James Thornton is Right on The Wage Freeze In Zambia

British High Commissioner to Zambia James Thornton has backed the Patriotic Front (PF) government’s decision to maintain the wage freeze on the civil service in the 2015 financial year.

Thornton says his concern is the broader economic situation of Zambia.

Thornton says if government is to control fiscal deficits, one of the ways to do so is to restrict public spending.

The British envoy says this is why he thinks that by imposing a wage freeze on the civil service, the Zambian government is trying to cut down on deficits especially that the public service was recently awarded a huge pay increment.

Last year (2013) the public worker’s wage bill represented 52% of the total budget. In 2015 Budget, the same expense represents 50%.

Zambia has a total public worker force of about 278 while the total population stands at 14 million people.

 MEDIA BREAKFAST ON 20TH OCTOBER 2014

tea

The Zambian Voice would like to invite all media houses for a Jubilee media breakfast where we will deliver our Jubilee message.

Among the issues to be discussed among others will be:

  1. Political, Social and Economic situation in the Country
  2. Political, Social and Economic Forecast

VENUE:        The Lusaka Hotel

DATE:           20th October 2014

TIME:           10:00HRS

 

PLEASE OBSERVE TIME

THE 2015 BUDGET- WHAT ARE THE ISSUES?

Emmanuel Mwamba facebook Photo

By Emmanuel Mwamba

(THE VIEWS EXPRESSED IN THIS ARTICLE ARE NOT OF THE ZAMBIAN VOICE AS AN ORGANISATION BUT OF THE AUTHOR WHO IS A FORMER PERMANENT SECRETARY AND A RENOWNED JOURNALIST)

‘’Shamenda Refuses to be Wage Freeze Envoy” screamed the headline in The Post edition of 15th October 2014.

One would ask: “How can the Minister of Labour disown provisions of his own government budget and speak like an overzealous union official?”

If you read The Post as your only source of information, you would be persuaded to assume that the narrative on national issues had degenerated to low levels.

For how does one explain the recent banner headline in the paper that stated; “2015 Budget a Theft Scheme- Edith Nawakwi”

How can a national budget be a theft and corrupt scheme? How can Zambia’s first and only female Finance Minister who is also FDD President make such utterances?

Is this dialogue genuine? Can a national budget truly be a corrupt or theft scheme as alleged by Nawakwi in The Post?

Another headline of interest  attributed to Vice President Guy Scott  read; “We are Not Looking at Right things – Guy Scott”.

How could the Vice-President, who was part of a Cabinet Meeting (and reportedly chaired it on behalf of President Sata) that approved the Budget, question its content publicly?

How can he let alone differ with or doubt the Budget’s economic philosophy?

What happened to the hallowed principle of collective responsibility by members of Cabinet?

It need not be labored that The Post has declared an open war with Minister of Finance, Alexander Chikwanda and are keen to portray him in the darkest of

terms, demonstrate that he has failed in his job and probably attempt to alienate him from President Sata, his colleagues and in the minds of right thinking Zambians.

But the questions that beg answers are; Is this Chikwanda’s Budget or a government Budget? Didn’t Cabinet sit and approve the proposals and estimates from the Ministry of Finance? Wasn’t Chikwanda presenting the Budget on behalf of government and President Michael Sata?

Infact the statements attributed to Vice President, Guy Scott and Minister of labour and Social Services Fackson Shamenda promote lawlessness and constitute an act of misconduct under the Ministerial and Parliamentary Code of Conduct Act no 35 of 1994, for disowning, disregarding or speaking against a collective decision made by Cabinet.

The law was made to regulate the conduct of our leaders in Cabinet and Parliament and both Scott and Shamenda know this but appear keen to breach these provisions.

What  is a Budget?

budget is a government document presenting government’s proposed revenues and spending for a financial year.

Following the approval by Cabinet, the Minister of Finance on behalf of the Republican President, proceeds to present the Budget to Parliament for approval,

A Budget is an invaluable tool that helps prioritize expenditure and helps manage the country’s resources. It can be a surplus, deficit or balanced budget.

The Budget proposes to raise revenue from taxes and fees imposed and propose to spend it on health, education, infrastructure, and other sectors.

In this budget and in attempt to optimize output or results, Chikwanda has moved the budget from an activity-based budget (ABB) to an output-based budget (OBB).

What are the Issues?

Zambia like many African countries comprises a population of majority of young people. The demographic distribution is that; 53% of the population comprises young people below the age of 18 years, 68% of the population comprises young people below the age of 25 years and 90% of the population is people below the age of 45 years.

The 2015 Budget recognizes that this scenario presents a dangerous scenario if this active population is not provided with economic means.

And that this scenario can be turned to a good opportunity for an active labour force if employment and empowerment opportunities could be created for it.

Since Zambia is an economy that relies on copper, suffers from low technological advancement, experiences low productivity, suffers from underdevelopment and is battling with high unemployment rates, it is imperative that aggressive policies to reverse this scenario are implemented.

Unless we are to make significant changes to diversify the economy and drive Zambia to economic independence, this sad scenario will continue.

Can this budget help bring economic independence to millions of Zambians?

Buoyed by growth in the real Gross Domestic Product (GDP) of over 6.5%, a projected good crop harvest, increased electricity generation, continued investments in private and public infrastructure, and anticipated growth in sectors such as manufacturing, transport and communications, the country is on the right path.

 Where is the Money Coming from?

The total Budget is K46.7billion. Up-to 88.5% or K41.2 billion will be raised using domestic revenue measures and financing.

Government hopes to raise K11.8 billion (25.3%) from Income Tax (company income, Pay as You Earn (PAYE), and withholding taxes), Mineral Royalties will contribute K5.9 billion (12.7%), Value Added Tax (domestic and import duty) will contribute K6.57billion (14.10%), and Customs, Exercise and Fuel Levy will contribute K6.97billion and Non-Tax Revenues (fees,fines, exceptional dividends) will raise K3.8billion.

Grants and foreign loans will only contribute 11.5% or K5.3billion of the budget far from the earlier years when financing of up-to 40% of the budget came from foreign grants and loans.

The Wage Freeze- The Elephant in the Room

As a rule thumb worldwide, public sector wage bill should be between 5% to 25% of the National Budget or up-to about 8% of the country’s GDP. This is to ensure that the economy remains stable and competitive.

This is also important to allow government remain with adequate resources to buy medicines in hospitals, provide education and other social services, buy goods and services and embark on infrastructural development.

Following the large pay awards in 2013 that saw the minimum salary for general workers rise to K3, 000.00 far higher than the private sector (which is paying K700 minimum wage), and a rationalization of salaries for all professionals the waged bill jumped to dizzying levels.

Zambia’s public sector wage bill now stands at 52% of the national budget!! This means that over half of the country’s resources are being spent on paying emoluments for 170,000 workers in the public sector.

It is held that government is the employer of last resort and that this expenditure is justifiable due to lack of available formal jobs in the economy.

But the current scenario is totally unacceptable and requires immediate solution. The wage freeze, in the interim is a temporal measure. But the long-term solution might require a trim to this bloated civil service. (Loss of jobs is an undesirable measure but looking at the current public sector wage bill, this is but inevitable).

In my view, the wage freeze and the rising contention over it, is as a result of failure of effective communication by government on this sensitive matter.

