Africa's top copper producer's 2011 budget gets mixed reaction

13:50, October 10, 2010      

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Zambian Finance and National Planning Minister Situmbeko Musokotwane on Friday announced the country's 2011 national budget, which analysts believe is not different from previous budgets of the copper-producing giant in Africa.

The budget, which was the second to be presented under the country's new budget cycle, which started last year, has, according to many commentators, not come up with any announcement which were different from the previous budgets.

Traditionally, the budget has been presented during the last week of January or first week of February but this was changed last year because it has been difficult to implement projects due to late release of funds.

The change in the budget cycle was meant to ensure that the budget was implemented beginning January, when the country's financial year starts and allow for funds to be released on time.

Finance and National Planning Minister of Zambia Situmbeko Musokotwane, when presenting the budget, whose theme is "A People' s Budget, from a People's Government", said although the country's economy had been growing over the years, the government's intention was to ensure that Zambians from all corners of the country benefited from the economic growth.

However, analysts argue that though the country has been recording an average economic growth of 5 percent in the recent years, it was not enough to have an impact on the high poverty levels in the country, saying poverty was still high.

"If we say it is a people's budget, it must be indicated in the figures presented but to me this is just an ordinary budget. It has nothing to do with the people," Alexander Chileshe, Executive Director of the Economic Association of Zambia (EAZ), said during a budget analysis meeting Saturday.

According to him, the Zambian government has, like every year, allocated more funding to the government public services, with the larger chunk going to service domestic and external debt, instead of allocating funds to social services such as health, education and infrastructure development.

The 20 trillion Zambian Kwacha (about 4.2 billion U.S. dollars) budget, which was an increase from the 2010 budget of 16 trillion Kwacha (about 4 billion dollars), has projected that the economy will grow by 6.4 percent while inflation has been projected at 7 percent and international reserves of at least 4 months of import cover.

In the 2010 budget, the government projected an economic growth of 5 percent but revised the growth to 6.2 percent recently due to the improved performance of the economy while inflation was projected at 8.0 percent and to limit domestic borrowing to 2.0 percent of the country's Gross Domestic Product.

However, this year's budget has been silent on a thorny issue of reintroducing the windfall tax for the mining sector which was abolished in the 2009 budget. The windfall tax was introduced in 2008 when the government revised its taxes to the mining sector.

"The windfall tax is a best mode of collecting funds from the mining sector because you collect according to what has been produced but as long as we cling on to the variable tax system, we will not be getting any money from the sector," the EAZ chief said.

Stakeholders feel the country was not benefiting from the high copper prices on the international market because of government's failure to reintroduce the windfall tax.

But the finance minister insisted that the government was getting sufficient benefits from the current mining taxation regime.

Other notable pronouncements in the budget include the increase in the number of workers who have been exempted from paying Pay As You Earn (PAYE). The Zambian government has exempted all workers earning 1,000, 000 Kwacha (about 200 dollars). In the 2010 budget, the government had exempted workers earning 800, 000 Kwacha (about 160, 000 dollars) from PAYE.

A church mother body, the Council of Churches in Zambia (CCZ), however says while the decision by the government to exempt the number of workers from paying tax was good, the increment was not enough.

The organization said in a statement released that the government should have considered the high cost of living in the country before arriving at the figure.

But the Bankers Association of Zambia (BAZ), an organization of all commercial banks in the country, believe the move to exempt more workers from paying tax will result in more money in people's pockets.

The organization's vice-president Mizinga Melu said the move really reflected the budget's theme of being a "people's budget."

The government has also decided to reduce its dependence on donor funds by announcing that the 2011 budget will be financed locally, with 82.7 percent of the resources coming from domestic resources while only 17.3 percent will come from external resources.

Zambia has, in the last 10 years, increasingly relied on domestic resources to finance its budget but analysts have expressed fears that the move will result in the government introducing unnecessary taxes that will be a burden on locals.

Among the new taxes include a 10 percent excise duty on plastic bags, an increase of motor license fee by 50 percent, a 15 percent customs duty on cold-rolled coils and a 25 percent duty on deformed bars and galvanized cold-rolled coils.

Source: Xinhua


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