The Policy Monitoring and Research Centre (PMRC) says the 2019 budget should address how government will curtail further accumulation of debt and the operationalization strategies for the Sinking Fund.

In a statement, Wednesday, PMRC executive director Bernadette Deka stated that PMRC was expecting to see a reduction on budget deficits towards the social sector and dismantling of arrears.

Deka stated that PMRC was expecting to see an increase in the allocation towards social protection from the 2018 allocation of K2.3 billion to around K3.0 billion in 2019, adding that efforts must be supported by fully migrating the Social Cash Transfer system to an electronic platform to reduce administrative costs and improve overall efficiency.

“The expected marginal increase in the 2019 budget compared to the 2018 budget is consistent with PMRC expectation as there is need to reduce on budget deficits towards the social sector and dismantling of arrears. The following are key expectations of PMRC in the 2019 budget as the country moves towards the successful implementation of the 7NDP: Goods and services to decline in 2019 as austerity and fiscal consolidation measures aimed at reducing the administrative costs of running government take effect. In the 2018 budget, expenditure on goods and services was 2.1 per cent of GDP and is expected to decline below one per cent in order to reduce the budget deficit to not more than 5.1 per cent of GDP,” Deka stated.

“Government had embarked on massive public infrastructure development across the breadth of the country, such as roads, health and education facilities largely financed by both external and domestic borrowing, resulting in increased debt service obligations. We, therefore, expect the 2019 budget to address how government will curtail further accumulation of debt and the operationalization strategies for the Sinking Fund. We also expect government to allocate sufficient resources towards dismantling of domestic arrears, which currently stand at K13.9 billion and curb any further accumulation of arrears through the full roll-out of the Integrated Financial Management System (IMFIS). Payment of arrears will ensure that there is enough liquidity for Micro, Small, and Medium-Sized Enterprises, which form the backbone of the economy.”

She stated that PMRC also expected an increase in the allocation towards social protection from the 2018 allocation of K2.3 billion to around K3 billion next year.

“These efforts must be supported by fully migrating the Social Cash Transfer system to an electronic platform to reduce administrative costs and improve overall efficiency. Further, we expect the government to prioritize funding payments of pensions to ease the burden of keeping unpaid retirees on the government payroll. We expect the budget to address the challenges of water and sanitation in rural areas by allocating more money towards water and sanitation projects. In the 2018 budget, much of the funding towards water and sanitation went towards the Lusaka Urban Water and Sanitation Project. PMRC expects 25 per cent of the water and sanitation budget to go towards rural areas. In order to actualize diversification away from mining, government must increase funding to the economic sector,” she appealed.

Deka explained the need to realign spending in the agricultural sector from Food Reserve Agency (FRA) and Farmer Input Support Programme (FISP) to key drivers of growth in the sector, such as extension services, research and development, among others.

“PMRC notes that in the 2018 budget, there was reduction in spending from K20,132,600,000 in 2017 to K17,258,329,480. Government should, therefore, prioritize setting up the tractor assembly plant and utilize the US $100 million Public Private Partnership (PPP) fund to improve productivity in the agriculture sector. There is urgent need to realign spending in the agriculture sector from FRA and FISP to key drivers of growth in the sector, such as extension services, research and development, livestock management and production, aquaculture, disease control and irrigation. Furthermore, PMRC expects government to maintain stability in the Mineral Royalty Tax regime (both in quantum and deductibility) and explore ways to boost production to offset losses from low commodity prices including; capital allowances of up to 100 per cent for mining operations and legislative reform to allow ring-fencing of capital allowances for open-pit development, shaft-sinking and shaft re-deepening,” stated Deka.

“It is envisaged that these measures will create optimal conditions for the industry to grow production. PMRC encourages government to press on towards achieving macroeconomic growth, fiscal consolidation and debt sustainability. We urge government to continue to acclimatize to austerity measures; the effective implementation of these measures, coupled with the Green Paper’s objectives, will uplift the livelihoods of Zambians through improved service delivery, low inflation rates, increased employment and increased Gross Domestic Product (GDP). Government’s intentions to rebalance the allocations in education, health and water and sanitation infrastructure in rural areas as a way of reducing development inequalities remains high priority focus.”