My resource basket is constrained – Ng’andu

FINANCE minister Bwalya Ng’andu says national budgeting is neither about dreaming nor magic.

He also says Zambia’s economy is right now in: “a very different and difficulty place” because businesses are yet to become more active, following the COVID-19 pandemic.

Dr Ng’andu was speaking on ZNBC TV’s Sunday Interview programme.

Programme host Grevazio Zulu asked the minister to speak to the inadequate budgetary allocation for dismantling of arrears, in the 2021 national budget.

K2,762,080,579 has been set aside for that purpose.

In response, Dr Ng’andu said when preparing a budget, “start from where you are; don’t start from where you want to be.”

“The budget is not about dreaming, it’s not about magic. [But] it’s about looking at the resource basket envelope that you have, and then looking at the entire expenditure that you have,” Dr Ng’andu said. “At the end of the day what you are trying to do is to put some money in this, at the same time in that. Somebody can easily say ‘you have not put enough in education, in health.’ But my resource basket is constrained! I can blow up the budget deficit even bigger. But if I do that, the risk I run is that I wouldn’t even be able to find the credit to support the revenue that I’m trying to collect.”

He said the problem was that domestic arrears were let to accumulate over so many years and that: “obviously we’ll not be able to do it (dismantle) in one year.”

“If I did it in one year, I will probably allocate so much money to dismantling of arrears but I won’t have money to allocate anywhere else,” Dr Ng’andu noted. “But what’s important is that we have begun a process of reducing the arrears. My expectation is that by the end of the year, going into next year, we’ll find ourselves sitting at the base where we would have probably dismantled over half of it. And that’s quite significant because what it means is that that’s the money that has gone into the economy, to boost the level of liquidity.”

He explained that one of the things the government had stressed on, to safeguard continuous accumulation of arrears, was to restrict commitment control.

Dr Ng’andu said a controlling officer was not going to incur expenditure if they did not have the money for it.

“That will limit how much controlling officers can go around accumulating debts for money which is not available,” he said. “The secretary to the treasury is working to make sure that controlling officers respond and enforce that particular director.”

Asked about which sectors he was looking at to spur economic growth in 2021, the minister mentioned the agriculture and tourism sectors, in a measured way.

“In terms of growth, you’ve seen that this year almost all the companies have gone down – they haven’t done much in terms of contributing to the economy. What we are looking to now is the economy, in the various sectors, to recover. We are looking particularly to agriculture. Barring very bad weather in the course of this year, we should be able to see some reasonable growth in agriculture,” Dr Ng’andu explained. “We expect that with the measures that we have introduced and the restoration of air travel, movement of people across the world, we should be able to see some recovery in the tourism industry.”

He added that he expected the wholesale and retail sector to recover, “particularly with the restoration of the value and distribution chains, in and out of Zambia.”

He said next year’s budget should help the country: “to come out of the kind of slumber we’ve been for a year.”

“Over and beyond that we need to focus on specific areas where we think we can be more [productive],” he said.

Dr Ng’andu said there some existing loans whose disbursement would continue next year.

“A number of water projects, electricity generation projects like the Kariba, the Kafue Lower Gorge would continue and would be financed from disbursement on existing loans,” he said.

On external debt, the minister said: “we’ve stopped contracting commercial debt.”

“So, there’s no problem, as far as that is concerned. But one has to look at the choices they have; the choices that I have are that I increase my budget deficit through higher domestic financing, than I would want to, so that I can finance education, health, recreation and culture – all those things that I have to finance,” he said.

Reminded that his budget crowded-out the private sector, Dr Ng’andu said: “at this point in time, yes, because if I don’t do that, it means that I won’t finance education, health.”

“But here is the thing; our own calculation is that as we go forward we’ll begin to see a gradual increase in taxable revenue, and even non-tax revenue,” he said. “As the effect of the lock-down begins to wear out and more economic activity comes back into play, and businesses become more active, we should be able to see an increase in revenue from the traditional ways from which we raise revenue.”

When that happens, Dr Ng’andu said; “then we’ll take a look and see whether there’s a need for us to maintain the same amount of debt financing that we are looking for.”

“But one has to bear in mind that the base we are at right now is a very different and difficulty place. If you don’t address the fact that businesses don’t have the capacity right now to…. Not their normal challenge in terms of payment of tax…” Dr Ng’andu explained. “If you don’t address that challenge and assume that you can tax them more, then there’s a problem. Conventional wisdom tells us that you can’t draw water from a dry well and a lot of companies [now] are pretty much like a dry well, which is why we are trying to revive them. Because not only are they (companies) paying less tax…”

He said by giving some of the concession tax relief measures to companies, “I’m actually forfeiting even more revenue.”

“So, this (budget deficit) for us is a short-term problem but it’s a problem that has to be faced in the way that we are facing it,” noted Dr Ng’andu.

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