PMRC 2019 BUDGET THE 2019 NATIONAL BUDGET PRESENTATION TO PARLIAMENT THE BUDGET COMMITTEE K86.8 BILLION Policy Monitoring and Research Centre (PMRC) Plot No. 36C Sable Road, Kabulonga, Lusaka, Zambia Private Bag KL 10 Tel: +260 211 269 717 | +260 979 015 660
ABOUT PMRC The Policy Monitoring Research Centre (PMRC) is a public policy research Think-Tank, whose vision is unlocking Zambia’s potential through evidence-based policy research, analysis and reform proposals to complement Governments efgorts across sectors. Within its core analytical work areas, PMRC’s stated aims are to: ■ Promote public understanding through research and education ■ Encourage debate on social and economic policy issues critical to national development ■ Disseminate research based reform proposals; and ■ Support government machinery in recommending policy and procedure to ensure efgective delivery of the national development agenda. PMRC was established to complement the Government of the Republic of Zambia in evidence-based social economic research across sector ministries and monitor coherence and implementation through collaborations with Government ministries, Government Agencies, Non Governmental Organisations (NGOs), Civil Society Organisations (CSOs). www.pmrczambia.com PMRC’S ROLE IN THE BUDGET PROCESS ■ Pre Budget submissions to the Ministry of Finance and Ministry of National Planning ■ We have had input into several policies and legislation (technical view) ■ Working with the Ministry of Finance on the Citizens Budget ■ Producing Inforgraphic for easy understanding of the Budget ■ Simplified analysis for the public ■ Public lectures ■ Appearance before the Budget Committee What is the linkage between the budget and 7NDP? ■ We are closely monitoring to assess the extend to which this Budget compliments the implementation of the 7NDP 2 | PMRC 2019 BUDGET PRESENTATION TO PARLIAMENT
BUDGET OVERVIEW ■ Government proposes to spend K86.8 billion or 28.9 percent of GDP in 2019 compared to K71.66 billion or 25.9% of GDP in 2018 ■ Theme: “Delivering Fiscal Consolidation for Sustainable and Inclusive Growth” About Fiscal Consolidation ■ Fiscal consolidation is a process where government’s fiscal health is getting improved and is indicated by reduced fiscal deficit. Improved tax revenue realization and better-aligned expenditure are the components of fiscal consolidation as the fiscal deficit reaches at a manageable level. ■ The link between fiscal discipline, economic growth on one hand and poverty/inequality reduction, on the other, needs strengthening. THE 2019 ■ The Debt status of the country remains a concern and thus this NATIONAL BUDGET budget theme is timely but the reality will be in the actions that government takes towards realisation of this theme. ■ The reality of this debt is further depicted by the fact that debt repayments amount to 27.2% which is above the combined allocations to 3 key social sectors of health, education and social protection. The specific macroeconomic objectives for 2019 K86.8 BILLION i. Attain annual GDP growth rate of at least 4 percent; ii. Sustain inflation within the range of 6 to 8 percent; iii. Raise international reserves to at least 3 months of import cover; iv. Increase domestic revenue to not less than 18 percent of GDP; v. Reduce the fiscal deficit to 6.5 percent of GDP; vi. Prioritise the dismantling of arrears and curtail accumulation; and vii. Reduce the pace of debt accumulation and ensure sustainability PMRC 2019 BUDGET PRESENTATION TO PARLIAMENT | 3
