Ministry of Finance Dr Bwalya Ngan’du has presented a supplementary budget to Parliament amounting to K9.8 billion, with about K6.4 billion to be spent on both external and domestic debt obligations.
Speaking during the presentation in Parliament, Wednesday, Dr Ngan’du said the proposed supplementary budget would be mainly financed from reallocations and variations of funds across and within the heads of expenditure, which were approved by Parliament, through the Appropriation Act, 2019.
This is the second successive supplementary budget presented to Parliament after Dr Ng’andu’s predecessor Margaret Mwanakatwe’s K7.2 billion supplementary budget approved by Parliament one year ago.
“The total supplementary budget stands at K9.8 billion. I wish to inform this August House that the proposed supplementary budget will be mainly financed from reallocations/variation of funds across and within the heads of expenditure, which were approved by this House through the Appropriation Act, 2019. Of this amount, approximately K8.7 million will be financed through the declaration of savings from within the existing budget provisions under various heads of expenditure in the 2019 national budget. The remaining balance of K1.2 billion is expected to be financed from additional domestic revenue amounting to K477 million, additional funding of K406 million from cooperating partners and carryover of funds of 2018 financial year amounting to K219 million,” Dr Ngan’du said.
He revealed that the government’s external debt servicing costs had soared owing to the kwacha’s sharp depreciation last quarter.
“Allow me to bring out the notable proposed expenditure allocations contained in this supplementary estimates expenditure number one of 2019. Under head 99, Constitution and statutory, I have proposed budget variations across heads of expenditure within 2019 national budget amounting to K6.4 billion to be spent on external and domestic debt obligations. This amount is required to meet the higher debt repayments due to deprecation of the kwacha against other currencies as well us to cover other shortfalls on maturities on government securities. On external debt, an amount of K3.5 billion has been necessitated due to higher than projected external debt service made during the first half of the year and the higher expected payments for the remainder of the year. Be informed that external debt service in the 2019 budget assumed an exchange rate of K10.5 to one US dollar, whilst the average rate during first January to 30th June, 2019, was K12.3 to one US dollar,” he narrated.
“This adverse movement in the rate has culminated in additional funding requirements against debt servicing obligations for 2019. With regard to domestic debt service of the K2.9 billion, K1.7 billion is expected to recover addition principal repayments arising from annual subscriptions on government securities, especially during the first half of the year, while the K1.2 billion is proposed for payments of domestic interests arising as a result of financing for the 2018 farming season. Under head 89; the Ministry of Agriculture, a supplementary provision K953 million is required of which K821 million is proposed for the procurement and distribution of fertilizers. And K128 million is further proposed for the budget price of maize (FRA’s maize purchase) so as to guarantee food security by purchasing 300,000 metric tonnes of maize through the Food Reserve Agency FRA.”
He explained that the Treasury had no choice but to bear high debt service repayments due to the kwacha’s poor performance against major currency convertibles.
“Under head 17; Ministry of Foreign Affairs, a supplementary provision of K344 million is proposed for the Foreign Service overseas allowance of the shortfall of the exchange rate experienced during this financial year. Under head 77; Ministry of Defence, a total sum of K288 million was proposed for natural security activities. Further head 37; Ministry of Finance, a total of K205 million is being proposed for supplementation of which K70 million is for the payment of gratuity to constitution-office bearers that have retired, but still on payroll; K60 mllion for the payment of SAP licenses fees for 2018 and 2019 paid centrally; K50 million is meant for payment for outstanding utility bills to various utility and service providers and K17.6 million is proposed for the procurement of additional accountable documents. Under head Zero; Cabinet Office, K150 million is proposed to cover the increased public affairs and summit-meetings related activities. I wish to underscore that the Treasury has no choice but to bear higher debt service payments as the exchange rate depreciated. However, this has been done by reallocating resources from other areas within the 2019 national budget and through additional tax revenue collected so far,” said Dr Ngan’du.
According to the Finance Minister, the supplementary budget is presented in accordance with Article 203, subsection 2, of the Constitution where the Ministry of Finance shall; where the amounts appropriated in an appropriation Act for that financial act is sufficient to meet expenditure in that financial year, will approach the National Assembly for approval in line with Article 202 subsection 5 a supplementary estimate of expenditure.