Zambia’s fiscal situation constrained – Yamba

GOVERNMENT says it will introduce expenditure cuts to close the huge financing gap currently existing.

The government says it spent K73.4 million on coronavirus related expenditure in the first half of the year.
The virus first broke out in the country in March this year.

Giving a budget performance update for the period January to June this year, Secretary to the Treasury Fredson Yamba said the need for prudent resource management had become more critical.

“I take this opportunity to reiterate the ministers’ message that, to close the financing gap for the year, expenditure cuts will have to be introduced. The need for prudent management of our resources across all sectors has even become more critical in view of the resource requirements to fight the COVID-19 pandemic,” he said in a statement Friday. “Going forward, it will be our duty at the Treasury to continue giving priority to effective resource management so that we help the nation to address the urgent health risks while facilitating economic sustainability and the well-being of the people of Zambia.”

Yamba said in view of the general revenue decline and expenditure increases, government would continue to strengthen domestic resource mobilisation for effective facilitation of national development.

He said, “this is a priority matter for the near term and the future.”

Yamba outlined several areas on which the government spent money, while admitting that the economic situation continued to be challenging.

“The total amount released under the ordinary use of goods and services component also included, among others, K359.2 million for purchase of medical supplies in government hospitals, K146.8 million for contributions and subscriptions to international organisations, and K77.3 million for the skills development levy. Further, a sum of K73.4 million was released towards COVID-19 related expenditure,” Yamba said. “The economic situation continues to be challenging and the fiscal situation is constrained. To this effect, the Treasury will continue to strive for efficiency in domestic resource mobilisation so that effective and value for money responses to the competing needs of the country in tackling the impact of the COVID-19 pandemic on health and the economy, are implemented.”
He reiterated the Ministry of Finance’s earlier projection that the coronavirus would continue to impact the economy adversely.
Among other mitigating factors, Yamba pledged to engage cooperating partners for support.

“The Ministry of Finance will also continually review the economic sustainability initiatives that are in place, so that in the foreseeable term, the negative impact of COVID-19 on the economy is moderated. As government, we will also continue to engage our external partners for support and strengthen cooperation on the fiscal front,” he said.
“Achieving fiscal consolidation is a priority target, that is why as government, we will continue to constrain public debt accumulation while ascertaining the effective implementation of public financial management regulations at all times.”

Regarding the budget performance so far, Yamba said tax relief measures that had been introduced and the involuntary scaling down of productive activities translated into a reduction in tax and non-tax revenues.

“During the first half of 2020, total revenue collections and grants amounted to K32.2 billion, 5.1 per cent below the K34 billion projection. Tax revenue accounted for K24 billion, non-tax revenue K7.5 billion, and project grants K729.6 million. In addition, the Treasury accessed K8.9 billion domestic financing,” Yamba said. “Regarding expenditure, the Treasury released a total sum of K46.8 billion, amortisation included. This was seven per cent below the projection for January to June, due to lower than projected disbursements for the foreign financed component. Of the K46.8 billion expenditure for the period under review, K33.7 billion was financed from domestic resources while K7.9 billion was foreign financed. Notable items under this category include K500 million for some outstanding pension payments, K1.1 billion for grain purchases under the Food Reserve Agency, and K1.4 billion for dismantling arrears. K73.4 million was also released towards COVID-19 related expenditure.”

He said in the same period, the government also continued servicing local and foreign debt.

“In the period under review, K14.3 billion was released for debt service. Domestic debt service payments totalled K8 billion, which included K1.9 billion principle repayments on government securities. On the other hand, external debt service amounted to K6.3 billion with principle repayments amounting to K3.3 billion,” said Yamba. “Expenditure on transfers and subsidies totalled K4.3 billion. Notable items in this category included: K1.9 billion for ordinary grants of which public universities got K556.5 million, hospitals K311.4 million, and grant aided institutions in line ministries K598.5 million; K585 million to support the operations of local authorities through the Local Government Equalisation Fund; K559 million towards the revenue mobilisation activities of the Zambia Revenue Authority; and, K518 million released in June for dismantling arrears for petroleum product supplies.”

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