REVENUE STIMULATING BUDGET, BALANCING SOCIAL SECTOR EXPENDITURE AND SUSTAINING ECONOMIC BENEFITS!

The 2024 projected budget announcement made on Friday the 29th of September by the Hon Minister of Finance and National Development, the next year’s budget is focused under the theme“Unlocking economic Potential”? hopes to drive economic activities based on four thematic pillars emphasized by the current governing stakeholders; Economic Transformation and Job Creation; b) Human and Social Development; c) Environmental Sustainability; and d) Good Governance Environment.

The 2024 budget clearly decorated some key aspects of economic interests with a deep scope highlighting around key macroeconomic overviews based on the previous and current running budget where it was strongly indicated that growth in real GDP for 2022 grew up to 5.2% with an end year of Inflation marking at 9.9%, having to have recorded an overall fiscal budget deficit sitting around 9.8% with a gross International reserves not exceeding to less than 3.8 months of import cover.

Meanwhile, this year’s economic growth patterns in the domestic market is expected to shrink at 2.7% contrary to the projected targets of 4% as evidenced by IMF and World Bank, which should annually be recorded in real low GDP growth rate, as current inflation is presently showing ?a 12% contradicting with the projections of sitting within the required policy corridor of 6-8% (desired target band), with a budget deficit showing a 5.8% working against the expected 4.8% and with an exactly 3 months of import cover on gross reserves.

On the financial and banking side, the local foreign exchange under performed as it recorded 10.9% Forex depreciation from January to date owing to low inflow of copper tax receipts following reduction in production resulting in unbalanced export wallet by traditional export base in volume terms.? Surprisingly, in this year the reductions seen of mineral output have not been related to the taxes, or lack of conducive and favourable policy but with the quality of investors.

Meanwhile, in order to suppress on the level of speed with the rate of depreciation of the Kwacha as occurred in between January and February 2023, the Bank of Zambia has been frantic efforts by its monetary policy in ensuring that certain conducive policy dosage are carefully administered to, one important peculiar policy intervention standing out, made so far this year within the first quarter was raising of Statutory reserve ratio which has since taken on strong upbeat to counterbalance pressured demand on Dollar outflow as monetary policy rate also trying to work out modalities to make heavy-lifting thereby cooling down on demand against supply factors, though it is projected that the MPR will remain with an upward trajectory in the short to medium term to help with escalating inflation patterns across the board.

?In this year, the local economy has not performed to its levels of best standards and expectancy following a slowing down patterns seen with the mining sector, as economic growth pattern is highly expected to pick up in 2024, meanwhile the expectation on this year’s fluctuating Inflation will be averaging within single digit blanket come next financial year following the anticipated sense of demand pick up in copper output as legal settlement among others are properly being addressed with government and key mining outfits, though at a very slow pace notwithstanding the existing with mineral market power as forces driving strongly towards an uptake in carbon economy.

This year’s budget performance has so far utilize about 157 Billion Kwacha, with social protection and Infrastructure development taking firm leads in expenditure column? deviating slightly with a 5% above the target line as stipulated under the set threshold even though working tightly on fiscal discipline, with strong elements such as CDF and others showing some serious disparities, as certain policies like the CDF needs urgent amendment to safeguard economic leakages and other vices, it will also help to match up with the decentralization policy and also to avoid back and forth on CDF funds as well as working to improve low absorption in funds. Though certain interventions have since been made to work with improve the scales of activities by procuring about 156 vans to help with the monitoring and evaluations process, though we are still lacking a number of areas to work around such as building capacity for the local government, moderating communication with the community about expected projects and funds availability as some constituencies are progressive with projects due to their local political structures, high illiteracy levels, poor local market systems ?etc ?

The general performances on many other aspects such as asset performance stood very strong, non banking sector was equally showing successful condition up to July and market risk has also reached satisfactory level, while it is observed that ?ICT has been taking a strong hold on performances. On the external development sector we have seen Import triggered an overall growth of 33% while the base of export is terribly reduced to 5% owing to low profile based on copper production

However, following the enactment of public finance management act of 2021 and in accordance with the annual borrowing plan which works to meet up with the funding gaps of the operating budget due to limited resource envelope, the government plans to 31.1 Billion Kwacha.

The 2024 budget of revenue and expenditure looks to achieve macroeconomic conditions of reaching ?4.2% on budget deficit, maintaining Inflation to turn to the policy corridor of single at all possible costs, in the proposed budget of 2024 key policy adjustments are expected to met with, based on the development plan anchored on National Development Plan as it acts as a key model of engine of economic growth driving a schematic plan as guided by the 2023 thematic areas of creating jobs and stimulating economic benefits, fostering a conducive regulatory and legal environment and anchoring political and economic stability.

The 177.9 billion Kwacha structure as indicated for the 2024 budget still has some plans to continue supporting farmer input programs, and looks forward to change the narratives in agriculture even if the last looked to have produced only 3.2 million tons MT of maize production – 2022/3, in my view with strong effort drive of wanting to reach about 10 million tons in the medium to long term, there is a strong need to increase Maize output which should be produced for the local and the regional market. It is also important to note that due to dramatic situations with climate factors, government has highlighted a strong need to push Investment in agriculture irrigation, deploying some mechanisms such as indulging into smart agriculture technologies, water harvesting, agriculture insurance etc.? On the side other, plans to upscale various interventions within the sub-sector of agriculture are there but there is a need to make making sure that Animal health and breeding processes come in hand as a key priority in livestock, working on incentives within the sector especially now that we have some expectations of introducing Agriculture credit window through the Zambia Credit Guarrantee Scheme which has been beefed up twice from its previous allocation.