First of all, the 200% pay awards that were dished out in the 2013 Budget should have been staggered to a period of two years.

Further although the workers feel that the wage freeze will affect them negatively in light of the increase in food prices and the family food basket, they should be reminded that significant amount of the country’s resources is being spent on the 170,000 lucky ones and that the 14 million Zambians are left in the cold crying for development benefits from the same limited resource envelope.

The civil service is a mere secretariat for government and the people of Zambia. Resources should be spent on Zambia and its people and not the current scenario, where the secretariat is gobbling over half the resources before programs and projects for the people of Zambia are embarked upon.

The Money has Been Spent on Roads!!

This is a strong remark that is constantly being made by union officials that government has spent all its money on roads!

The scrutiny of the budget, however, tells a different story.

Only K5.6 billion is being spent on the road sector. This is a response to the ambitious Link Zambia 8000 project, a legacy project for President Sata that many people; especially our folks in rural areas have appreciated.

General Public Services (public affairs, constitution making process, CDF, local and foreign debt service and compensation and awards) have received K12billion (25.8%).

Defence units have receivedK3.2billion (7%).

Public Order and Safety has been allocated K2.1billion (4.7%).

Economic Affairs (FISP, Empowerment Funds, FRA, Rural Electrification, ZESCO power rehabilitation, road infrastructure) has received K12.7billion (27.3%).

TheEducation Sector has received K9.4billion (20.2%) and the Health Sector has received K4.4billion (9.6%).

Others are social protection;environmental protection, housing and communityamenities, recreation, culture and religion receive the residual balances.

The infrastructure development has mostly benefited from financing from savings from abolished fuel subsidies and recent borrowings. It will be illogical to use these resources to consumptive programs such as wages.

Its just not roads that is the focus of this budget. Numerous programs to increase access to clean and safe drinking water for people in rural areas has been increased, the modernization of hospital infrastructure and upgrade of health facilities is underway besides other projects.

The Changes in the Mining Sector

To answer to the many concerns that Zambia is benefitting poorly from the mining sector, Government has redesigned the tax system that applies to the mines.

The new tax regime for mining operations has replaced the current two-tier system with the following mining tax structure:

(a) 8% Mineral Royalty for underground mining operations as a final tax;

(b) 20 % Mineral Royalty for open cast mining operations as a final tax.

(c) 30% CorporateIncomeTaxrateonincomeearnedfrom tolling; and

(d) 30% Corporate Income Tax rate on income earned from processing of purchased mineral ores, concentrates and any other semi-processed minerals, currently taxed as income from mining operations.

This new tax regime for the mines is intended to increase Government income from the mining sector. It is also aimed at increasing transparency in the sector and achieves a more equitable distribution of the mineral wealth between the Government and the mining companies.

Conclusion

This is an ambitious Budget in scope and in its ideals. If implemented properly, it forms a good earnest step into the next 50 years.

The issues surrounding the huge public sector wage bill, and the measure to impose a wage freeze, requires that government and public sector unions sit to discuss and have an honest discussion on the matter in order to find an amicable solution to the matter.

END

The Careless Remarks By Chishimba Kambwili Incited And Provoked UNZA Students

Kambwili2

Chishimba Kambwili

Mr. Chishimba Kambwili on Tuesday 15th October 2014 in the afternoon warned UNZA students not to dare him over the take-over of the former Commonwealth Youth Centre situated within UNZA grounds.The students want the property to be given to UNZA so that it can caution on the current accommodation shortage at the campus. The students on the other hand want to use the property for other purposes.

Mr. Kambwili promised to ruthlessly sort out the students saying he was a man of no nonsense.

“If they have threatened other ministers before, they cannot threatened me. I don’t tolerate nonsense from young boys and girls.That facility belongs the the Ministry of Youth and Sports. UNZA students are not the only youths. I will sort them out,” said the Minister of Youth and Sports.

These remarks incensed the UNZA students who later in the night on the same day took to the street rioting. It was later reported that four police officers were injured and five students were arrested and charged with riotous behaviour.

As an organisation we have been trying to engage the students on best ways of bringing out their grievances in a more amicable manner other than riotous behaviour. It is therefore saddening that malicious demonstrations are still happening in some universities and colleges. We certainly do not support lawlessness.

However, the statement of the Minister frustrates our efforts coming from a leader who is supposed to be like a parent. The minister is right to call for discipline at UNZA campus but not in the manner he did it. The manner in which the minister issued his counsel  to the students was inciting and provocative to students. It was also disrespectful to call students at campus as boys and girls because they are not so young to be treated as such. 

As a leader, the Youth Minister ought to know how to engage the youth. It is a natural fact that youth have so much energy and zeal which they want to externalize in all forms, therefore, elders need to handle them in a manner that will make them (youths) use their energy productively. No leader can command respect from youths if he approaches them in a forceful way. There must be maturity in the way we handle the youths. 

It is a pity that police officers got injured and we sympathize. However we are also worried for the youths who have to be inconvenienced out of school as a result of the arrest and court proceedings. Whilst the students are responsible for their actions, the minister too, need to take responsibility for his careless utterances which incited the youths. The minister should find amicable ways of sorting out the issues at campus so that students are not incensed or inconvenience

Kambwili confronting Ethopian refereeRecently Chishimba Kambwili caused a spurt when he allegedly issued some verbal assault on the match official, comments he 24 hours later denied ever making, and has since threatened legal action against scribes that transmitted those words to the larger audience.

However, pictures emerging from Nkana stadium captures Kambwili invading the pitch

and accosting the heavily guarded match officials. Kambwili’s gesture in these images is not those of a man saying “hello” or “congratulations for a job well done”.

The man in Nigeria regalia is seemingly fuming and issuing what those who were around him will term “unprintable”.

Graciously, Kambwili admits accosting the referees and telling them something; whatever it was he denies it had anything to do with “stupid” as journalists Abigail Chaponda, Kalumiana Kalumiana and other credible sources within earshot of the incident conveyed to the bigger audience.

http://bolazambia.com/en/?p=5771

Dangote Sues Fackson Shamenda

Mr. Aliko Dangote

Mr. Aliko Dangote

Dangote Cement’s Zambian subsidiary has sued the country’s labour minister for libel and slander after he accused an executive of the company of attempting to bribe him.

A row has been brewing between Zambia and Dangote Cement after the minister made the allegations in September.

Dangote said in papers filed in court that the minister had created an impression that the company was exploiting Zambian workers and enticing government officials with bribes.

“The plaintiff has been brought into public scandal and its reputation has been injured,” Dangote said in a writ of summons dated October 10 in Lusaka High Court.

The dispute appears to be the latest in a string of incidents in which the southern African nation’s government has resorted to unorthodox tactics against foreign investors it believes are circumventing labour laws.

Dangote Industries Zambia (DIZ) has 400 workers building a $400 million cement plant, a staff count that should rise to 2,000 when production starts in November.

During a tour of the plant in Ndola, the minister of labour, Fackson Shamenda, said a Nigerian executive attached to the Zambian unit tried to bribe him at a hotel.

The Minister was earlier given 24 hours to withdraw his statement or face court action. Mr. Shamenda opted to be sued by engaging a government lawyer (Attorney General).

