PeP Expectations From Today’s National Budget

PeP EXPECTATIONS FROM TODAY’S NATIONAL BUDGET

By Sean Tembo – PeP President

1. A national budget, just like any other budget, has two sides; the revenue side and the expenditure side. The revenue side is primarily made up of all sources of revenue to the Government including tax revenue, non-tax revenue (such as toll fees, levies etcetera) debt (external and domestic) and grants. The revenue side of the budget is also known as the “Resource Envelope”. The expenditure side of the budget is dependent on the revenue side (theoretically speaking). Depending on how much a Government expects to raise in the fiscal year in question, it then allocates to different expenditure needs. There are two basic types of Government expenditure; that is recurrent expenditure and developmental expenditure. Recurrent expenditure is incurred in order to meet the day to day living expenses of Government (yes, even a Govt has to live, just like you and l), which include salaries, operating expenses such as stationary, medicines in hospitals etcetera. On the other hand, developmental expenditure is expenditure that is incurred either for infrastructure or for non-infrastructure projects that span over more than one fiscal year.
3. With the above said, our expectations of the 2022 National Budget that will be presented later today by the UPND Administration, are many and varied. To start with, this is the first budget the UPND Administration is presenting, since ascending to power in a landslide victory on 12th August 2021. After 23 years in the opposition, in which they incessantly pointed fingers at what is wrong with the national budgets of the FTJ administration, LPM administration, RB administration, MCS administration and ECL administration. Indeed, after pointing fingers at the national budgets of 5 different administrations, it is now time for the UPND administration to show us what their idea of a national budget is, and how different it is from the national budgets of the five previous administrations which they condemned.
5. As Patriots for Economic Progress (PeP) we expect the UPND administration to address certain basic specific issues in the national budget for the 2022 fiscal year. On the revenue side, we expect the budget to be funded at least 95% from domestic resources (tax and non-tax revenue). In order to achieve this, the UPND administration does not need to increase any rates; they just need to seal the revenue leakages that are there in tax and non-tax revenue. World Bank estimates are that more than 70% of tax revenue is not collected by the treasury due to corruption and tax evasion, and more than 67% of non-tax revenue that is collected by Government does not reach the treasury but disappears somewhere between the point of collection and the treasury. So if the UPND administration can seal even 80% of these leakages, the country’s domestic resource base can be more than doubled without any increments in the rates. We remain to see if the UPND administration will pursue this avenue. But here is the catch; if the UPND administration doesn’t pursue this avenue then we can deduce that instead of sealing the revenue leakages, the UPND administration has installed themselves as the new beneficiaries of the revenue leakages so that the revenue can be leaking into their pockets.
7. Our second key expectation from the 2022 national budget in terms of the revenue side is that Government will cut down on domestic borrowing (Govt bonds and Treasury Bills) which currently stands at more than K130 billion Kwacha, because this crowds out the private sector and is the primary cause of our very high lending rates which average 34% per annum against a regional average of 8%. If the UPND administration can exponentially half the domestic borrowing over the next 3 fiscal years, our average lending rates can easily become single digit because financial institutions will be stuck with excess liquidity. Lower lending rates will be a key catalyst for economic growth and empowerment of Zambians in our economy. So far, our citizens have largely remained spectators in the economy because of lack of access to reasonably priced finance. We just sit and watch as foreigners come with their money and establish companies and reap supernormal profits. All because Government’s insatiable appetite for domestic borrowing thereby driving lending rates to the sky and crowding out the private sector. This needs to be addressed as a matter of urgency.
9. On the expenditure side, we expect the the UPND administration to liquidate domestic areas which currently stand at more than K30 billion, by at least 50% in the 2022 fiscal year. Domestic arrears is money which Government owes various suppliers of goods and services in the economy. For an economy as small as ours, when the biggest economic player (Govt) owes other players that much money, it simply means that there is no liquidity in the economy (ndalama mulibe mu economy). An economy that has no liquidity cannot grow. Therefore, if the UPND administration hopes to grow the economy and create the promised jobs, the first housekeeping matter which they need to attend to is to dismantle domestic arrears. Otherwise their goal of economic growth and job creation will remain a pipe dream.
11. Our other key expectation on the expenditure side is to shift leaning too much towards handouts (social cash transfer) to leaning towards economic empowerment (small loans of not more than K10,000 for starting or growing a business). We are all agreeable that the poorest and most vulnerable citizens in our country need to be assisted by Government. The only debate is how best to assist them. When you give someone a handout (SCT), yes you have assisted them but you still need to come back tomorrow and the next day and the other day to assist them again. You’re essentially creating a perpetual dependency that cannot be sustained. But if you assist someone by giving them a small loan of say K10,000 which they need to start a barbershop or grocery store and they have to pay back say K50 everyday, they will clear off their loan in 7 months and will remain with the business and also contribute in a small way to the national tax pool. There’s no question that economic empowerment is a more sustainable way of assisting the poor and vulnerable in our country. But the challenge has been that the previous PF administration was leaning more towards handouts than economic empowerment. For instance, in the 2021 National Budget, a total of about K8 billion was allocated to handouts (SCT and FISP) while a paltry K256 million was allocated to economic empowerment. The UPND administration is expected to address this if they hope to effectively assist the poor and vulnerable in our country.

Of course we will give a detailed review of the 2022 National Budget after it is presented. This will be done through our Alternative National Budget which we shall present on Thursday, 11th November 2021, at a venue to be announced. Otherwise we are hopeful that the UPND administration will make the economic turnaround which they promised and which the Zambian people are anxiously expecting.

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SET 29.10.2021