IT looks like it will be a tight budget!
Yes, the 2014 National Budget looks like it will be a stiff one due to the current economic trends including the deficit which is expected to stretch from about 4.3 per cent of the Gross Domestic Product (GDP) to about 8.5 per cent.
From my perusal of current reports by the Ministry of Finance, the International Monetary Fund (IMF) and the World Bank it is obvious that the major job for Finance minister, Alexander Chikwanda (below), as he presents the budget on Friday, will be more of where to get the resources than what to spend it on.
The deficit has been compounded by two opposing factors, the reduction in the revenue collection by the government chief tax collector, the Zambia Revenue Authority (ZRA) and the increase in expenditure.
Government expenditures this year is expected to be above the budget as the result of the payment made on fuel subsidies which were incurred before the removal of the provision in May.
The unprecedented salary increment for civil servants which was effected last month has also added to the fiscal pressure as well as other expenditures.
On the flip side, on average, the ZRA has been failing to meet the collection targets due to various factors which could not be the subject of this column.
Realistically speaking the government will, under the 2014 national budget, need more funds to cure these fiscal ills than it will be ready to give out.
Yes, like the IMF observed, to address the fiscal challenges the government will have to use a combination of stepped-up revenue collection and tight expenditure controls.
This is more so since the government aims at reducing the deficit to about five per cent of GDP, similar to what was originally planned for 2013.
Ensuring that this budget is adhered to will be another important thing for macroeconomic stability and hence the foundation that will support continued strong growth of the Zambian economy.
That said, I feel the 2014 National budget will require stakeholders and other interest groups including civil servants to be realistic and water down their expectations in terms of increased direct benefits.
At the risk of sounding like a pessimist or indeed a prophet of doom, I would say that I am not expecting much in terms tax rebates on both personal income and the corporate one.
Last year, the government increased the pay as you earn (PAYE) exemption threshold from K2,000 to K2,200 per month.
The K200 increment translated into 10 per cent and I cannot foresee the threshold being increased by a bigger figure for next year than that.
In short the government will have to ensure that it sets aside more funds on production than on consumption to help bridge the current deficit.
Coming at the time when the mine houses who the major contributors to the GDP are grumbling about the current mining tax regime, there will be no “free money” in this budget.
They have been complaining that the current mineral royalty is too high saying the situation has been compounded by the high electricity tariffs being charged by the power suppliers.
In terms of expenditure the government is expected to stiffen the various fiscal disciplinary measures to ensure that spending agencies stick to the budget.
Interestingly the stakeholders including the general citizenry will also be looking out to see how the government will hand the issue of the removal of subsidy on fuel.
This is with a view to seeing which sectors will attract the funds which could have otherwise gone towards the offsetting of the subsidies.
Some provision is expected on the resuscitation of the closed parastatals as well as on beefing up the capital levels for government-sponsored banks to support the local business and farming communities.
Having allocated K3.4 billion for road construction throughout the country in this year’s budget the government will ensure that projects are completed.
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