVID-19 Bond proceeds were used to stimulate economic activity through the dismantling of arrears, payment of Value Added Tax refunds and liquidation of outstanding pension
arrears.

” In addition, National Savings and Credit Bank has been recapitalised to facilitate the provision of financing to small and medium enterprises. The proceeds were also used to finance youth
empowerment programmes, procurement of medical equipment, drugs and medical supplies,” said Dr Ng’andu. – Daily Revelation

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