Issued on wednesday, 4th october 2023.
Ladies and gentlemen of the press, and fellow citizens,
Let me begin by extending our sincere gratitude for your presence today. We are truly delighted and honoured to have you all here. Not too long ago, we gathered in this very place to reflect on zambia’s economic performance in the first half of the year. We are here once again, this time, to share our analysis and recommendations on the 2024 national budget, presented on the 29th of september 2023 by the minister of finance and national planning, honourable situmbeko musokotwane, under the theme “unlocking economic potential.”
Budget overview
The proposed 2024 national budget is projected to be k177.9 billion, representing an increase of k12.6 billion compared to the previous year’s budget of k167.3 billion. Notably, the budget reflects government’s effort to maintain macroeconomic stability in line with the 8th national development plan (8ndp), with targets such as real gdp growth of at least 4.8 percent, inflation within 6-8 percent, and domestic revenue accounting for at least 22 percent of gdp.
Expenditure
We note that the 2024 national budget is expansionary, with an overall budget increase of 6.3 percent compared to the previous year. Notable increases in budget allocations can be observed in sectors such as economic affairs, education, and health. Economic affairs, in particular, has received increased funding, aiming to revive key sectors like agriculture, manufacturing and mining.
Revenue
We equally recognise efforts to shift sources of financing for the national budget, with foreign financing reducing by 55.3 percent to k17 billion from k38 billion in 2023 and a minimal increase in planned domestic borrowing to k16.3 billion from k15.6 billion in 2023. We also understand that a significant amount of domestic revenue will be sourced through taxes which are projected to account for 64 percent of the total budget from 55.9 percent in 2023.
This is a positive move but it also calls for the disclosing of a more detailed plan on its feasibility especially considering that government has committed to finance 79 percent of the budget internally. We urge the government to pursue measures that promote tax compliance and reduce tax evasion to stimulate revenue collection. The increase of excise duty for tobacco and tobacco related products to k400 per mille from k361 is welcome as it will boost revenues.
Public debt management
The 2024 national budget shows government’s continued effort towards resolving zambia’s public debt. In this regard, we have observed the reduction in external debt service allocation and commitment to k6.1 billion in 2024 from k18.2 billion in 2023, representing a 33 percent reduction. This is progressive as it frees up more resources for the social and economic sector spending.
It is also important to mention that while the country has reached an in-principaldebt restructuring agreement with bilateral creditors covering $6.3 billion, there is still need to accelerate the finalisation of discussions on restructuring the country’s private debt including eurobonds. Additionally, there is need for government to ensure strict adherence to the annual borrowing plan of 2024.
We have also noted that while the public debt management act no.15 of 2022, provides for the establishment of a sinking fund, its operationalisation in the 2024 national budget remains unclear.
Although the budgetary allocation for dismantling arrears remains unchanged at k6.9 billion, it is encouraging to note governments commitment towards unlocking liquidity in the economy which is key in promoting the performance of the private sector.
Mining sector
In the mining sector, there has been a substantial increase in the budget allocation for geological mapping, soaring from k4.3 million in 2023 to k160 million in 2024. The centre for trade policy and development (ctpd) is delighted to announce that this significant boost aligns with one of our critical recommendations for the revival of this sector. It signifies the government’s recognition of the pivotal role that geological mapping plays in assessing the quantity and quality of mineral reserves. Once realized, this investment has the potential to empower the government to engage in well-informed negotiations with prospective investors, thus bolstering the mining sector’s growth prospects.
The budget also mentions the intent to operationalise the mineral regulation commission, a pivotal component for effective mining sector regulation. Our appeal to government is that this commission should receive sufficient funding to equip it with the necessary technical and human resources. Adequate resourcing will enable monitoring of artisanal and small-scale mining activities, as well as the enforcement of responsible mining practices among larger companies.
Additionally, the declaration of all minerals as strategic is a forward-thinking move, particularly given the expected surge in demand for minerals critical to clean energy technologies. It is important, however, to outline specific policies to harness the benefits of these resources beyond mining tax revenue. We urge the government to develop and communicate a clear strategy for the sustainable development and utilization of strategic minerals.
Furthermore, the effectiveness of past tax incentives in the mining sector has raised questions. To improve the impact of tax policies, we recommend a thorough evaluation of existing incentives and their outcomes. This evaluation should inform the design of future tax incentive programs, ensuring they align with the sector’s development goals and economic realities.