In the wake of Zambia’s aspiration to take about 3 million tourist by end of 2026, ?government sourced the 100 million Dollars from multilateral partners which will be thrown into tourism sector to develop certain tourist sites which includes the untapped potential poised in the northern circuit that has remained ?seriously undeveloped yet it’s a n area that has seat with many historical sites and with a greater tourism relevance coupled with potentials seen in ?North western and western, the fund will therefore be used to develop and improve sites and marketing activities.

The tax plan fostered in the mining sector as presented from the previous budgets presentations especially with the financials of both 2022 and 2023 pronouncements, have steadily maintained mineral loyalty tax regime on tight chest for the sector in order to formulate a deep sense of sustainability and predictability too, even though we have seen the lowest production this year in copper output amidst strong standing demand with relatively minimal changes on the prices of this key commodity among others, as Zambia’s first quantum minerals started this year on its nickel production with projected capacity standing at 55,000 MT per annum.

In the wake of many mineral factors that Zambia is endowed with, the government in its 2024 budget pronouncements has made a pledge to spend about 150 million Kwacha towards conducting country-wide geological surveys which will be undertaken in all areas to ascertain the mineral resources and identify some key strong areas of natural resource base especially in its drive to achieve 3 million metric tons of output in copper among other mineral resources. In accelerating this effort, there has been a strong drive to make Regulation body (a mineral commission body) to come and drive industry support.

With strong policy energy following certain presidential delivery priorities, which are centred on private sector development, leading and leveraging on technology and innovation, fostering aspects around project development and enhancing public services, the minister highlighted on a the continuous need to drive aspirations on building economic zones need to grow, as he indicated with plans to throw fiscal initiatives and incentives to effect local production and upscale productivity.

On the social empowerment policy instruments, to begin with the constituency development fund popularly known CDF continues to receive massive support, despite few challenging factors still existing, so in terms of the CDF budget allocation it has seen an increase from 28.3 Million Kwacha to 30.6 Million Kwacha, CDF is basically a good model of economic bottom up to change the narratives at community level, and uplift lives at constituency level but it needs proper coordination and needs some good models of monitoring mechanism. While the social support from other aspects of social investment plans have since continued to seeing Woman Empowerment funds right on the cards, meanwhile in the 2023 budget the central bank was supposed to have opened up (operationalization) the Zambia Credit Guarantee Scheme but this has been pushed to 2024 with an expandable allocation of about 300 million kwacha doubled from current running budget. ?

With efforts to stabilize the local currency from unwarranted external shocks resulting from import process, government has remained steadfast with a strong upbeat in driving economic benefit through the establishments of local industries to help building price stability whereby anchoring local content policy, the proposed budget of 2024 underscores the establishment of 4 Industrial yards to be situated in Chinsali, Chipata, Choma and Mongu. As it also being indicated that the 3 farming block as mentioned in the budget of 2023 as well, with an additional making up four in total as 2024 projected target, have since been planned to work on the road infrastructure making ease way right into the markets with outputs and proper passage for input as well. Though, at current we are talking of 10 existing farming block across the country but challenges are that we are not receiving any productive output at the moment. As a matter of critical concerns, despite having the sound policy poised in the Agriculture sector with strong political support and good budget allocation, we basically need to have some system of building capacity and skills development to the 6 million small scale farmers through adhoc extension officers so that we can push in more productive output for both local and the regional markets.

In terms of fuel support, though it is well known various policy interventions are still anchored around this subsector, there is a need to introduce a stabilization fund on energy otherwise this poises a huge risk to the economy, even if we are currently transporting diesel from Tanzania ( through diesel carrier which has reduced cost factor at relatively 19% higher) and believing that the current transformation of Indeni? has substantially helped out to lower the cost, as government calls for absolutely no subsidies to be imposed on oil and it is also calling for public private partnership deals on fuel.

The current running budget had few things worked from the previous, so as this projected budget since the debt negotiating process came to a logical conclusion, we have seen that the general public supplies it has scaled down from 39% to about 33% making a room to allocate more resources on local government function and also balancing on domestic debt repayment which will increase an aggregate demand in the economy.? Meanwhile, we have sectors such as education increasing on its allocation in terms of budget share to about 15% from 13.9%, this was a source of concern as two to four budgets that run in the recent past, and education sector was scaling down together with health but with the 2024 budget we have seen a good allocation of 27 Billion Kwacha with a support to employ about 5,200 staffs and employing of 4,000 staffs in healthcare. The 2024 budget is talking of sharing a 13 billion Kwacha into agriculture which had previous about 11 billion kwacha, so this increase argument with the growing demand for agriculture opportunities in the country and the region.

The social sector plans in agriculture, education, community and health have also received strong policy focus leading to an increase in food pack support in schools, beefed up with social cash transfer, FISP and government aims to complete about 132 mini-hospitals in rural areas.

?The aspects of roads infrastructure has not been outspoken from stakeholders with this current regime but of course it was necessary to slow down considering the strong propensity that the previous regime took, the current running budget has a budget share of about 5 Billion Kwacha on road infrastructure and the next year’s budget is speaking of having an increase to about 8 billion Kwacha to cater for truck and feeder roads, among the key roads to work by government are roads connecting major provincial towns with few on rehabilitations and maintenance works.

However, the global economy will continue to seeing low economic profile which will average to 2.8% growth rate, as geopolitical tension protracted coupled with commodities being on sharp changes, as Oil production is seeming to be reducing following a firm contraction in commodity ?supply hampered by Russia oil export withdraw , as demand remains upbeat leading fuel increase cost and price-growth on key sub-elements and materials used in ?agriculture such as fertilizer among many other key agricultural inputs.

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