The Policy Monitoring and Research Centre (PMRC) has urged government to create space for private sector participation in the economy if its aspirations for 2019 are to come to fruition.
In a post budget analysis conducted by the PMRC research department, with support from the centre executive director Bernadette Deka, it was noted that private sector growth and entrenching of macroeconomic stability through fiscal consolidation needed to be at the centre if Zambia’s vision of becoming a prosperous middle-income country by 2030 was to be achieved.
PMRC has also questioned why government was unable to fulfil some of the commitments it made in 2018 like setting up a tractor assembly plant at the Lusaka South MFEZ.
“The 2019 National Budget was formulated against the backdrop of the austerity measures being implemented by government to deliver fiscal consolidation. It provides a firm foundation for the country to return to moderate debt levels, entrench overall macroeconomic stability and promote sustained and inclusive growth. The budget proposes bold and substantial changes in revenue mobilisation and spending strategies in support of the goal for fiscal consolidation. The proposed measures aim to ensure that domestic revenue as a proportion of GDP increases to 18.7 per cent from 17.7 per cent in 2018. The 2019 Budget also aims to achieve a fiscal deficit of no more than 6.5 per cent of GDP from the projected 7.4 per cent in 2018,” the report highlighted.
“The focus of the budget is to promote not only broad-based sustainable and inclusive growth, but also address the high unemployment and poverty levels among the people. To achieve this, the creation of space for private sector growth and entrenching macroeconomic stability through fiscal consolidation is central to this process. The budget is aligned to the Economic Stabilisation and Growth Programme, the Seventh National Development Plan (7NDP), and the vision of becoming a prosperous middle-income country by 2030. The national budget intends to actualise poverty reduction through proportional investments to sectors as outlined in the 7NDP. The Economic Stabilisation and Growth Programme is aimed at fiscal consolidation, reduction of the budget deficit and management of debt while stimulating growth.”
The report also highlighted how agricultural productivity remained low in the country, especially among small scale farmers due to high dependence on rainfall for their agricultural activities as well as low value addition.
“The agriculture sector remains the largest employer and coveted diversification torchbearer. After more than 50 years of independence agricultural productivity remains low especially among small scale farmers largely due to high dependence on rain-fed agriculture, poor mechanisation and low value addition. To address some of these challenges the 2019 Budget seeks to promote all year-round agriculture production as well as climate smart agricultural practices through the development of irrigation infrastructure with a 2019 target of 3,000 additional hectares. Government in the 2018 Budget announced plans to set up a tractor assembly in the Lusaka South Multi Facility Economic Zone and has in the 2019 Budget re-echoed the same pronouncement with a promise of access to cheaper equipment to improve mechanisation and productivity,” the report read.
“We continue monitoring why the assembly plant was not established in 2018 as planned. Government also announced plans to revise the Food Reserve Act in 2019 to enhance sustainability and efficient management of national strategic food reserves. However, it must be noted that PMRC made submissions regarding revisions to the Food Reserve Act urging the Zambian government to resist the temptation to get involved in maize marketing through the Food Reserve Agency but focus on investments in key drivers of growth in the agriculture sector that include extension services, disease control, livestock management, research and development.”
Meanwhile, PMRC has asked government to focus on attracting independent power producers by setting a conducive governance environment in the sector.
“AGiven the current fiscal constraints,PMRC urges the government to focus on attracting private investment in the electricity sector by setting a conducive governance environment in the sector. This includes effective planning, competitive procurement and contracting,” read the report.
“Effective planning is very important for minimising costs for consumers and making the most of independent power producers while procurement should involve tools such as the Least Cost Power Development Plan. In addition to these measures, Government must ensure credit worthiness of the off-taker and state utility company Zambia Electricity Supply Corporation (ZESCO) is achieved coupled with high quality independent regulation. These measures have the potential to increase investments in the electricity sector without increasing the financial burden on the Government.”