2018 budget must address fiscal discipline and debt – HH

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UPND leader Hakainde Hichilema expects Finance Minister Margaret Mwanakatwe to address the country’s ballooning debt as she presents the 2019 national budget on Friday.

Outlining his budget expectations, the opposition leader demands that the Minister announces the mechanism for contracting and tracking of debt from China.

Hichilema also demands that the 2019 budget speech must make a clear, time-bound policy statement on the future of the country’s engagement with the IMF.

Below is his full statement

As the Minister of Finance moves to present the 2019 budget, we expect that the PF will address pertinent economic issues that are affecting the country. The PF Government’s poor economic management has been the major cause of the economic stress the country is facing. The PF Government preaches economic prudence but practices the opposite. They are far from managing the economy prudently. And here is why.

Medium Term Expenditure Framework (MTEF)

In September, 2017, the PF produced the MTEF 2018-2020 with the indicative budget for 2018 of K65.4 billion as part of fiscal consolidation. At the end of the same month, the national budget was presented with an estimate of K71.7 bn. Where did the fiscal consolidation go? Fiscal consolidation simply means that Government will not borrow heavily to finance the consumption.

In a very similar way, the MTEF 2018-2020 shows that the 2019 budget should be around K69.4 billion, but the MTEF 2019-2021 now gives the 2019 budget to be around K84.6 billion. Fiscal consolidation is a myth and MTEF-based budget predictability and credibility are but a fleeting illusion.

If you get into the breakdown of the budget allocations between MTEF 2018-2020 and MTEF 2019-2021, the situation is even worse in terms of misalignments. e.g., General Public Services has increased from 31.9% of budget in the MTEF 2018-2020 to 34.5% in the MTEF 2019-2021 while Economic Affairs (a key function of building productive capacity in the economy) has dropped from 25.5% of budget in the MTEF 2018-2020 to 22.1% in the MTEF 2019-2021. Similarly Education has fallen from 17.2% of budget in the MTEF 2018-2020 to 16.2% in the MTEF 2019-2021. This is simply poor decision making! While they are significantly increasing the nominal size of the budget, they are at the same time allocating smaller shares to investments in productive sectors (agriculture, tourism, mining etc) and social sectors (health, education, water and sanitation). Where will the growth and taxes to reduce the debt come from with this type of budgeting? There is no point in even publishing such inconsistent MTEFs, it’s a waste of time.

Zambia Plus

The implementation of Zambia Plus is set to be completed at the end of 2019 (the last year of Zambia Plus), but the Minister cannot even provide headline achievements (let alone a comprehensive report) on the implementation of Zambia Plus in 2017 and half-year 2018. And yet here we go again with a 2019 budget making the same promise about fiscal consolidation, fiscal discipline, debt management and all that noise. The PF is useless at medium term policy and planning, this is the reason they are sinking the country with debt.

Legislative Reform

Since the 2016 Budget Address, the Ministry of Finance has been promising to finalize and submit mine to parliament key legislation: Budgeting and Planning Bill; Public Procurement Act; Loans and Guarantees Act. To date these have not been tabled before the Parliament but legislation that supports their spending appetite are rushed through (e.g., 30 Ngwee on Internet calls, Borehole levy, National Health Insurance, Skills Development Levy, etc.) In fact, did you know that the collections on Skills Development Levy started without an operational mechanism so that when funds were collected they were misappropriated by the Ministry of Education who bought vehicles and paid out allowances? This information is in the 2016 Auditor General’s report which was presented to Parliament in November last year. This is but a tip of the iceberg as far as reckless expenditure during the PF is concerned.

IMF

We demand that the 2019 budget speech must make a clear, time-bound policy statement on the future of engagement with the IMF. If we have failed to auto-correct and are so off-track that the IMF won’t even talk to us anymore, let’s stop lying to the Zambian people. Let PF come clean in the Budget that IMF is off the cards! In addition the PF must give us a clear roadmap on how they will either address the fiscal concerns raised by IMF or let us know that they have failed to manage as we prepare for a roller coaster ride towards the unenviable Highly Indebted Poor Country (HIPC) status again.

Debt

The Minister must issue a clear budgetary policy statement on why her ministry failed to deliver detailed quarterly debt status reports that indicate the broad structure of debt (how much is concessional and how much is commercial, by creditor type, bilateral, country and multilateral (including International Financial Institutions); what are the interest terms and the conditions (including collateralization of assets), by creditor type. This is something we must know so that when arbitrary taxes and levies are introduced, we are in a better position to anticipate them.

China Debt

We demand that the Minister announces the mechanism for contracting and tracking of debt from China; China and Zambia should demonstrate and put on record disciplines that ensure to stem Zambia’s accrual of debt that we cannot pay back except through asset takeovers and natural resource “robbery.” If we think the Chinese debt is a joke read about what happened in Sri Lanka.

Let’s Calculate

We are called calculator boys; well we need to calculate to know where we are going and how we can get out of debt. The problem with PF is they do not calculate. In general this PF government must just cut on unnecessary expenditure and increase expenditure on the productive sector. What do we mean, here is an example, the Government is allocating expenditure for international travel (consumption). Let us say the delegation is 10 people, travelling to the USA, their tickets will cost US$17,000 or K170,000 and their subsistence will be US$15,000 or K150,000 (calculated at $300 per day for 5 days for 10 people). This gives us a total of US$32,000 or K320,000. This is just travel. If the Government is serious and they instead send only 5 people to this conference and invest the balance K160,000, with three women using the women empowerment fund, and those women start growing tomato. This money could easily finance 3 hectares of tomato with an estimated revenue of K1.2 million kwacha from where the Government would get K36,000 in revenue taxes and a possible K192,000 on VAT. This investment would give Government K228,000 in revenue, add the K150,000 advanced to the women as a revolving fund, that is K378,000 and they could refinance double the number of women. This is not theory, this what this Government would do if they reduced expenditure on travelling for conferences and increase investment in agriculture. And then someone calls us CALCULATOR boys!

As UPND, when in power, we will address this circus which is literally sending the economy into a downward spiral; a spiral stemming from poor economic management as we have demonstrated in the paragraph above.

*Hakainde Hichilema*
*UPND President*

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