 

http://allafrica.com/stories/201410140947.html

World Economy Needs Smart Fiscal Policies

IMF Survey

October 8, 2014

  • Smart fiscal policy could support jobs, bring public debt to safer levels
  • Fiscal policy can help achieve needed structural reforms
  • Targeted fiscal steps can tackle youth unemployment, labor market problems

Fiscal policies can help support job creation, though designing the right policies will depend on conditions in individual countries.

Job creation sits atop the policy agenda globally. High and persistent levels of unemployment call for a broad policy response, generally encompassing structural reform and other economic policies. While fiscal policy cannot substitute for comprehensive reforms, it can support job creation in a number of ways, according to the IMF’s latest Fiscal Monitor.

According to the International Labor Organization, global unemployment exceeds 200 million people, and an additional 13 million people are expected to be unemployed by 2018. In order to address the high and persistent levels of unemployment, the IMF is calling for a multipronged policy response, where fiscal policy works in tandem with broader structural reform efforts to support job creation.

“Under certain conditions, the fiscal decisions taken by countries can help promote labor market reforms,” said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department. “Labor market reforms can have sizeable costs. A higher deficit or slower pace of deficit reduction can absorb these costs and offset the adverse short-term impact of reforms on output and employment. It can also facilitate political consensus on reform, for instance, by compensating groups that may be adversely affected by the change. Smart fiscal policy also values public investment.”

Policymakers can use targeted measures—cuts in employers’ social contributions or reform of pension systems—as part of an arsenal of policies designed to help fix some of the current weaknesses in labor markets, such as high youth unemployment and low participation in the labor force by women and older workers. Measures targeted to specific labor market trouble spots are more cost effective than blanket ones.

The IMF Fiscal Monitor is published twice a year to track public finance developments around the world.

Advanced economies’ efforts on track

In advanced economies, a slowing pace of deficit reduction should provide support to economic activity. Fiscal efforts over the past five years in many of these countries have helped to stabilize debt-to-GDP ratios, though the average debt-to-GDP ratio across all advanced economies is expected to exceed 100 percent of GDP at the end of the decade. Hesitant recovery and risks of lowflation and reform fatigue call for fiscal policies that carefully balance support for growth and job creation with fiscal sustainability.

With continued uncertainties regarding the strength of the recovery, fiscal policies now often include measures aimed at increasing competitiveness, employment, and long-term growth. The challenge, according the Fiscal Monitor, is how to absorb the costs associated with these measures in such a way so as to keep overall budget deficit in check. This could be achieved by cutting spending in other areas or shifting to other forms of taxation.

Emerging markets on guard

Although budget deficits and debt ratios remain moderate on average, fiscal positions and risks vary widely across emerging market and middle-income economies. While immediate pressures on public finances have eased, the IMF sees lower potential growth, prospects of tighter financing conditions, and rising contingent liabilities as looming risks.

In emerging market and middle-income economies, debt ratios and deficits remain generally moderate, although on average above precrisis levels. The prospect of increasing risks calls for rebuilding the policy room for maneuver that was used during the last few years.

Geopolitical conflicts in Ukraine and the Middle East could also raise fiscal risks, but the report acknowledges these are difficult to measure at this point in time.

Developing countries on uneven ground

As for low-income developing countries, with a few exceptions, immediate fiscal risks are generally moderate. A key policy challenge in low-income developing countries is to scale up the provision of social public services and growth-enhancing infrastructure, health, and education.

Looking forward, efforts should focus on improving fiscal outcomes through revenue mobilization, budget prioritization, and greater efficiency of public spending. Another important policy challenge is strengthening fiscal governance, especially for the growing number of low-income developing countries that are gaining access to global financial markets.

http://www.imf.org/external/pubs/ft/survey/so/2014/POL100814A.htm

2015 BUDGET ADDRESS BY HON. ALEXANDER B. CHIKWANDA M.P, MINISTER OF FINANCE, DELIVERED TO THE NATIONAL ASSEMBLY ON FRIDAY 10TH OCTOBER, 2014

1. Mr. Speaker, I beg to move that the House do now resolve into Committee of Supply on the Estimates of Revenue and Expenditure for the year 1st January, 2015 to 31st December, 2015 presented to the National Assembly in October 2014.
2. Sir, I am the bearer of a message from His Excellency the President, recommending favourable consideration of the motion that I now lay on the Table.
3. Mr. Speaker, on the 24th of October, 2014, Zambia celebrates its Golden Jubilee that marks half a century of political independence. The nation has achieved much over the past 50 years. We have had an unbroken period of political stability and peaceful co-existence by putting into practice our motto of “One Zambia One Nation”. We have advanced the cause of freedom and self-determination at home and abroad by fighting for the liberation of our neighbours. We have also advanced a generation of Zambians who are contributing to the growth of our nation at home and in the diaspora. These are achievements worth celebrating.
4. Sir, one of Zambia’s many unique attributes has been its unparalleled political and social stability since independence in 1964. This includes the period up to the 1980s when Zambia was home to many liberation movements from our neighbouring countries and was, therefore, in the forefront of their independence struggles.
5. From 1991, Zambia has been a vibrant multi-party democracy having
discarded the one party system with a very un-salutary governance track record. The Patriotic Front came into power three years ago through a peaceful transition. This political stability and social harmony has been the platform upon which our strong economic growth and macroeconomic stability has been anchored.
6. Mr. Speaker, despite these significant milestones, much still remains to be done to make our independence more meaningful to the lives of our citizens. The development challenges we face as we enter the sixth decade as a nation remain daunting. Overall, poverty in Zambia remains high at about 60 percent even though it is much lower in urban areas at around 23 percent. Some of the most critical challenges that the Government faces, therefore, are to create decent jobs and wealth to ensure greater provision of social safety nets.
7. Sir, Zambia has a very young population, and a growing labour force, with over 53 percent of the population below the age of 18 years and 90 percent of the population below the age of 45 years. Being a country of predominantly young people, Zambia can yield a demographic dividend if our youth are equipped with skills and meaningfully involved and deployed in the various productive sectors of the economy.
8. Mr. Speaker, these challenges are made even more formidable in the face of threats posed by climate change, over-reliance on primary commodities, low technological advancement, low productivity
and rapid urbanisation. Over the past three years, the Patriotic Front Government has continued to strengthen the requisite macroeconomic foundations for development. This has been done through upgraded investments in all sectors including infrastructure which is necessary in addressing the challenges of accelerated development.
9. It is in this context that the theme of the 2015 Budget is “Celebrating our Golden Jubilee as One Zambia One Nation by Making Economic Independence a Reality for All”.
10. Mr. Speaker, economic development that facilitates prosperity for all can only have meaning and sustainability if it is firmly premised on fiscal prudence and responsibility. This should be our legacy to posterity.
11. Mr. Speaker, in framing the 2015 Budget, it is the vision of bringing economic independence to the millions of Zambians that has been our practical guide and moral benchmark. My address today is in four parts. Part I provides an overview of the global and domestic economic developments this year. In Part II, details of Government’s macroeconomic objectives and sectoral policies and strategies for 2015 are presented. The main details of the 2015 Budget are given in Part III and my address is concluded in Part IV.

