11 August 2013

Zambia: No Budget Overrun - Chikwanda

FINANCE Minister Alexander Chikwanda has allayed fears of overshooting Budget expenditure this year as portrayed by critics, saying that expenditure has continued to be within sustainable levels and there is no need to panic.

Citing by-elections as a major source of concern by some stakeholders who say these can trigger a Budget overrun, Mr Chikwanda re-assured that by-elections were budgeted for under the contingency fund and were not a worry.

The minister, however, said that the Patriotic Front (PF) administration did not support the trend of by-elections as resources could be channelled to other important national ventures such as improving infrastructure.

"There hasn't been any single year without having a deficit and we have managed and the ability to manage is there," Mr Chikwanda said. Mr Chikwanda said the delay to remove subsidies on fuel and financial support to the Food Reserve Agency (FRA) for its operations had caused slight Budget deficits as well as the new salaries for public service workers but that this should not be cause for anxiety as this was a manageable development.

Mr Chikwanda said it was the Government's intention to, by all means, avoid damaging the national Budget profile and avoid unnecessary borrowing, especially from international financial institutions such as the International Monetary Fund (IMF) and the World Bank as well as domestic borrowing.

He said during a media briefing in Lusaka yesterday that Zambia's economy was intact and was performing well despite external economic turbulences, especially in Western Europe, which was a major trade consumer and influenced global economic trends.

Mr Chikwanda said growth prospects globally were not showing positive signs in the medium term and that with such an economic environment, Zambia, being a small economy, was performing well.

The other factor cited was the performance of international prices for copper on the international market.

He said the inflation rate and growth targets were expected to be registered around six and seven per cent at the end of the year and that this would be a positive achievement.

Mr Chikwanda, who was flanked by Secretary to the Treasury Fredson Yamba and Bank of Zambia Governor Michael Gondwe said an IMF team was recently in the country for talks on economic affairs and the talks had been fruitful and that a Medium Term Expenditure Framework (MTEF) had since been submitted to Cabinet for the 2014 national Budget for approval, and this would further be discussed with the IMF team when talks resumed.

He said the 2014 Budget would target superior growth for the agricultural sector as it was the lifeline of economic survival for the country, especially with growing demand in the region where food deficits were of growing concern.

He said broadening the tax base to include the informal sector would be a costly venture as this would gobble up millions, while collecting less revenue. Mr Chikwanda added that the newly-introduced Statutory Instrument number 55 would yield intended results in terms of ensuring that foreign-owned companies, especially in the mining sector did not externalise all the earnings without adhering to tax obligations.

He said the BoZ and the Zambia Revenue Authority were closely monitoring the trends in the mining sector as regards to tax obligations and ensure they were met.

Mr Chikwanda said donor dependence towards Budget support had dwindled to two per cent from around 70 per cent and that indicated the confidence of managing national affairs without wholly depending on external financing.

"We are managing to reduce donor dependence but bond markets should be the other way out for Zambia, as we did when we raised the US$750 million Euro bond and such resources should be channelled to capital projects such as roads and power generation as we are doing," he said.

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