SEAN Tembo is of the view that the 2021 National Budget must address economic stability and growth.
Formally stating his party’s expectations from the 2021 National Budget that is due for presentation tomorrow in Parliament, the Patriots for Economic Progress (PeP) leader said there was no question that Zambia’s high periodic debt service obligations, which are foreign currency denominated, have had the undesirable effect of depleting the country’s foreign reserves which subsequently caused the kwacha to weaken against major convertible currencies.
He said this vicious cycle, left unattended, would potentially collapse the country’s economy and lead to untold suffering among citizens.
“Our expectation is that the Minister of Finance, in his 2021 National Budget, will devise a way to address this vicious cycle and to prevent our economy from continuing on its current downward spiral,” he urged. “A possible solution to this problem is to restructure our debt so as to spread it over a longer period and reduce our periodic debt service obligations and give some relief to the Treasury.”
He noted that the country’s productive capacity had continued to dwindle, largely due to the continued power deficit and subsequent load-shedding which has adversely impacted businesses across the country for a continuous period of three years now.
He said the power deficit has caused some sectors such as steel manufacturing to almost collapse, just as they were beginning to rise and Zambia was striving towards self-sufficiency in its steel needs.
“We are back to importing the bulk of our steel from other countries such as South Africa,” Tembo noted. “Suffice to mention that our reduced self-sufficiency and increased imports undermines our balance of payment position and further weakens the kwacha against major convertible currencies, thereby feeding into the vicious cycle.
“Therefore, our expectation is that the Minister of Finance, in his 2021 National Budget, has come up with a tangible plan of addressing the electricity crisis that has bedeviled our economy for a continuous period of more than three years now. It is worth mentioning here that the cost of importing electricity is always by far lower than the cost of lost productivity due to lack of electricity,” he said.
Tembo said it was myopic for any government to believe that it was making a saving by load-shedding instead of importing electricity to allow the economy to operate at its maximum productive capacity.
He said PEP believes that it was self-evident that the COVID-19 pandemic had had a major retrogressive impact on some sectors of the economy such as hospitality and tourism.
“These sectors are major employers of our labour force and our view is that without specific government assistance to the sectors that have been heavily hit by the COVID-19 pandemic, they may not fully recover, or if they do, the recovery will be extremely prolonged,” he said. “In order to safeguard these critical sectors so as to ensure job sustainability in the quickest possible time, our expectation is that the Minister of Finance in his 2021 National Budget has crafted an economic relief package specifically targeted at sectors that have been heaviest hit by the COVID-19 pandemic, such as tourism and hospitality, so as to facilitate their full recovery in the quickest possible time.”
Tembo said such a relief package could comprise subsidised interest loans issued to players in the sector by government financial institutions such as the Development Bank of Zambia and the Citizens Economic Empowerment Commission.
He said he was cognizant of the good work that the Zambia Revenue Authority (ZRA) has been doing to mobilise resources on behalf of the Treasury.
“However, our view is that ZRA has been focusing their energies too much on the small fish while neglecting to properly tax the big fish, especially the mining houses. Not so long ago, ZRA embarked on a commendable exercise to undertake a forensic audit on all mining companies,” he said. “However, this exercise came to an abrupt halt when ZRA raised an assessment of about K8 billion against the first mining company that was audited. To the best of our knowledge, this K8 billion assessment was never paid and ZRA was further prevented from undertaking any further forensic audits against any mining house.”
Tembo said from PEP’s perspective such could only mean corruption and political interference on the operations of ZRA.
He urged Dr Bwalya Ng’andu to address such issues and that going forward, ZRA should be unshackled so as to allow it to collect the country’s fair share of tax from the mining companies.
Tembo noted that despite cumulative inflation over the past decade amounting to more than 150 per cent, and also despite the depreciation of the kwacha against major currencies cumulatively amounting to more than 200 per cent over the past decade, the highest denomination has remained K100.
He said this resulted into the country’s cash being too bulky to carry around and also defeats one of the key properties of money; that it must be portable.
“It is also worth noting that our highest denomination is now worth less than US $5. Further, even neighbouring countries such as South Africa, Botswana, Lesotho and Namibia, whose currencies are far stronger than the Zambian kwacha, actually have 200 as their largest denomination. Having lowly denominated currency notes actually has a retrogressive effect on the economy because it increases the cost of doing business such as cash-in-transit fees to businesses,” he said. “Therefore, it is our expectation that the Minister of Finance will address this issue in his 2021 National Budget presentation by introducing a K200 bank note. Such a measure will increase the portability of our currency and also reduce the cost of doing business among economic players.”
Tembo should Dr Ng’andu fail to address the pertinent economic reforms outlined by PeP, then his 2021 National Budget would not be worth the paper that it is written on.