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2012 National Budget Comments

Sunday, 13 November 2011 14:05 | Written by Chibamba Kanyama | PDF | Print | E-mail

By Robert Liebenthal, Vice President, Economic Association of Zambia

  • Is it “business as usual” or change? Enough money in the pockets? Some important and welcome changes (see below). Some will be disappointed that there isn’t more money in their pockets. But, the answer lies in the details and in implementation. Find a way of getting beyond “90 days” but keep the sense of urgency. Need the energy to last 5 years.
  • Macro targets are ok and reassuring – commitment to fiscal soundness – overall deficit 4.3% of GDP, domestic borrowing requirement 1.3%, revenue 19%, but:
    • What if growth less than 7%? Ratios will go up. What is Plan B?
    • International environment volatile – EU yesterday cut 2012 growth forecasts
    • What happened to MTEF and SNDP?
    • Does borrowing stock in 2012 take account of huge 2011 overrun? (18.8%)
    • Is increase in Gov borrowing consistent with inflation target? And what happens if revenue shortfall?
    Zambia needs contingency – rainy day fund to deal with volatility (like Botswana) Depends on discipline – avoid shoot-from-the-hip policy pronouncements
  • Welcome to foreign borrowing and use of sovereign bond. Especially better parliamentary oversight and better appraisal capacity in MoFNP – especially for roads. Likewise, reforms aimed at diversification and productivity, PSD, tourism, agriculture, PFM reforms – Planning and Budgeting bill, PPP Framework, and Statistics (paras 37-50). On all of these, much work has been done. Our plea is to consult with stakeholders and GET ON WITH IT. (not sure about MFEZ, however)
  • Will there be an IMF program?
  • Statement on exchange rate policy ok as far as it goes, but the Manifesto seemed to imply more intervention to tilt towards NTEs, diversification and competitiveness. Some economists believe there is Dutch Disease – i.e. tendency to overvaluation. Needs to be on the agenda.
  • Everyone will welcome revenue measures (except mining companies). Some will wish you had gone further, e.g. lower standard rate of income tax. But balance has to be struck. Could have wished for a more comprehensive statement on mining tax policy, (i.e. principles), but we agree that issues such as windfall tax are best left to experts provided there is a policy framework (e.g. target revenue share). Tourism would have benefited from reduction in visa fees.
  • On social services,
    • Allocations important, but budget execution more so. Address effectiveness of spending. Abolition of user fees welcome, but make sure revenue is replaced.
    • What happens to mobile hospitals?
    • Local government – note the caution, but try to move fast because Zambia needs fiscal decentralization
    • TVET – need to revisit the strategy and shift more to private sector provision to ensure supply meets demand.

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