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 2010-10-10 04:13 am Back to NEWS
Donors reduce grants to 2011 budget
Finance minister Stumbeko Musokotwane on arrival at the National Assembly of Zambia for 2010 budget presentation on Oct 8,2010.The Post

Cooperating partners have reduced their grant contributions to Zambia's national budget for 2011 by almost half to only 7.7 per cent compared to 14.5 per cent for this year.

And the government has allocated K244.6 billion for the holding of next year's tripartite elections.

Meanwhile, finance and national planning minister Situmbeko Musokotwane admitted that there was continued absence of commitments from cooperating partners in the health sector.

Unveiling the 2011 national budget worth K20.5 trillion under the theme: "A people's budget, from a people's government," in the National Assembly in Lusaka yesterday, Dr Musokotwane said over the last 10 years, the government had increasingly relied on domestic resources to finance the national budget and would continue on that path.

"We remain committed to paying our own way in the world. Sir, K15, 769.1 billion, about K15.76 trillion or 76.8 per cent of the budget, will come from domestic revenues and K1, 587.7 billion about K1.58 trillion or 7.7 per cent through grants from our cooperating partners," Dr Musokotwane said. "The deficit of K3, 180.6 billion about K3.2 trillion or 15.5 per cent will be financed through domestic borrowing of K1,219.8 billion about K1.2 trillion and external borrowing of K1, 960.8 billion about K1.9 trillion."

Going by Dr Musokotwane's figures, the donors' grant contribution has been reduced by over K1 trillion and foreign borrowing increased threefold compared to figures in the 2010 budget.

According to the 2010 national budget, which he presented last year, Dr Musokotwane had said: "The government proposes to spend K16,717.8 billion or 22.5 percent of GDP in 2010. To finance these expenditures, the government will raise domestic revenues of K12,107.0 billion representing 72.4 percent of the budget and expects to receive grants from our Cooperating Partners amounting to K2,426.7 billion or 14.5 per cent of the budget. The balance of K2,184.1 billion or 13.1 per cent will be financed through domestic borrowing of K1,487.0 billion and foreign borrowing of K697.1 billion."

In the 2011 budget, Dr Musokotwane said expenditure on general public service would be reduced to below 30 per cent for the first time while expenditure on economic affairs, health and education had been increased and would account for over half of the budget.

"The allocation to the general public services amounts to K5,855.5 billion or 28.5 per cent of the budget. Of this, K1, 665.3 billion will be used to service domestic and external debt," he said. 

"I have also allocated K244.6 billion for the holding of elections. In addition, K146.2 billion has been provided for grants to local authorities and K108 billion for constituency development fund (CDF)."

Dr Musokotwane allocated K3.5 billion for the preparation of sector devolution, which will commence in 2012, following the approval of the decentralisation implementation plan in 2009.

In the agriculture sector, Dr Musokotwane said the government would continue to help farmers to increase output, productivity and incomes.

“Drawing on the successes of the Farmer Input Support Programme in 2010, I have increased the allocation to the programme to K485 billion in 2011 from K435 billion in 2010,” Dr Musokotwane said.

However, a check in the 2010 budget speech shows Dr Musokotwane had said: “I have allocated K430 billion for the Farmer Input Support programme in 2010.”

Further, Dr Musokotwane said the increment to the Farmer Input Support Programme (FISP) in 2011 would make farmers deliver even a higher harvest in 2012 compared to the historic 2.8 million metric tonnes of maize in the 2009/2010 agricultural season.

Dr Musokotwane said sustaining bumper harvests required the strengthening of marketing arrangements to avoid wastage and losses to farmers.

“To continue with our efforts to support farmers in far flung areas of the country and to guarantee national food security, I have allocated K150 billion for the Food Reserve Agency in 2011,” he said.

Dr Musokotwane said he had increased allocation for the Food security pack programme by 50 per cent to K15 billion in 2011.

He also allocated K13.3 billion to agricultural extension services and K37.2 billion for the construction of dams, irrigation projects and training of small-scale farmers to enhance irrigation farming.