PART I
GLOBAL AND DOMESTIC ECONOMIC DEVELOPMENTS IN 2014
12. Mr. Speaker, the global economy continues to recover but at a subdued pace. Output is projected to increase to 3.3 percent this year, up from 3.0 percent in 2013. In
advanced economies, positive growth is projected for the United States of America while in the Euro-zone there are concerns about stagnation and deflation. The emerging economies such as China and India will continue with their positive growth trajectory, albeit at a lower rate. In Sub-Saharan Africa, growth is projected to decline marginally from the 2013 level to 5.1 percent.
13. Sir, the performance of commodity prices varied in 2014. Copper prices averaged US $7,097 per metric tonne during the first nine months, down from US $7,752 per metric tonne in 2013. This reflects sluggish demand particularly from China. Similarly, crude oil prices have marginally declined during the same period to an average of US $102.95 a barrel compared to US $103.22 in 2013. It is also worth noting that the current spot prices for crude oil are showing a downward trend of below US $100 per barrel. With regard to food items, prices for main cereal crops such as maize, wheat and rice declined while prices for meat and dairy products increased.
14. Mr. Speaker, on the domestic front, preliminary projections are that real GDP growth will be higher than the projected 6.5 percent for this year. This will be mainly driven by a good harvest in the 2013/2014 farming season, increased electricity generation, investments in private and public infrastructure and growth in manufacturing as well as in transport and communications.
15. Sir, the growth recorded over the past three years has been accompanied by a significant rise in employment. In my 2014 Budget address, I informed this House that Government’s ambition was to create 200,000 decent jobs in 2014. I wish to report that current estimates are that the Zambian economy will generate about 120,000 new formal sector jobs in addition to thousands of other jobs being created in the informal sector. These jobs will mainly be in the private sector, reflecting the growing capacity of the private sector as the primary engine of economic growth and job creation.
16. Mr. Speaker, in 2014, the Treasury took measures to consolidate the fiscal position. These measures included actions to contain the size of the public sector wage bill and streamlining of expenditure towards priority programmes. As a consequence, the end year budget deficit is expected to be within the programmed level of 5.5 percent of GDP compared to 6.5 percent in 2013.
17. Mr. Speaker, inflation was contained within single digits over the first nine months and was 7.8 percent in September 2014 from 7.1 percent in December 2013. The slight increase was due to the depreciation of the Kwacha, mainly in the first half of the year, and the pass-through from upward adjustments in fuel prices and electricity tariffs. With these pressures now largely accounted for, Government is confident that for the sixth consecutive year, inflation will be contained to single digits in line with Government’s macroeconomic objectives.
18. Sir, the first half of 2014 experienced a rapid depreciation of the Kwacha against major currencies, reaching a high of K7 per US dollar in May. This partly arose from a reduction in the supply of foreign exchange to the market, particularly from the mining sector, and subsequent speculative behaviour. In response, the Bank of Zambia tightened monetary policy through a number of measures, including adjusting upwards the policy rate, increasing the statutory reserve requirement and extending its application to Government and Vostro accounts. Through these measures, the exchange rate has now stabilised around an average of K6.2 per US dollar.
19. Sir, the tight liquidity conditions came at the cost of a temporary rise in interest rates which constrained access to credit. Having achieved relative stability in the foreign exchange market, the Bank of Zambia has, since July 2014, eased liquidity conditions. As a result, the daily average overnight interbank rate reduced to 12.8 percent as at end-September 2014 from 25 percent at end-June 2014. With a gradual increase in liquidity, it is expected that commercial banks will pass on the benefits to borrowers by reducing lending rates. High interest rates inhibit growth and ultimately stoke up inflationary spirals.
20. Sir, the overall condition and performance of the financial sector was satisfactory as at end-September 2014. The financial sector’s aggregate capital adequacy and earnings performance improved, while asset quality and liquidity conditions remained stable. With regards to the implementation of the new capital adequacy framework for the banks, impressive progress has been made in terms of compliance.
21. During 2014, trading activity on the Lusaka Stock Exchange (LuSE) increased, reflecting improved investor sentiment and participation on the local bourse. Market capitalisation increased by 8 percent to K62.9 billion while the All-Share index rose by 17 percent to 6,620.9 by end-September 2014.
22. Mr. Speaker, LuSE listing requirements stipulate that no single shareholder should control more than 75 percent of the equity in any company. This is to ensure that more of our citizens participate in the capital markets. I am therefore directing the Securities and Exchange Commission to ensure that all listed companies comply with this requirement. To comply with the listing requirements, Government will itself reduce its shareholding in ZCCM Investments Holding Plc to 60 percent from 87 percent. The 27 percent shares will be sold to Zambian citizens as a way of entrenching economic independence of our people.
23. Mr. Speaker, the overall Balance of Payments is expected to register a surplus of US $486.0 million in 2014 compared to a deficit of US $344.9 million in 2013. This surplus is attributed to improvements in both the current and financial accounts. Higher copper export volumes and the receipt of Eurobond proceeds account for the expected improvements.
24. Mr. Speaker, consistent with improvement in the overall Balance of Payments position, gross international reserves are projected to increase to US $3.2 billion at end-December 2014, representing 3.6 months of import cover, from US $2.7 billion or 3.0 months of import cover recorded at end-December 2013.
25. Mr. Speaker, the stock of Government’s external debt as at end-September 2014 was US $4.7 billion. This represents an increase of 34 percent from US $3.5 billion as at end 2013. The increase in the external debt stock was mainly on account of the US $1 billion Eurobond that was issued in April as part of programmed financing in the 2014 budget. The total external debt service for the first nine months of 2014 amounted to US $126.2 million which is less than 3 percent of the domestic revenues.
26. Mr. Speaker, Zambia’s domestic debt including arrears as at end-September 2014
stood at K21.9 billion representing an increase of 5.6 percent from K19.7 billion as at end-December 2013. The increase was largely on account of programmed financing for the 2014 Budget.
—-
PART II
MACROECONOMIC OBJECTIVES, POLICIES AND STRATEGIES FOR 2015
27. Mr. Speaker, the Government in 2015 will continue to focus on industrialisation together with job and wealth creation, so as to reduce poverty and inequality on a sustainable basis. This will be achieved by investing in sectors that have been identified to best promote employment for our youthful population, significantly increase productivity in the economy by empowering our workers with the requisite skills for the 21st century, contribute to higher and inclusive economic growth, and develop the rural areas to narrow the urban-rural divide. These include the agriculture, tourism, manufacturing and construction sectors. Additionally, for inclusive growth, emphasis will be placed on investing in the social sectors.
28. Mr. Speaker, the specific broad socio-economic policy objectives for 2015 will be to:
(a) achieve a real GDP growth rate of above 7.0 percent;
(b) achieve an end year inflation rate of no more than 7.0 percent;
(c) increase international reserves to at least 4.0 months of import cover;
(d) raise domestic revenue collections to at least 18.5 percent of GDP;
(e) contain domestic borrowing to no more than 2.0 percent of GDP;
(f) accelerate the diversification of the economy, and continue the drive to create decent jobs, especially for the youth; and
(g) accelerate implementation of interventions in the health, education and water and sanitation sectors.
Economic Sector Policies
Agriculture
29. Mr. Speaker, Zambian agriculture recorded an historic achievement during the 2013/14 farming season when over 3.35 million metric tonnes of maize was harvested, the highest tonnage ever attained. This strong performance was due not only to an 8.1 percent increase in the area planted, but more importantly, a 22.3 percent increase in yields, reflecting higher productivity by our farmers. The area planted for other crops such as rice, groundnuts and millet also increased, reflecting that our goal of crop diversification is becoming a reality.
30. Mr. Speaker, to achieve even more productivity in agriculture, Government will increase the resources allocated to the sector. Among others, this will allow for the provision of effective extension services that will equip our farmers with the technical knowledge and skills to remain productive in the face of challenges posed by changing weather patterns. Government will therefore recruit 500 additional extension officers and better equip them by providing motor cycles and extension kits. Government will also ease the housing problem for extension officers by
continuing to rehabilitate camp houses in 2015.
31. Sir, to further promote crop diversification, extension services will continue to support farmers in growing crops suitable for the ecological zone. The Farmer Input Support Programme (FISP) will also be tailored to provide seeds for a variety of crops according to ecological comparative advantage. Achieving greater productivity and diversification in agriculture will require limiting spending on maize which currently absorbs over two thirds of the entire agriculture budget.
32. Mr. Speaker, in the context of the growing threats of climate change, the Government will upscale support to conservation farming involving a total of 84,000 farmers in 31 districts during the 2014/15 season.
