Mutati and Chiteme Proud of Reforms
Economy
Hon. Mutati speaking to stakeholders. Photo from Ministry of Finance

Felix Mutati and Alexander Chiteme (Ministers of Finance and Development Planning respectively) are confident that the economic and fiscal consolidation reforms their Government embarked on in 2017 are beginning to yield positive results. According to a statement from Ministry of Finance following a liaison meeting with Zambia’s Cooperating Partners (basically a group entities with deep pockets), Mr. Mutati indicated that the fiscal deficit in December 2017 stood at 6.1% against a budget of 7.3%. Furthermore, Mr. Chiteme disclosed at the Zambia Cooperating partners’ event that a total of 2450 (both active and stalled) projects were currently being executed in the 10 provinces.

Mr. Mutati was bullish on the performance of the economy when he discussed the country’s year end performance for 2017. Ending the year at 6.1% inflation, the lowest in 40 years according to the Minister, was significant and indicative of the evidence of the stimulus that the fiscal consolidation had achieved. Furthermore, he informed the stakeholders that the Treasury had reduced domestic debt from K19 billion in December 2016 to less than K10 billion in December 2017.

Should the aforementioned trajectory continue, we envisage less participation on the local debt market. From a strategic point of view, it looks like Mutati and his team are targeting enhancement of domestic resource mobilization as per his statement. They have identified the following as key areas that will allow them to achieve this: 1. Improvement of economic and fiscal governance, 2. Tax policy reforms and tax administration modernization, 3.enhanced debt management and improvement in supply of debt data, 4. Revision of Bank of Zambia legislation to provide for enhancement of monetary policy management, and 5. Revision of procurement legislation and implementation of new procurement reforms.

These were bold statements by the Minister and it was prudent for Financial Insight to look closer at these points and try and find evidence of these reforms. On tax reforms, ZRA has made a number of announcements regarding changes in how they do business. Many will note that recent publication of standardized pricing when it comes to ordering motor vehicles. It now more predictable for purchasers of imported cars to know what their tax bill will be. What this does is that it reduces that impact of fraud whilst making it predictable for the tax man to know how much they expect to collect. Furthermore, the TPIN registration for bank accounts is a sure way for the Tax man to monitor and know whether they are collecting all their dues from tax payers.

Although it may sound reactive, the revision of legislation around procurement is a welcome move. There have been echoes from many in the public over concerns around the pricing model that is used. To an extent, some local entrepreneurs have complained that bidding for certain projects is an exercise in futility. However, with reform coming, we predict that many of these concerns will be addressed. Furthermore, we see an opportunity for the Minister’s team to place patriot clauses in the reforms that will enable businesses to thrive. On the other hand, local businesses must watch this space very carefully and provide feedback as they will only have themselves to blame if the legislative reforms are not in local businesses favor.

 

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