Minister of Finance Dr Bwalya Ng’andu last Friday unveiled the much-anticipated 2020 national budget for Zambia amounting to K106 billion (32 per cent of the country’s Gross Domestic Product). From this expenditure, K72 billion will be from government revenue while K34 billion will come from domestic and external sources.
This budget was much-anticipated because first, Dr Ng’andu was recently appointed to the most challenging government post after the dismissal of Margaret Mwanakatwe, and second, because he is superintending an economy that has seen some battering over the years, leading to the depreciation of the kwacha, dwindling foreign exchange reserves, rising inflation as a result of skyrocketing food prices, with worse expected to come ahead.
Last Friday, all eyes and ears were on Dr Ng’andu – Zambians in general, economists, engineers, the mines, workers as well as the international community had focused their attention on the budget presentation to see how the minister would swing things around to offer hope to the Zambians. And yes, he did not disappoint. For instance, among the many key points to look at and commend the minister for are:
Let us begin with the minister’s decision not to go ahead with the sales tax proposed in this year’s budget by his predecessor. In all honesty, Zambia was not ready for this sales tax as industry opposed it and gave a host of reasons for their stance. Dr Ng’andu agreed with them and actually revealed that the Ministry of Commerce, Trade and Industry was equally opposed to the sales tax because its negative implications would have caused more harm than good on the already struggling economy. During a post-budget discussion on Friday night, Dr Ng’andu was honest enough to state that he had to weigh the options before taking on sales tax and for him, he says the politician in him could not risk jobs just a year before the general elections. He has, however, promised to work on efficiency in the administration of Value Added Tax, a move that has been welcomed by the Zambia Chamber of Mines, the opposition and other stakeholders who widely opposed the proposed sales tax.
Taxes on LPGs and Gas Stoves
Realising the telling effect climate change has had on the country, leading to reduced power generation by Zesco, the Minister of Finance decided to remove duty on liquefied petroleum gases (LPGs) for cooking and gas stoves to enable citizens have easy access to these products as the country battles with extended hours of power load shedding. This move is commendable as it will, without doubt, help minimize the usage of charcoal and ultimately reduce the cutting down of trees in our forests. With these climate change effects having a toll on Zambia, the country cannot afford to ignore the importance of preserving trees and ensuring the entire environment is protected.
In the 2020 national budget, the minister has made an allocation of K636 million towards the sinking fund, money that is meant to assist in payment of the $750 Eurobond which is due in 2022. However, K636 million (about $47 million) is far below what is needed to meet the first repayment of the Eurobond. We require a minimum of $250 million every year for us to meet the first repayment of $750 million by 2022. But again, we are confident the able minister, Dr Ng’andu, has got his act together and will definitely work out plans to ensure the country doesn’t miss that deadline. He seems to be in charge and knows what he is doing, so we can safely say we are safe!
Key targets in the 2020 National Budget
– Annual GDP growth rate of at least 3%.
– Achieve and maintain inflation within target range of 6-8%.
– Raise international reserves to at least 2.5 months of import cover.
– Reduce fiscal deficit to 5.5% of GDP from 6.5% in 2019.
– Increase domestic revenue to not less than 22% of GDP.
– Reduce domestic borrowing to 1.1% of GDP from 1.4% of GPD in 2019.
– Dismantle domestic arrears.
– Government proposed expenditure of ZMW 106. 01 billion in 2020 anchored on enhanced domestic revenue collection aimed at increasing
– Government resources to undertake essential public services and development programmes as outlined in the Seventh National Development Plan.
– Government proposed the following revenue measures to raise ZMW 106.01 billion:
income tax – ZMW 25.61 billion; VAT – ZMW 18.94 billion; customs and excise – ZMW 9.21 billion; non-tax revenue – ZMW 17.71 billion; other revenues – ZMW 449.22 million; domestic financing – ZMW 3.46 billion; and foreign financing and grants – ZMW 30.62 billion.
– The composition of the sources of the revenue measures are 67.9% from domestic revenue, 29.2% financing from domestic and foreign sources, and 2.9% from cooperating partners.
Truthfully and generally speaking, this is a fair budget considering the circumstances under which it has been formulated – the country is walking a tight rope economically! What remains is to see how Dr Ng’andu will juggle the Treasury and ensure money goes where it is desperately needed to keep the economy afloat.