33. To maximise the use of our arable land and grow crops throughout the year, irrigation development will continue to receive high priority with the construction of at least one smallholder irrigation scheme in each Province. This is expected to bring a further 6,000 hectares under irrigation in the next 12 months thereby bringing the total land area brought under irrigation with Government support over the last three years to 17,500 hectares.
34. Mr. Speaker, the focus in the livestock sub-sector will be on enhancing extension and disease control services. This will be done by establishing 23 livestock extension service centres, constructing and rehabilitating livestock blocks and camp houses, establishing 13 Satellite Insemination Centres, continuing the livestock restocking programme and upscaling disease control measures. Government will also encourage initiatives by the private sector to promote livestock production.
35. Mr. Speaker, the current annual national fish consumption stands at 130,000 metric tonnes. However, annual national production is 95,000 metric tonnes of which only 20,000 metric tonnes is from aquaculture and 75,000 metric tonnes is from rivers and lakes.
36. With the depletion of fish in our main water bodies, the development of aquaculture has become imperative. In this regard, Government will undertake reforms that will ease entry of our enterprising citizens in the private sector into aquaculture production. In addition, Government will continue with research activities, provision of extension services, surveillance and fish re-stocking.
37. Mr. Speaker, Government will in 2015 build on the success that has been scored at Nitrogen Chemicals of Zambia where the production of Compound D fertiliser has reached 100,000 metric tonnes for the 2014/2015 farming season. Sir, the annual production capacity of Nitrogen Chemicals of Zambia to produce Compound D fertiliser has increased to 150,000 metric tonnes following the recapitalisation by Government.
38. Sir, the recapitalisation programme will continue to enable the company recommence production of ammonium nitrate to facilitate local manufacture of top dressing fertiliser and explosives thereby creating further employment opportunities and reducing the importation of fertilisers into the country
Manufacturing
39. Mr. Speaker, in order to add impetus to job creation, Government has granted a number of tax concessions over the past three years to spur growth in the manufacturing sector. To further promote growth in the sector, Government Departments are hereby directed to give preference to locally produced goods in line with the Industrialisation and Job Creation Strategy. To this effect, beginning 1st January, 2015, Government will remove the voucher system applicable on such imports.
40. Mr. Speaker, in my 2014 Budget address, I announced that Government had released K106.9 million to the Development Bank of Zambia (DBZ) to support the financing needs of Small and Medium Scale Enterprises (SMEs).
41. Sir, I am pleased to report that all the funds have been disbursed to 47 SMEs involved in various sectors including agro-processing, manufacturing, engineering, fisheries, tourism and hospitality as well as in construction and agriculture. In order to facilitate further lending to SMEs in 2015, Government will commit additional funds to further recapitalise the DBZ.
42. Mr. Speaker, to further enhance medium to long term financing for SMEs, Government will support initiatives such as the Alternative Investment Market launched by LuSE. Such frameworks will allow SMEs to raise funds from the stock market at an affordable cost and tap into technical and managerial skills through new equity partners.
43. Sir, Government will also scale-up entrepreneurship training and market-relevant skills development under the Technical Education, Vocational and Entrepreneurship Training Institutions.
These interventions will invariably lead to wealth and job creation as SMEs hold the greatest potential for job creation.
44. Sir, Government will also continue allocating funds to the Citizens Economic Empowerment Commission to support value chain development. Out of the 1,526 approved projects this year, 1,072 projects valued at K48 million have since been funded, 92 percent of which are in rural areas, thus contributing to our efforts to narrow the urban-rural divide. Of the funded projects, 64 percent went to women and youths.
45. In addition, Government has already embarked on the design of industrial clusters that are going to be established in each district as a way of realising economic independence for our citizens. The clusters will provide industrial workshops from which our entrepreneurs will be able to manufacture various products, thus promoting value addition, particularly in the areas of metal fabrication, timber and agro-processing, aquaculture and automotive industry.
46. Mr. Speaker, the Government will continue to facilitate infrastructure development to support the growth of the manufacturing sector through the promotion of multi-facility economic zones and industrial parks.
Tourism
47. Mr. Speaker, Zambia’s tourism sector has immense potential for increasing revenue collection and delivery of decent
jobs to our citizens due to its labour intensive nature. I am glad to inform this august House that growth in this sector has been positive in recent years. In 2013, tourist arrivals increased by 6.5 percent to over 900,000. Preliminary data for 2014 show that this number will be surpassed as end-June 2014 arrivals of over 455,000 were 5.2 percent higher than the same period last year.
48. Sir, to unlock the massive potential for employment in the sector, Government will continue to improve airport infrastructure, electricity connectivity and access roads to tourist areas, particularly those along the Northern Circuit, Lower Zambezi and Kafue National Parks.
49. Mr. Speaker, as regards airport infrastructure, Government is expanding and upgrading the Kenneth Kaunda International Airport in Lusaka and will construct a new airport at Simon Mwansa Kapwepwe in Ndola. Further, plans are underway to rehabilitate a number of aerodromes across the country to increase access by air.
Mining Sector
50. Mr. Speaker, mining sector production in the first eight months of 2014 at 448,673 was about 50,000 metric tonnes lower than the corresponding period in 2013. The lower outturn was largely on account of a significant fall in output recorded at one of the major mines due to the temporary suspension of mining operations as a result of operational challenges. The depletion of oxide ore at some mines and stockpiling of concentrates also contributed to the lower output. Despite these operational constraints, copper production is projected to be marginally higher than the 2013 production of about 790,000 metric tonnes.
51. Sir, Government is promoting the domestic auctioning of gemstones in order to obtain maximum benefits from the resources and to promote transparency and accountability in the sub-sector. This is in support of the diversification and growth of the mining sector, evidenced by gemstone sales of over US$ 50 million in the first eight months of this year. It will also contribute to domestic revenue collection, thereby enhancing our fiscal position as we make economic independence a reality for all.
Economic Infrastructure Development
52. Mr. Speaker, as emphasised by His Excellency the President in his address to this august House, infrastructure development is an indispensable pillar in our efforts to raise the productivity of our businesses, diversify the economy and promote inclusive growth. In this regard, the PF Government has made tangible progress in developing key infrastructure in the transport and communications and energy sectors.
Transport and Communication Infrastructure
Roads
53. Mr. Speaker, the Government has continued implementing the road infrastructure programme under the Link Zambia 8000, Road Tolling and the Lusaka 400 Road Projects. Equipment for Pave Zambia 2000 has since been procured and distributed to all provinces and manufacture of pavers has commenced in 7 provinces. Government’s expectation is the rapid acceleration of this project in 2015 which will provide further income opportunities for our unemployed youths.
54. Sir, under phase one of the link Zambia 8000 Road Project, a total of 22 projects valued at K9.8 billion, covering a length of 2,260 km are under implementation countrywide. Included under this programme are the Kasama-Mporokoso, Mbala-Nakonde, Chama-Matumbo, Chongwe-Katoba basic School, and the Isoka-Muyombe-Lundazi-Chama roads. Additionally, works on the Kitwe-Chingola Dual Carriage Way are advanced at 40 percent, the Pedicle road at 48 percent, and the Mansa-Luwingu road at 37 percent, while 19.5 km of the Kawambwa-Mushota road and 60 km of the Bottom road have been completed. I wish to also inform this august House that the procurement process for the engagement of a contractor for the Kalabo-Sikongo road has commenced. Works have also been completed on the Kasama-Mbesuma and Kalulushi-Lufwanyama roads.
55. Mr. Speaker, Government is alive to the reality that maintaining our road network in a good state entails investing in road maintenance and rehabilitation. In this regard, 63 km of the Lusaka – Chirundu road has been rehabilitated. Further, 52 km of the 91 km road from Luangwa Bridge to Feira has been upgraded to bituminous standard while maintenance works will soon commence on the Chinsali-Nakonde road.
56. Sir, Government is also constructing a number of bridges to ease movement of our people and open up our rural areas. In this regard, Government recently completed and commissioned the Michael Chilufya Sata Bridge in Chiawa. Further, 22 out of the 26 bridges on the Mongu-Kalabo stretch are under construction with seven bridges already completed. The construction of the Mufuchani Bridge in Kitwe is also underway. I wish to also report that the contract for the construction of the Kazungula Bridge has been signed and the contractor is mobilising.
57. Mr. Speaker, the Government is operationalising the road tolling programme as an innovative and self-financing mechanism for sustainable road rehabilitation and maintenance. This programme is being implemented at 8 weighbridges and 18 ports of entry targeting vehicles with weights above 6.5 tonnes. So far, K187.4 million has been raised from this programme in 2014.
Railways
Mr. Speaker, Government is committed to improving the railway network to reduce the heavy load on our roads. I wish to report that of the targeted 442 km of the Livingstone-Chingola line, a total distance of 117 km has been rehabilitated, while 133km will be completed by the end of 2014.
