JUNE 30, MONTH OF BIG DECISIONS
By Amb. Emmanuel Mwamba
The month of June is a month of big decisions for the New Dawn Governmnet.
The indirect subsidy on fuel subsisting since last year is expected to come to an end this month-end.
Government has to decide whether to extend the tax waiver on petroleum products and conitune to lose revenue or abandon the initiative.
The IMF Deal also comes up for determination this month-end. The success or failure of this deal has immediate impact on the national budget and its performance.
Here are some details;
- FUEL PRICE- The Statutory Instrument No2 of 2022, ( Customs and Exercise (Suspension)( Fuel)Regulations 2022) that extended the suspension of collection of taxes of petroleum and diesel will expire on June 30th.
Government has to decide whether to extend the tax waiver or lift it.
Government loses upto $41.4million per month by foregoing the collection of these taxes.
Government also spends $26million on meeting price differential of the world market and exchange rate fluctuations.
To mitigate this loss, government introduced monthly price review.
Government also subsidises uniform pump pricing across the country.
- IMF Board to determine Zambia’s case- In December 2021,the IMF team reached a Staff-level Agreement with the Zambian authorities on a new arrangement under the Extended Credit Facility (ECF) for 2022-2025 for $1.4billion.
The staff-level agreement is subject to IMF Management and Executive Board approval and receipt of the necessary financing assurances.
The IMF Executive Board is expected to determine Zambia’s case on 30th June 2022.
CHALLENGES
Reports of large scale corruption or imprudent use of public resources as demonstrated by the $50million fertiliser scandal, the ZESCO wooden poles deal, the opaque process in the fuel sector, all pause challenges to the securing of the IMF Deal.
Government has pledged to shift public spending away from inefficient public investment and poorly targeted subsidies, towards greater investment in health and education and the delivery of more social benefits.
To this effect, Government pledged to reform the FISP Programme by reducing expenditure from 2.8% GDP to 1%. It is yet to be measured what the adverse social-economic this decision will impact the Agriculture sector and rural communities.
Government also pledged to abandon all direct and indirect subsidies.
This was not done especially the petroleum sub-sector Government lost anticipated revenue by this action.
On subsidies on electricity, Government ZESCO has applied to the ERB to revise the charges and fees on new electricity connections.
ZESCO is yet to apply for revision of its tariffs.
CONCLUSION
Zambia had committed itself to an ambitious economic reform program, pledged to engage creditors of its foreign debt, committed to reforming debt management and pledged to promote debt transparency by strengthening and revising the Loans and Guarantees Act.
Government was also expected to reform public procurement rules and regulations central to ensuring value for money and the transparent use of public resources, improve the efficiency of public expenditures, and halt the accumulation of arrears.
It is yet to be seen how much has been achieved as the IMF Deal comes up for approval as for example, subsidies in the fuel sector were maintained during this period despite the pledge to drop them.
