Zambian 2011 National Budget: Mixed Reactions

Zambian Finance and National Planning Minister Situmbeko Musokotwane has announced the country’s 2011 national budget, which has provoked mixed reactions from stakeholders, especially towards the allocation of funds. Bankers Association of Zambia (BAZ) vice-chairperson Mizinga Melu described Dr Musokotwane’s budget as an excellent one. “Listening to Dr. Musokotwane’s budget, and the focus it is highlighting, I think this is an excellent budget, I am extremely pleased with it,” she said. Yet Economics Association of Zambia (EAZ) president Noel Nkhoma says he was disappointed because the government did not take into consideration some of the concerns raised by the citizens like revising the mining windfall tax.

Mr. Nkhoma said the mining taxes needed revising as Zambia’s economy was dependent on the mining sector. “For me it (the budget) would have done well to take into consideration the views of the Zambian citizens, it would have helped to revisit the mining windfall taxes which is what the Zambian people want,” he said. Mr. Nkhoma also said more than K43 billion should have been allocated towards agriculture to facilitate an irrigation dependent type of farming because of vulnerability to rainfall fluctuations.

Renowned businessman Dante Saunders told Radio Phoenix that the budget focus did not excite him because it was a foregone conclusion that it would not be implemented as set by precedence in the past years. “I have heard 46 budgets in my lifetime and understand my age, 46 budgets, I have never seen a single one that has been implemented, so I am not excited not one bit because there has never been a budget that addresses the plight of the poor majority,” Saunders said.

Finance and National Planning Minister of Zambia Situmbeko Musokotwane, when presenting the budget, whose theme is “A People’ s Budget, from a People’s Government”, said although the country’s economy had been growing over the years, the government’s intention was to ensure that Zambians from all corners of the country benefited from the economic growth. The 20 trillion Zambian Kwacha (about 4.2 billion U.S. dollars) budget, which was an increase from the 2010 budget of 16 trillion Kwacha (about 4 billion dollars), has projected that the economy will grow by 6.4 percent while inflation has been projected at 7 percent and international reserves of at least 4 months of import cover.

However, analysts argue that though the country has been recording an average economic growth of 5 percent in the recent years, it was not enough to have an impact on the high poverty levels in the country, saying poverty was still high. “If we say it is a people’s budget, it must be indicated in the figures presented but to me this is just an ordinary budget. It has nothing to do with the people,” Alexander Chileshe, Executive Director of the Economic Association of Zambia (EAZ), said during a budget analysis meeting Saturday. According to him, the Zambian government has, like every year, allocated more funding to the government public services, with the larger chunk going to service domestic and external debt, instead of allocating funds to social services such as health, education and infrastructure development.

Other notable announcements in the budget include the increase in the number of workers who have been exempted from paying Pay As You Earn (PAYE). The Zambian government has exempted all workers earning 1,000, 000 Kwacha (about 200 dollars). In the 2010 budget, the government had exempted workers earning 800, 000 Kwacha (about 160, 000 dollars) from PAYE. A church mother body, the Council of Churches in Zambia (CCZ), however says while the decision by the government to exempt the number of workers from paying tax was good, the increment was not enough. The organization said in a statement released that the government should have considered the high cost of living in the country before arriving at the figure.

But the Bankers Association of Zambia (BAZ), an organization of all commercial banks in the country, believe the move to exempt more workers from paying tax will result in more money in people’s pockets. The organization’s vice-president Mizinga Melu said the move really reflected the budget’s theme of being a “people’s budget.”

The government has also decided to reduce its dependence on donor funds by announcing that the 2011 budget will be financed locally, with 82.7 percent of the resources coming from domestic resources while only 17.3 percent will come from external resources. Zambia has, in the last 10 years, increasingly relied on domestic resources to finance its budget but analysts have expressed fears that the move will result in the government introducing unnecessary taxes that will be a burden on locals.

Among the new taxes include a 10 percent excise duty on plastic bags, an increase of motor license fee by 50 percent, a 15 percent customs duty on cold-rolled coils and a 25 percent duty on deformed bars and galvanized cold-rolled coils.