58. Furthermore, progress has been made in refurbishing passenger coaches resulting in improved service that has attracted over 7,600 passengers per week compared to less than 5,000 under the concessionaire. In addition, the volume of cargo transported has increased to over 400,000 tonnes during the first half of the year from about 280,000 tonnes during the same period in 2013.
59. Sir, the rehabilitation of storage facilities at Chipata Station has been completed and Zambia Railways Limited has since commenced operations on the Chipata-M’chinji railway line. This route will enhance regional trade through the Nacala Corridor.
60. Mr. Speaker, the 162 km Mulobezi railway line together with livestock wagons and passenger coaches are also being rehabilitated. Work on the Copperbelt inter-mine railway network is progressing well at Konkola and Nchanga mine plants. Rehabilitation works along the Luano-Chililabombwe line are also nearing completion.
61. Mr. Speaker, Government will continue to support TAZARA to ensure that it facilitates the movement of goods and passengers and enhances local and foreign trade links. Government is, therefore, resolving the policy constraints relating to the operation of TAZARA by harmonizing positions with our Tanzanian partners.
Energy Infrastructure
62. Sir, the energy sector continues to grow and contribute positively to economic growth. Government has moved proactively to reduce the power deficit in the electricity sub sector which has potentially been a major hindrance to our future economic prosperity. We have just brought on stream 360 megawatts of power having completed the Kariba North Bank hydro power extension project.
63. Mr. Speaker, another 120 megawatts at the Itezhi-Tezhi Hydro Power Plant and 300 megawatts of thermal power being developed in Sinazongwe by the private sector will come on stream next year to further enhance our power generation capacity. In addition, Government will continue to undertake extension and rehabilitation works on the transmission and distribution networks under the Power Rehabilitation Project.
64. Sir, the construction of the Pensulo-Kasama and the Pensulo-M’soro-Chipata 330kv transmission lines is expected to be completed next year.
65. Mr. Speaker, the 750 megawatts Kafue Gorge Lower Project, including the two 330kv transmission lines, is back on course following the strengthening of the governance structure for the project in line with international good practice. It is expected that by the end of 2014, the procurement process for the Engineering, Procurement and Construction Contractor, the Transaction Advisor and Fund Manager will be finalised. Government’s expectation is that execution of this project will accelerate in 2015.
66. Mr. Speaker, Government’s policy in the petroleum sub–sector is to ensure a stable supply of fuel in all parts of the country. To this end, the programme of building provincial depots will continue. The Mpika Fuel Depot has been commissioned, while the Solwezi and Mongu Fuel Depots are expected to be completed in 2015. The identification of additional sites in the remaining provinces is in progress.
67. Sir, in order to deal with challenges in this sector, the Government is reviewing the petroleum supply chain and the financing options. Further, alternative sources of fuel supply are being pursued to reduce costs. Discussions at bilateral level with oil producing countries for the supply of crude and finished products have commenced to streamline the procurement process by eliminating middlemen.
Social Sector Policies
68. Mr. Speaker, to advance Government’s commitment to social justice, its social sector priorities in 2015 will remain focused on improving access to and enhancing delivery of education, health and water and sanitation services as well as accelerating implementation of social protection programmes.
Education and Skills Development
69. Mr. Speaker, Government will continue to focus on increasing equitable access to quality education and empower our youths through skills training. In order to increase access, and improve progression rates to higher levels of learning, construction of education facilities especially at secondary and tertiary levels will remain paramount. Emphasis will also be placed on enhancing early childhood education.
70. Sir, to improve the quality of education, Government will continue the programme of upgrading teacher qualifications to meet the minimum standards required. The training of teachers in science, mathematics and technology subjects will be scaled up to address the inadequate number of teachers in these fields. Government will continue implementing the revised education curriculum that puts emphasis on life skills to align student qualifications to the needs of industry and the wider economy.
71. Mr. Speaker, the Government will also continue with the school feeding programme to promote the cognitive development of young children, particularly the disadvantaged.
Health
72. Mr. Speaker, in line with the Government’s objective of bringing cost effective quality health services as close as possible to all Zambians, Government will continue to increase the availability of frontline health personnel, enhance infrastructure and improve the provision of drugs and medical equipment. Sir, the health status of Zambians continues to improve under the PF Government as revealed by the 2013/2014 Zambia Demographic Health Survey.
73. Sir, in order to address human resource constraints in the health sector, Government has been implementing the National Training Operational Plan since 2013. The current number of frontline health personnel stands at 13,147. In 2015, Government plans to recruit additional staff so that the overall number of health personnel increases by over 2,000, bringing the total number to over 15,000.
74. Sir, Government has commenced the construction of two new training institutions in Senanga and at Levy Mwanawasa General Hospital in Lusaka. In addition, 27 other health training institutions are under rehabilitation and expansion. This is expected to accelerate the supply of health personnel by increasing the number of graduates to 10,000 per year from the current 5,500.
75. Mr. Speaker, 30 district hospitals are also under construction in various parts of the country and a further 8 will be started before the end of this year. In addition, the programme to construct 650 health posts is underway and will be completed by the end of 2016.
76. Sir, to further improve the quality of health care and reduce referrals both locally and abroad, Government is well advanced with its modernisation programme to upgrade the health facilities at the University Teaching Hospital, Livingstone General Hospital and Kitwe and Ndola central hospitals. Under this programme, Government is procuring specialized equipment including CT scans, Magnetic Resonance Imaging machines and CATHLABs.
77. Mr. Speaker, improving the supply of medical drugs and logistical systems remains a priority of the Government in order to ensure timely and adequate supplies. In line with this, the Government embarked on the establishment of six regional hubs under Medical Stores. The Choma and Chipata regional hubs are already operational and a third, in Mongu, will be operational by the end of 2014. The remaining three are expected to be operational in 2015.
Water Supply and Sanitation
78. Mr. Speaker, the PF Government remains committed to ensuring that all Zambians have access to clean water supply and sanitation services. I am pleased to report to this House that out of the 2,000 boreholes planned for this year, 1,514 had been drilled as at end-September, 2014. In
addition, 10 piped-water schemes and 921 boreholes had been rehabilitated. As a result of these interventions, rural access to clean and safe drinking water has increased to 64 percent from 61 percent of the population in 2013.
79. Mr. Speaker, in 2015 Government will continue interventions aimed at increasing rural access to clean and safe drinking water from the current 64 percent to 67 percent. This will be achieved by constructing an additional 2,500 water points, mainly boreholes. Government will also rehabilitate an extra 2,000 existing water points during the same period.
80. Sir, to ensure adequate access to sanitation facilities, Government has trained and rolled-out total sanitation approaches in 44 districts. This has resulted in 1.3 million people in rural areas having access to adequate sanitation facilities. In 2015, Government will continue promoting community-based approaches and the construction of institutional sanitation facilities. With these interventions, rural access to sanitation facilities is targeted to increase to 45 percent from the current 43 percent.
81. Mr. Speaker, Government in 2015 will increase access to clean and safe drinking water in urban and peri-urban areas from the current 83 percent to 85 percent of the population. This will be achieved through the rehabilitation and construction of water supply infrastructure in the various urban towns under the 11 water and sewerage utility companies.
82. Sir, Government is also committed to improving sanitation facilities in urban and peri-urban areas. As such, designs for water supply and sanitation improvements under the Lusaka Water Supply, Sanitation and Drainage Project have been completed while rehabilitation works on the water and sewerage systems under Southern and Mulonga Water and Sewerage Companies in Livingstone and Chingola have commenced.
83. Mr. Speaker, promoting sustainable solid waste management is critical to ensuring environmental protection. In 2015, Government will provide resources to local authorities to enable them procure refuse trucks and other solid waste management equipment country wide. Local authorities will be encouraged to embark on waste-to-energy projects through the Public Private Partnership arrangements.
Social Protection
84. Mr. Speaker, Government remains committed to ensuring adequate social protection for its citizens. The provision of sustainable and equitable pension benefits as well as other social safety nets for vulnerable members of society is, therefore, at the core of Government’s social protection policy.
85. Sir, our public pension system is characterised by huge actuarial deficits, low annuities and unsustainable entitlements. To address these challenges, an inter-ministerial committee was constituted to review the pension system. The committee
has since completed its review and made recommendations to redesign the pension rules and framework and harmonise the social security legislation. Government is now considering these recommendations.