Agriculture sector
Turning to agriculture, fisheries, and livestock, the overall allocation has increased by 23.3 percent compared to the 6.7 percent allocation in 2023. The budget highlights encouraging initiatives such as opening a credit window for small-scale farmers to help them access affordable financing for improved agriculture production. However, in contrast to the mining sector which has set targets to grow copper production to 3 million tonnes by 2032, the agriculture budget lacks clear production targets. To drive the sector’s development, we recommend that the government sets specific production goals for key agricultural commodities. These targets can serve as a roadmap for the sector and provide a basis for measuring progress.
In terms of steps to prevent price increases in essential agricultural commodities such as mealie meal, the government plans to continue engaging and appealing to an agreement with private millers buying maize from fra to reduce the cost of mealie meal. While the government’s efforts to control mealie meal prices are noted, we believe that a more comprehensive strategy is needed to address rising food costs. We propose, rather, measures targeting improving agricultural productivity and reducing production costs
A crucial observation is also made regarding the gradual increase in budget allocation towards farm block development over the last three years, which represents 40.2 percent in 2024 compared to 2023. Notably, as in previous budgets, growing funding allocation continues to be granted towards farm block development without providing progress made and utilisation of funds for the previous years.
Energy sector
In the energy sector, the budget maintains that fuel subsidies will not be re-introduced. However, the budget does not outline strategies to mitigate the impact on the cost of living, given the substantial implications of fuel cost. As an illustration, the basic needs and nutrition basket (bnnb) as espoused by the jesuit centre for theological reflection (jctr) shows an increase in the basket size to about k9,267.34 for a family of five as of september this year, compared with k8,850.38 for a family of five in the same period since the removal of subsidies in 2021.
A continued focus on rural electrification, recognizing its pivotal role in expanding electricity access to remote areas is progressive. Nevertheless, it underscores the need for diversification of investments in the energy sector by tapping into alternative energy sources such as solar, wind, geothermal, biomass, hot springs, and possibly nuclear energy. Such diversification is essential to reduce over-reliance on hydro-energy, which remains susceptible to fluctuations in rainfall patterns.
Consitituency development fund (cdf)
Cdf allocation has increased by 8.1 percent to k30.6 million per constituency from k28.3 million per constituency. While this increase is positive, there is still need to stregnthen policies and measures that will improve the implementation of cdf. To ensure effective utilization of the increased cdf allocation, we propose the implementation of electronic monitoring for disbursements and fund utilization. Furthermore, addressing human resource constraints and establishing clear project plans will maximize the benefits of the cdf for local communities.
Legal reforms
The following legal reforms were pronounced to be undertaken in the 2024 national budget address:
- The animal identification and traceability bill
- The mineral regulation commission bill
- Amendment to the employment code act
- Introduction of a unified tax administration law and the amendment of the zambia revenue authority act
- Amendment to the constituency development fund act and the public procurement act to strengthen citizen participation and streamline procurement processes.
- Review of the banking and financial services act to ensure that the financial sector effectively contributes to growth and economic development.
The review of legal reforms is progressive in ensuring that we have a strengthened legal system that works to advance development for all zambians. However, we do note that there is not intention by government to put in place legislation that speak to tobacco control. Recognizing the economic and health costs associated with tobacco consumption, we strongly advocate for the enactment of comprehensive tobacco control legislation. Such legislation would not only improve public health but also contribute to budgetary stability. We urge the government to prioritize the enactment of the tobacco control bill. The budget has not also made any intention known to table before parliament an access to information law. In the interest of enhancing good governance and transparency, we emphasize the urgent need for an access to information law that allows the public to access information held by public authorities.
Ladies and gentlemen, in conclusion, while the 2024 national budget has some positive announcements, it does not adequately provide a clear roadmap to addressing the cost of living and major challenges in key sectors that are earmarked to drive socio-economic development.
Ladies and gentlemen, in conclusion, the center for trade policy and development (ctpd) has presented its analysis and recommendations regarding the 2024 national budget. This budget reflects zambia’s commitment to maintaining macroeconomic stability, increasing investments in crucial sectors such as education and healthcare, and shifting the sources of financial support. Among the noteworthy positive elements are reductions in external debt service allocations and substantial investments in geological mapping for the mining sector.
However, there are significant areas of concern that need attention. These include the imperative to address private debt issues effectively and the necessity of operationalizing the sinking fund for better financial management. Ctpd also underscores the importance of establishing clear production goals in the agricultural sector to ensure food security and tackle rising food costs. Additionally, diversifying energy sources is deemed essential to reduce dependency on hydro-energy. Furthermore, ctpd strongly advocates for the enactment of comprehensive tobacco control legislation and the implementation of an access to information law to enhance transparency in governance.
Thank you.
Issued by:
Mrs. Natalie kaunda
Ctpd acting executive director
