THE Centre for Trade Policy and Development says it is clear that Zambians are already bearing an increased debt and tax burden, through the introduction and implementation of new taxes and levies.
CTPD researcher Bright Chizonde has urged the government to walk the talk on austerity measures aimed at limiting government expenditure to priority areas.
Chizonde said overpriced infrastructural expenditure, financing of huge entourage trips, Zambia Airways relaunch, purchasing of luxury planes and others should all be replaced with prudent investment in human resource such as restoring meal allowances to students, ensuring medical supplies are available in health facilities, scaling up the social cash transfer programme with no misallocations, making sure farmers have inputs on time, and most importantly; paying public workers on time.
“In line with our 2019 Budget analysis themed: ‘The Writing on the Wall: The Illusion of fiscal consolidation in the presence of huge Public Debt’, we continue to urge the Zambian government to walk the talk on austerity measures aimed at limiting government expenditure to priority areas. CTPD is of the considered view that if government fails to realign its spending priorities, fiscal consolidation will remain more of an illusion,” he stated.
Chizonde stated that fiscal consolidation would not be achieved if it remains focused on the revenue side.
He foresees the government target towards achieving fiscal consolidation not to be realistic in 2019 due to a number of factors among them policy inconsistencies, rising public debt and potential reductions in revenue generation as even recently announced by the Zambia Revenue Authority.
“Fiscal consolidation can be attained by either reducing government expenditure, increasing government revenue collection or a combination of both. The failure by government to adhere to its own debt management strategy through accelerating the contraction of debt, by about $1 billion in 2018 alone, remains the greatest challenge to achieving fiscal consolidation in 2019,” he said.
Chizonde stated that thus far, it had become evident that government liquidity had reduced as indicated by delayed payment of salaries, increased domestic arrears and rapid depletion of international reserves – currently at about $1.5 billion which is less than two months of import cover.
He stated that the government in 2018, announced a number of austerity measures aimed at reducing the fiscal deficit but remained adamant regarding the need to reduce spending.
“It is clear that Zambians are already bearing an increased debt and tax burden, through the introduction and implementation of new taxes and levies. Therefore, fiscal consolidation will not be achieved if it remains focused on the revenue side. The only avenue for increased revenue collection currently is through improving compliance levels with respect to exiting taxes -ZRA estimates tax compliance to be below 60 per cent,” he stated. “The government should therefore focus on assessing the current spending priorities if it wishes to achieve fiscal consolidation in 2019. CTPD notes the importance of infrastructural investment but this should not be done at the expense of macroeconomic stability.”
Chizonde stated that borrowing to the tune of about $16 billon was not sustainable for Zambia as shown by the increased debt payments which have crowded out social sector spending, depleted reserves and made the Kwacha more volatile.