86. Mr. Speaker, to effectively contribute to the eradication of hunger and extreme poverty in rural households, Government scaled up the Social Cash Transfer Scheme in 2014. As at June 2014, over 145,000 individuals had been supported of which more than 80 percent were female. It is projected that by the end of 2014, about 190,000 beneficiaries will be reached. This Scheme will continue in 2015 as a tangible demonstration of Government’s resolve and commitment to eradicate hunger and extreme poverty.
87. Mr. Speaker, Government remains committed to implementing other social safety nets including the Women Empowerment Programme, the Food Security Pack, the Public Welfare Assistance Scheme, medical grants and the bursary scheme for students. In 2015, Government will review some of these with the aim of rationalising coverage to maximise their impact.
Debt and Aid Policy
88. Sir, Government remains committed to maintaining a sustainable debt level. In this regard, Government conducted a Debt Sustainability Analysis in June this year which indicates that the country’s debt position remains sustainable. The net present value of Zambia’s external debt at 23 percent of GDP remains below the internationally accepted threshold of 40 percent of GDP. 89. Mr. Speaker, I wish to assure this House that the PF Government will exercise fiscal prudence in contracting debt. Borrowing will therefore be restricted to financing only critical capital investments. To avoid burdening future generations with unsustainable debt, Government will further strengthen domestic revenue mobilisation so that an increasing proportion of our budget is financed from domestic resources.
90. On the domestic front, Government will limit its borrowing to not more than 2 percent of GDP to ensure that fiscal policy does not crowd out the private sector. This will further support the lowering of interest rates in the domestic market. Heavy borrowing by Government pushes up the cost of Treasury instruments, in the process raising commercial bank interest rates which impedes all business, particularly Small and Medium Enterprises’ borrowing and dampens the impetus for job creation.
91. Sir, as I indicated in my last Budget address to this august House, the revision of Zambia’s aid policy has become imperative. This is in view of the general global decline in Official Development Assistance and the shift by bilateral Cooperating Partners from direct budget support to sector and project support.
92. I am pleased to inform the House that Government has made progress in drafting the new policy which will focus more on strengthening trade relations,
enhancing private sector exchanges and partnerships to build capacity in the various priority sectors of the economy in line with the Revised Sixth National Development Plan.
Fiscal Policy
93. Mr. Speaker, substantial progress has been made in 2014 to consolidate the fiscal position. The end-year overall deficit is projected to be within the target of 5.5 percent of GDP, down from 6.5 percent in 2013. In 2015, the Treasury will continue to exercise prudent fiscal management with the overall deficit targeted to further fall to 4.6 percent of GDP.
94. Sir, this lower fiscal deficit is a fine balance between ensuring macroeconomic stability and the need to fund critical public infrastructure that supports a higher and sustainable growth trajectory. The deficit will over the medium term continue to be reduced to around 3.3 percent of GDP by 2017. In recognition of this effort, I am glad to inform this House that international rating agencies recently revised Zambia’s outlook from stable to positive, and affirmed the country’s ceiling at B+.
95. Mr. Speaker, key to the achievement of our fiscal deficit target will be the continued control of the recurrent expenditure of the budget. Further, limiting expenditure on maize marketing, ensuring cost reflective fuel pricing and rationalising capital expenditure will be essential in containing the deficit.
96. Mr. Speaker, to further strengthen the fiscal position in 2015, Government will improve the efficiency with which it controls its resources through the full operation of the Treasury Single Account. This will ensure better cash management and avoid idle balances in the banking system. Consequently, the need for Government to borrow unnecessarily on the money markets to finance its operations will be curtailed.
97. Sir, a strengthened fiscal position will also arise as a result of a continuation of Government’s effort to modernise tax administration with e-based tax and customs administration systems that will enable tax payers to declare and pay taxes online. This will enhance the operational efficiency within Zambia Revenue Authority and reduce the cost to taxpayers of complying with their tax obligations.
98. Mr. Speaker, the reform of land titling procedures and the roll out of the Zambia Integrated Land Management and Information System is expected to be completed in 2015, thereby boosting non tax revenues. As a consequence of these efforts, and changes in tax policy which I will detail later, the revenue to GDP ratio in 2015 is projected to rise to 18.5 percent from 17.2 percent projected for end-2014.
99. Sir, there are some concerns regarding the application of Value Added Tax (General) Administrative Rule Number 18 on proof of export requirements. It has been noticed that some exporters have not complied with the requirements of Rule 18 and this has led to non-payment of VAT refunds. It is Government’s desire that these concerns are resolved expeditiously and amicably.
Monetary and Financial Policies
100. Mr. Speaker, in order to support poverty reduction and economic growth, monetary policy in 2015 will remain focused on achieving single-digit inflation rates of no more than 7 percent. Higher inflation adversely affects the poor majority of our people who have no way of protecting their incomes. Consequently, the Bank of Zambia will control inflation through increased use of market-based monetary tools that avoid economic distortions. Further, a liberal foreign exchange system will be maintained, with the Central Bank’s interventions limited to smoothing out short-term fluctuations in the exchange rate.
101. Sir, increased access to formal financial services remains a priority objective for this Government. To demonstrate its commitment, Government will continue to implement the various initiatives enshrined in the financial sector development programme. Initiatives to extend financial services to ordinary citizens and small business enterprises will be prioritised around two broad strategies. The first of these is the development of a regulatory framework for agency banking aimed at encouraging financial institutions to bring banking services to the vast number of unbanked Zambians. The second is the implementation of the National Strategy on Financial Education to provide ordinary Zambians with financial knowledge.
Structural Reforms
Public Financial Management Reform
102. Mr. Speaker, a sound Public Financial Management (PFM) system is indispensable to the efficient collection of public finances, their allocation to priority areas and the efficient accounting and control of these finances. In this regard, the PFM Reform Strategy was launched earlier this year to enhance PFM practice in Zambia.
103. Sir, key milestones achieved so far include the publication of the National Planning and Budgeting Policy and the rolling out of the Integrated Financial Management and Information System (IFMIS) to more sites. Work has also progressed on the drafting of the National Planning and Budgeting Bill and the mainstreaming of IFMIS into Government structures.
104. Mr. Speaker, another significant achievement is the submission today, as part of the 2015 Budget, of an Output Based Budget (OBB) for the Ministry of Education. The OBB is one tangible outcome of implementing the Planning and Budgeting Policy. It requires that the budget becomes more results-oriented and in line with national development priorities. It will also provide this House with more relevant information for assessing Government’s budget proposals and performance.
105. Sir, as a Government that believes in inclusiveness, I wish to report that a consultative meeting was held with members of the Expanded Committee on Estimates on the proposed OBB pilot. More consultative and sensitisation meetings will be held with members of this august House and other key stakeholders before progressively rolling-out the OBB to all Ministries, Provinces and other Spending Agencies.
Public Sector Reforms
106. Mr. Speaker, in order to strengthen governance and operational efficiency of State Owned Enterprises (SOEs), the Government has incorporated the Industrial Development Corporation (IDC). The IDC will be the holding company for all SOEs and will become the main vehicle for investment in strategic sectors where the private sector is not able to venture.
107. Sir, the Government is concerned about the low levels of efficiency, high level of liabilities and poor financial management practices in some Grant Aided Institutions. In order to address these concerns, Government has commenced a review to assess their viability and sustainability. Institutions that will be found unsustainable will either be abolished or reverted to Central Government.
Fiscal Decentralisation
108. Mr. Speaker, I am pleased to announce that the review of the Intergovernmental Fiscal Architecture has been completed and work to implement the results of this review has commenced. Consequently, in 2015, a Local Government Equalisation Fund (LGEF) will be established to provide a stable, buoyant and predictable source of revenue from Central Government, to supplement Local Government revenues. This will enable councils to deliver better municipal services and invest in local development projects.
109. Sir, financing of the Fund will be based on a revenue sharing arrangement, where Central Government will allocate a minimum of 5 percent of total income taxes. Allocations to individual councils will be formula-based to ensure equity and transparency. The release of grants to councils will be conditional on observance of good public financial management practices and delivery of essential municipal services.
Private Sector Development Reforms
110. Mr. Speaker, in order to reduce the cost of doing business for the private sector, Government will operationalise the provisions of the Business Regulatory Act of 2014 to ensure that the principles of the law are complied with when introducing licences. In this regard, Government will work towards institutionalising regulatory impact assessments to rationalise licences and streamline procedures.