billion at December 2017 . Government Expenditure ZMW 86.8 billion Budget Government Revenue ZMW 56.1 billion Financing from corporate partners ZMW 1.9 billion Outlook 2019 Financing from domestic and foreign sources ZMW 28.8 billion Source: Ministry of Finance, 2019 National Budget TARGET 2018 2019 2020 2021 Macroecono mic Targets Real GDP Growth 4.0% 4.3% 4.5% 4.6% 2018 -2021 CPI Inflation (end of period) 6% to 8% Budget Deficit (% of GDP) 7 .4% 6.5% 5.5% 5.1% l 6,454 6,477 6,490 6,490 Copper Price (US$/MT) l Copper production (MT) 891,203 924,510 961,822 999,302 Source: Ministry of Finance, Green Paper.2019 -2021 Medium Term Expenditure Framework and 2019 National Budget l © 2018 KPMG Zambia Limited, a Zambian member fjrm of the KPMG network of independent member fjrms affjliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 2019 Revenue and Financing 31% Total Tax Revenue NonTax Revenues 54% Domestic Borrowing % Total Foreign Grants and Loans 5 11% 4 | PMRC 2019 BUDGET PRESENTATION TO PARLIAMENT © 2018 KPMG Zambia Limited, a Zambian member fjrm of the KPMG network of independent member fjrms affjliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
BUDGET BY FUNCTION 2019 Expenditure by Function 2019 Budget 2018 Budget 2017 Budget Function ZMW Percentage ZMW Percentage ZMW Percentage ‘million of Budget ‘million of Budget ‘million of Budget General Public 31,277 .06 36.03% 25,898.03 36.10% 17 ,970.34 27 .90% Services Defence 5,072.43 5.84% 3,498,22 4.90% 3,204.45 5.00% Public Order and 2,865.51 3.30% 2,144.57 3.00% 2,342.97 3.60% Safety Economic 20,651.09 23.79% 17 ,258.33 24.10% 20,132.60 31.10% Affairs Environmental 875.10 1.01% 951.35 1.30% 616.47 1.00% Protection Housing and Community 2,238.70 2.58% 816.26 1.10% 822.81 1.30% Amenities Health 8,069.13 9.30% 6,781.56 9.50% 5,762.03 8.90% Recreation, Culture and 297 .27 0.34% 451.16 0.60% 323.5 0.50% Religion Education 13,274.55 15.29% 11,561.64 16.10% 10,641.93 16.50% Social 2,187 .06 2.52% 2,301.26 3.20% 2,693.21 4.20% Protection Grand Total 86,807 .89 100.00% 71,662.39 100.00% 64,510.30 100% Major observations: ■ Education allocations in the 2019 budget is 15.2 % which is less than 20% global threshold e.g the Cairo Declaration. ■ Health allocation at 9.30% falls short of the Abuja Declaration, which stipulates an allocation of about 15% - 20%. © 2018 KPMG Zambia Limited, a Zambian member fjrm of the KPMG network of independent member fjrms affjliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. ■ Agriculture allocation also falls short of the Maputo declaration of between 10% - 15% PMRC 2019 BUDGET PRESENTATION TO PARLIAMENT | 5
GENERAL COMMENTS PILLAR ONE: ECONOMIC DIVERSIFICATION AND JOB CREATION Economic diversification still remains unattained. We have been submitting that Agriculture, Tourism, Energy and Manufacturing present major opportunities for diversification reform and we shall provide comments herein. AGRICULTURE Agriculture productivity (especially among small scale farmers) has been low and is attributed to over dependence on rain fed agriculture, poor agricultural practices and limited mechanization. ■ We acknowledge that one of the ways to promote all year round production as well as climate smart agricultural practices is to continue developing irrigation infrastructure. We cannot underestimate this in view of the reports of the El Nino weather partners in the 2018/2019 season. We need contingency and mitigation measures to protect our crop sub sector. THE 2019 E-VOUCHER NATIONAL BUDGET Over 716,000 farmers accessed inputs under the e-voucher system. Further, around 5,800 agro-dealers throughout the country were involved in the supply of agro- inputs. Challenges ■ Limitations of telecommunication connectivity, ■ Financial services provision challenges and K86.8 BILLION ■ Limited information technology. We also acknowledge that Government will procure and distribute inputs to the afgected parts of the country. The afgected districts will be re-introduced on the e-voucher system in 2019, once the challenges have been resolved. PMRC has been working with Smart Zambia and was the first institution to produce a statement clearly stating how the new e voucher system will work. ) Smart Zambia Institute has indicated that three (3) modes of administering the Farmer Input Support Programme (FISP) will be used. These are; 1. Cardless mode 2. Using electronic voucher (e-voucher) cards with government engaged bank 3. Using electronic voucher (e-voucher) cards with a proxy bank. 6 | PMRC 2019 BUDGET PRESENTATION TO PARLIAMENT
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