THE Ministry of Finance says government will soon present a bill to Parliament which will repeal and replace the Loans and Guarantees Act.

And the Ministry says government’s deal with the International Monetary Fund does not include any agreement to privatise any public entity.

In a statement, Friday, the Ministry stated that in the 2022 budget, the proposed deficit was at 6.7 percent of GDP.

“Once the budget is announced by the Minister of Finance and National Planning, it culminates into an Appropriation Bill which sets the fiscal deficit for a particular year as authorised by Parliament. For 2022, the proposed deficit is 6.7 percent of GDP and will be financed by both domestic and external borrowing. With respect to contraction of debt, the government is bound by the Loans and Guarantees (Authorisation) Act. The government will take a bill to Parliament to repeal and replace the Act with the view to prescribe the manner in which government acquires loans,” read the statement.

And the Ministry stated that the success of the International Monetary Fund IMF program would be measured by the fulfilment of the laid out prior actions to restore macroeconomic stability.

“The success of this programme will be two sided in view of the Lender (IMF) and the Receiver (Zambia). On the lenders side, one conditionality to successful programme implementation is undertaking programme Reviews. These represent the formal condition that all Financial programmes with the IMF must be reviewed at set intervals. After the initial financial disbursement is made, subsequent tranches are conditional on the successful completion of a programme review and endorsement by the executive board. If positively endorsed, then the programme would be deemed to be on track. These include the assessment of both qualitative and quantitative performance criteria such as level of net international reserves, budget deficit level, net domestic credit extension to the government by the banking sector, being on track according to agreed quantities in the memorandum of economic and financial policies,” the statement read.

“On the receiver’s (Zambia) side, a programme agreed with the IMF is a significant initial signal of confidence for attracting additional international financial resources. The measure of success of programme implementation will be guided by the fulfillment of the laid out prior actions and structural benchmarks agreed upon with the fund which are expected to translate into restoration of macroeconomic stability, signaled by the positive performance of various macroeconomic indicators, including the level of market confidence depicted by increased capital inflows on the capital account of the balance of payment and foreign direct investments on the financial account. The level of liquidity in the market given by increased revenue mobilization translating into reduced budget deficits and increased debt servicing is another anticipated outcome, among others.”

The Ministry stated that government would implement counteractive measures to reduce the cost of doing business.

“The removal of subsidies may temporarily increase the cost of doing business. However, to reduce the cost of doing business, the government will implement counter-active measures such as improving the business environment and streamlining the number of licenses and permits required for businesses. Subsidy removal is a measure that will enable realignment of public expenditure from poorly targeted choices such as fuel, to enhanced investments in health, education, and social protection. The outcomes favour our society’s less privileged,” read the statement.

“Regrettably, the capacity to service our loans and invest in development remains very limited and in the absence of restructuring, the country will continue to be choked by the debt burden. We reiterate that without the IMF Programme, debt restructuring would practically be impossible as creditors would be unwilling to engage in refinancing discussions. We need the IMF Programme.”

The Ministry clarified that the agreement with the IMF was not centred on identifying any public entity for privatisation.

“Discussions with the IMF have not centred on identifying or earmarking any public entity for privatisation. The government and the fund, instead have agreed on the need for the public sector to curtail inefficient expenditure, including among State Owned Enterprises (SOE’s). The government is therefore undertaking a review of all public entities to rationalise expenditure to those entities, and where necessary, implement reforms for more efficient and cost-effective service delivery,” read the statement.

The Ministry of Finance stated that allowing mineral royalties to be deducted would encourage further investment in the mining sector.

“Mineral Royalty is a payment received by government as consideration to extract minerals. In 2022, government will continue to collect mineral royalty in line with international best practice. However, contrary to the previous mining tax regime, companies will now be allowed to deduct the mineral royalty as a normal business expense under the Corporate Income Tax regime. This will encourage further investment into the mining sector and consequently improve mining productivity, export earnings, and employment opportunities for our people. The government will also continue working with gold mining companies to support the further development of a safe, transparent, and domestic revenue enhancing industry,” the statement read.

“In addition, the Bank of Zambia has so far purchased 282.79 kilograms of gold since December, 2020, at a cost of K345.6 million. Gold weighing 195.95 kilograms was purchased from Kansanshi Copper Mines at a cost of K241.8 million, while 86.84 kilograms was purchased from Zambia Gold company, a subsidiary of ZCCM-IH, at a cost of K103.8 million. The Central Bank plans to purchase approximately 25, 200 ounces of London Good Delivery Gold from Kansanshi Copper Mining Plc and 21, 000 ounces of gold with a minimum of 88% purity, from Zambia Gold Company, per year. These estimates are based on the gold purchase agreements signed with Kansanshi Copper Mining Plc and Zambia Gold Company in December, 2020. The objective of this initiative is to shore up and diversify international reserves. The viability and attractiveness of this venture is that the gold is being purchased in local currency.”