PART III
THE 2015 BUDGET
111. Mr. Speaker, in 2015, Government proposes to spend K46.7 billion or 24.6 percent of GDP. This will be financed from domestic revenues of K35.1 billion which is 75.2 percent of the total Budget and 18.5 percent of GDP. Grants from cooperating partners of K1.2 billion or 2.6 percent of the total budget will complement domestic revenues. Domestic borrowing is projected to be 2.0 percent of GDP translating to K3.8 billion while K4.2 billion is a combination of foreign programme and project financing. The balance of K2.4 billion is earmarked proceeds from the 2014 Eurobond.
2015 Expenditure Allocations by Function
112. Sir, in line with the sector policies outlined in Part II, I now discus the supporting expenditure allocations by functions of Government.
2015 EXPENDITURE BY FUNCTION Function 2015 Budget
K’million Percentage of Budget
General Public Services 12,040.18 25.80%
Public Affairs and Summit 68.86
Constitution Making Process 29.26
Constituency Development Fund 210
Local Government Equalisation Fund 586.76
Domestic Debt Interest 2,896.16
External Debt Interest 2,391.68
Compensation and Awards 100
Defence 3,247.21 7.00%
Public Order and Safety 2,180.02 4.70%
Economic Affairs 12,746.64 27.30%
Empowerment Funds 123.7
Sovereign Wealth Fund 100
Farmer Input Support Programme 1,083.17
Strategic Food Reserve 992.9
Rural Electrification Fund 70.71
ZESCO Power Rehabilitations 600
Roads Infrastructure 5,626.51
O/W GRZ Contribution 3,226.34
Environmental Protection 174.96 0.40%
Housing and Community Amenities 798.71 1.70%
Water Supply and Sanitation 540.99
Health 4,464.09 9.60%
Drugs and Medical Supplies 753.52
Medical Infrastructure and Equipment 268.24
Recreation, Culture and Religion 323.63 0.70%
Education 9,433.33 20.20%
School Infrastructure 1,069.53
University Infrastructure 650
Social Protection 1,257.80 2.70%
Public Service Pension Fund 805
Social Cash Transfer 180.59
O/W GRZ Contribution 150
Food Security Pack 50
Grand Total 46,666.56 100.00%

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