Social Cash Transfer funding hits only 27% – ZIPAR

The Social Cash Transfer programme has only received less than 30 per cent funding by the end of the first half of 2018 due to government’s huge debt interest payments, says ZIPAR.

And ZIPAR research fellow Shebo Nalishebo says government added $1.3 billion to the total debt stock in just a six-month period between January and June this year.

Meanwhile, Ministry of Finance assistant director at the Investments and Debt Management Department Mwila Kasase-Zulu has appealed to all stakeholders to help government bring the country’s debt back to sustainable levels.

In an analysis of government spending released in Lusaka yesterday, the Zambia Institute for Policy Analysis and Research (ZIPAR) shows that while government spending on debt interest payments for the first half of 2018 was much more than planned, spending on key social sectors are not receiving promised funding in line with the 2018 budget.

ZIPAR disclosed that government spent K9.1 billion on debt interest payments for the first half of 2018, which was far higher than planned, compared to the K6.2 billion budgeted for.

According to ZIPAR’s data, only 27 per cent of the budget for Social Cash Transfers has been dispersed, amounting to K197 million, against the intended K411 million that should have been disbursed by the mid-year point.

Support for the 574,000 poor households who in 2018 are intended to receive Social Cash Transfers has been dealt a huge blow due to debt interest repayments.

Speaking during a presentation of the analysis of the mid-year budget performance, Nalishebo revealed that government’s debt interest payments have squeezed spending on social services, and are even higher than education sector spending.

“Previously, interest payments used to be way down our ladder in terms of government spending. But now, interest payments are even higher than our spending on the education sector,” Nalishebo told stakeholders at Taj Pamodzi Hotel.

He explained that government’s capital expenditure continued to rise at a worryingly high pace during the half-year period under review.

“If you look in more detail at capital expenditure; we spent K12.4 billion in the first half against a projection of K7.5 billion so we went K4.9 billion overboard. So, by June (2018), 85 per cent of what we planned to spend on capital expenditure was already spent! And this is the largest source of budget overruns,” Nalishebo added.

“I can’t emphasize this hard enough: with the high capital expenditure from borrowed money, and increasing debt servicing costs, we don’t have enough funds available for other critical spending such as social services, operations and maintenance.”

He reminded all stakeholders that government’s huge public debt affects everyone.

“If you are going to have cuts in recurrent departmental charges, this is the reason we have the shortage of drugs in health facilities…and even when it comes to education; lack of funds for school supplies are affected. So, most of you who think that debt is just this big figure up there, which does not affect you? You are wrong! It really goes down to the individual, and these are the effects of what debt can do,” he said.

“And because a lot of these are not being paid up, it has led to the accumulation of arrears.”

And Nalishebo revealed that government added $1.3 billion to the total debt stock in just a six-month period between January and June this year.

“Looking at the financing figure, Zambia has effectively added about $1.3 billion to the stock of government debt in the first half of the year because of this borrowing. Usually, this figure of around $1.3-$1.5 billion is usually what we borrow for the entire year. But this is just half-year; we have already hit K1.3 billion! Hopefully, those austerity measures will really kick-in so that this figure really slows down and we continue being in the figures that we have seen previously,” he said.

“If this was a movie, it will be called ‘$1.3 billion coming soon to a debt stock near you’ because our deficit was K7.3 billion, and that’s what we were supposed to borrow, but we ended up borrowing K13 billion instead.”

He further stressed the importance of government seizing that all-important International Monetary Fund (IMF)-backed bailout package.

“Foreign grants continue to be erratic. At mid-year, we have only collected nine per cent of the planned grants for the year. We need to be realistic in terms of even how we do the projections for grants because, really, without the IMF programme, a lot of the commitments on foreign grants won’t be met,” Nalishebo observed.

He also advised that government should re-visit reversing the 80 per cent completion threshold for construction projects to revive economic growth.

“In the austerity measures, government mentioned that, ‘anything that is below 80 per cent in terms of completion of projects, we need to cut off [funding].’ What we are saying is, we need to revisit that threshold because what if some of those of projects, which is at 50 per cent completion rate, is actually more economically or socially viable than something that is at 80 per cent. Why not prioritise a project like that, that is going to bring you the growth that you need rather than just a blanket statement of 80 per cent?” asked Nalishebo.

Meanwhile, Zulu, who was the keynote speaker on behalf of the Ministry of Finance, appealed to all stakeholders to help government tackle the looming debt crisis.

“I wish to urge all stakeholders and citizens of Zambia to rally behind government as it implements the debt reform measures that will ensure that Zambia’s debt is brought back to sustainable levels,” said Zulu.

The ZIPAR analysis of the mid-year 2018 budget performance was held under the theme: “What does the mid-year budget performance mean for Zambia’s Public Debt and Service Delivery?”

         

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