Briefing journalists at State House today, the Head of State said this will be achieved through implementation of austerity measures.
“Government is committed to ensuring that debt is contained within sustainable levels through implementation of austerity measures. Inflation was contained within the target range of 6-8 percent in the first five months of 2019 supported by appropriate monetary policy interventions. In the recent past, inflationary pressure increased mainly due to low agricultural output. Therefore, inflation increased to an average of 9.6 percent; thereby breaching the target range,” President Lungu said.
“The exchange rate of kwacha against major trading currencies has been relatively stable, averaging about k12.6 per united states dollars. Cost of borrowing domestically, however, has continued to be high.”
He said his government had implemented a number of policy measures this year to maintain debt within sustainable levels, protect the vulnerable, and reduce the cost of running government.
“These include: 1. Public financial management: my government operationalised the public finance management act of 2018. This is providing an institutional and regulatory framework for financial management, strengthening accountability, oversight and control of public funds for effective service delivery. 2. Revenue enhancing measures: the roll out of the treasury single account was completed and digitising of government processes continued in 2019. This will improve revenue collection and enhance service delivery,” President Lungu said.
“3. Expenditure management: expenditure reducing measures have continued to be implemented. These include; limiting financing to projects that are at least 80 percent complete; implementation of cost cutting measures relating to travel of senior officials; protecting the vulnerable through ringfencing the resources to social sectors; and the cleaning up of the public service wage bill.
4. Energy reforms: progress has been made on sector wide energy reforms, including electricity and petroleum. Government’s intention is to enable 100 percent private sector importation of fuel and get tariffs for electricity to cost reflective levels.”
On pension reforms, he said the government was in the process of restructuring the pensions system.
“5. Pension reforms: government is cognisant that the pension systems in the current form are not sustainable, contributing to accumulating of arrears and affecting the livelihood of pensioners. Efforts are underway to restructure the social protection system in order to expand the scope of benefits under the national scheme and ensure sustainability of the pension system. Cabinet will soon be reviewing proposed reforms for approval.
6. Debt management: the medium-term debt strategy has been developed to inform the path for debt sustainability,” President Lungu said.
And President Lungu said the government is convinced that Zambia is able to generate adequate resources internally to meet the country’s ambitious development agenda.
“However, it is regrettable to note that this has been compromised by low tax compliance level and leakages resulting from collusion between taxpayers and some of our officers. This compromises tax revenue collection and those found engaging in such illegal activities will be dealt with severely,” President Lungu said.
On taxes, the head of state said it is clear from numerous concerns raised that government needed to reverse the intention to replace value added tax (VAT) with sales tax.
“In view of this development, I expect the minister of finance through the commissioner-general of the zambia revenue authority to ensure all compliance and administrative challenges surrounding vat are dealt with without fail.
Further, I expect the Zambia Revenue Authority to strengthen tax compliance and ensure integrity and professionalism among its staff.
“In the same vein, let me implore the Minister of Finance to ensure skewed business activities in clearing and freight forwarding towards a few customs clearing agents is addressed. This anomaly where over 80 percent of the customs clearance is done by a few clearing companies while over 800 small clearing companies are fighting for a paltry 20 percent should be corrected,” President Lungu said.
On construction, he said since the enactment of the national construction council Act of 2003, great strides had been made in ensuring that local contractors are empowered through the full implementation of the 20 percent subcontract policy.
“It has been observed that there is no problem with contracts signed between government and foreign contractors yet there is a problem with contracts signed between foreign contractors and subcontractors in respect to rates applied, which are much lower for subcontractors. More importantly, scope of works for local contractors are only on drainages and road markings. This has resulted in very limited skills transfer. Added to this, construction materials are procured at very high cost from the same foreign contractors,” President Lungu said.
“The road development agency is, therefore, directed to carry out a review of all contracts signed between foreign contractors and local contractors and ensure strict compliance to this policy intended to create capacity building and empower local contractors. I expect a detailed report within 14 days.”
On jobs, he said the government is convinced that meaningful jobs can only be created through industrialisation.
“Under the national industrial policy, government aims to promote an export-oriented industrialisation. So far, progress has been recorded in the export of products such as cement, honey and detergents in line with the national local content strategy. In addition, locally owned small enterprises in fields such as carpentry and foundry are being supported through the establishment of industrial yards in solwezi, ndola, kasama, mongu and chipata districts which are expected to be completed this year, while those in kitwe, lusaka and mansa, will be completed in 2020,” President Lungu said.
“Once completed, these yards will result in increased access to processing facilities and the creation of more than 4,000 direct jobs.
I therefore, direct the minister of commerce, trade and industry to ensure the completion dates for the industrial yards are not missed for our people to have access to these facilities.”