Now just under one year in office, the Patriotic Front government will tomorrow present its first solely shaped national budget. This long awaited event is what many say will show a glimpse of the PF?s economic direction. President Sata set the tone during the opening of Parliament when he announced some policies and programmes his government intends to implement in the quest to develop the country. FELIX NKINKE and MARTIN KAPENDE look at this historic event and what is likely to take center stage.
Alexander Chikwanda
WHEN the PF came into office in 2011 and Mr Sata assumed the responsibilities of running the affairs of Zambia, expectations among Zambians were high as the new government had promised during campaign trails to put more money in people?s pockets.
After almost 20 years in power, the MMD had lost popularity and succumbed to defeat at the hands of the PF. It is envisaged by many that the MMD had over-stayed in power and somewhat lost direction thus a change was inevitable.
A year down the line after the donchi kubeba euphoria has simmered down, many Zambians are anxious to see the government work and deliver on its promises.
During his state-of-the- nation address to Parliament recently, President Sata outlined various programmes and policies his administration will embark on to develop the country.
He announced the creation of up to one million jobs and bringing about 17,000 hectares of land under irrigation in the next five years.
The President also said the 2013 budget will be the first one to be solely drawn by his administration ?as the current one was initiated by the out-going losing MMD government?and that it will ensure that economic growth is all-inclusive and pro-poor.
The focus is expected to be on strategic areas such as education, health, agriculture, local government and housing and improved governance, and rural development.
Government is expected to review the current tax system in a bid to generate more income for capital intensive projects that also have an ability to create further jobs.
It is the governments hope to also step up efforts to seal all loopholes that allow tax evasion and possible leakages by strengthening the framework for granting fiscal incentives and enhancing audit trails to ensure export volumes are accurately declared.
President Sata?s team led by Finance Minister Alexander Chikwanda is expected to continue widening the tax base by including income earners that have previously not been captured on the tax base list.
These measures are probably just a tip of what the PF administration intends to do going by what the party?s manifesto outlines. However, the 2013 budget will test the administration?s resolve to reduce poverty and create jobs by growing business.
Many interest groups earlier in the year made budget submissions to the finance ministry and majority speak one voice; the budget should be pro-poor, aim at job creation and poverty alleviation, create new industries and a fair business playground and improve infrastructure.
Presently only about 900,000 Zambians capable of working are in formal employment out of four million that must be in gainful employment while government figures show poverty level scales teetering at about 62 to 64 percent while infrastructure remains deeply dilapidated. Expectations are many.
Tax-payers are undoubtedly seeking further tax cuts through an increase to the current exempt threshold of pay as your earn of K2 million and expand the income tax bands.
Fuel, a vital economic driver which Zambia does not produce is expected to be an issue too as Zambians wants to see fuel pump prices drop.
Government will outline its macroeconomic objectives and what benchmarks it will set to be achieved. For instance President Sata has already stated that his government wants the economy to expand by eight percent from the current seven percent while year-end inflation must not jump beyond the current single digit.
Mr Chikwanda will also announce that borrowing must reduce while interest rates must continue declining and Zambia must maintain a stable exchange rate with major convertible currencies such as the US dollar.
Resource allocation must be as equitable as possible if the recent gains are to make any sense to the vulnerable according to commentators.
During budget presentation, attention, particularly of foreign dignitaries, would be drawn towards hearing Government?s proposed total expenditure for 2013, how much will be financed from domestic resources and that to be sourced externally. The current budget stands at K27 trillion and the number is expected to increase tomorrow.
To cover up for revenue losses, introductory and adjustment measures are expected on various taxes such as direct taxes, customs and excise taxes and value added tax while non-tax measures are also expected to be announced.
However, it should be noted that widening the tax base has always been a challenge for governments in the past mostly due to the limited size of the formal sector and difficulties in coming up with mechanisms to capture the informal sector. So, it?s worth seeing how the PF budget would address this issue.
In the agriculture sector calls are for Government to direct expenditure on infrastructure development, policy orientation of the Food Reserve Agency and administration of Farmer Input Support Programme (FISH), improving agriculture incentives for the private sector as well as investing in extension services and improving agriculture diversification.
As professor Oliver Saasa outlined in his expectations of the budget, the FISP budget will most likely be restructured to include other crops, fisheries and livestock.
He adds that money from the Eurobond must go towards infrastructure and rural development but not consumption.
To support agriculture diversification, as highlighted by the President in Parliament, it is expected that more money would go to the FISP to broaden support to include sorghum, groundnuts, rice and cotton. Diversifying the FISP to include other crops would encourage farmers to pursue crop diversification as enshrined in the PF manifesto. Cotton has already been included in FISP this year.
Other calls include the removal of import duties on some agricultural inputs and machinery and removal of value added tax (VAT) on some inputs so that the cost of production reduces to enable farmers be competitive in the region plus possibility of long-term agriculture financing.
Import duty on a number of agricultural equipment and inputs are expected to be removed or reduced to make the sector competitive. Importation of equipment such as that for irrigation pumps are expected to be given special treatment.? It is expected that import duty on irrigation pumps might be zero-rated.
Measures that will enhance private sector growth are also expected. Calls have been made for Government to consider removing customs duty on some imported goods to promote the sector?s development.
These include removal of custom duty on manufacturing equipment; suspend duty on imports of all packaging equipment and zero custom duty for imported solar equipment and accessories in light of continues power outages in the country. The budget could also remove custom duty for imports of all agro-processing equipment and reduce duty on intermediary inputs products from 25 percent to 10 percent to boost growth.
Financial allocations to health and education are expected to rise.
With proposed countrywide health infrastructure development, as highlighted by the President in of constructing 650 health posts, this year, the government has its job well cut out.
The planned construction of four universities is expected to be reflected in Mr Chikwanda?s budget tomorrow.
Youth unemployment is expected to be addressed as over 60 percent of Zambia?s population comprise youths.
Many are calling the budget tomorrow as a litmus test that shall set the tone on how President Sata hopes to turn the economy.
Source: http://www.daily-mail.co.zm/?p=16638
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