Dr Musokotwane allocated K1.5 billion for construction of a bridge and preparatory works at Luena farm block in Luapula Province and K261.8 billion to livestock and fisheries programmes, which he said had tremendous potential to create jobs and serve as a source of diversified economic growth and export earnings.

Dr Musokotwane said in an effort to reduce animal diseases through creation of disease-free zones, the government would construct livestock service centres in five districts in Northern Province, four districts in Soutehrn Province, two districts each in Central and Western Provinces and one each in North-Western and Eastern Provinces as well as construction of disease checkpoints across the country, and purchase vaccines in 2011.

“For these activities, I have allocated K26.6 billion in 2011. In addition, K21.8 billion has been provided for fish breeding and aquaculture extension services,” he said.

In tourism sector, Dr Musokotwane allocated K12.8 billion for marketing Zambia’s tourism sites and K37.7 billion for the development of roads and infrastructure in Kafue National Park, development of Lusaka National Park and creation of a tourism one-stop shop facility and K1.1 billion for upgrading permanent exhibitions at Lusaka National Museum.

In the energy sector, Dr Musokotwane said power would be very important for the growth of Zambia’s economy and the government was working on increasing power production output.

He increased allocation to the Rural Electrification Programme to K314.3 billion in 2011 from K234.7 billion in 2010 to spur rural development, adding that the government would develop mini-hydro power stations and extend access to rural areas to open them to investments and reduce the rural-urban divide.

In the transport and communication sector, Dr Musokotwane said he had increased allocation to the road and infrastructure development to about K3 trillion in 2011 from about K1.4 trillion in 2010.

He said the Rural Road Unit had been allocated K6 billion and K28.4 billion for rehabilitation and upgrading of airports and airstrips including at Kasaba Bay, Mansa, Kasama and Mongu.

“The total allocation to the transport and communication sector amounting to K3, 327.9 billion is historic and unprecedented,” Dr Musokotwane said.

In the education and skills development sector, Dr Musokotwane said he allocated about K3.8 trillion to the sector, representing 18.6 per cent of the budget.

Of that amount, the government allocated K444.2 billion for building high and basic schools across the country and K36.5 billion for the construction and rehabilitation of training institutes and research centres.

“In 2011, the government will recruit 5,000 teachers, for which a provision of K131.6 billion has been made. Another K46.4 billion has been provided for the procurement of desks and learning materials,” he said. “We provided K159.9 billion towards the dismantling of personal-related arrears to our teachers and lecturers.”

In the health sector, Dr Musokotwane said the government continued to invest in infrastructure and human resources.

“In the continued absence of commitments from cooperating partners in the health sector, I have increased the allocation of domestic resources to the health sector by 30.1 per cent. In 2011, I have allocated K1,772.9 billion about K1.77 trillion to the sector compared to K1,362.5 billion about K1.36 trillion in 2010. This is a demonstration of our resolute commitment to ensuring that service delivery is not compromised at our health posts, health centres and hospitals,” said Dr Musokotwane.

He said the government would recruit 1,700 health personnel that include doctors, nurses and other essential medical staff at a cost of K52.7 billion, while K37.5 billion had been allocated for procurement of medical equipment.

He said K117.8 billion had been allocated for the procurement of essential drugs and medical supplies, of which K23.1 billion was for anti-retro-viral medication and K11.5 billion for vaccines and immunizations.

In water and sanitation, Dr Musokotwane said K555 billion had been allocated for construction of boreholes, repair water reticulation systems and pit latrines in a bid to meet Millennium Development Goals (MDGs).

He allocated K919 billion towards public order and safety programmes.

On social protection, Dr Musokotwane said government allocated K547.5 billion for retirees.

Dr Musokotwane said he had allocated K76 billion for empowerment funds, of which K10 billion was for youths, K26 billion for women and remaining K40 billion had been allocated to the Citizens Economic Empowerment Fund (CEEF).

Dr Musokotwane said the government was firmly committed to providing relief to workers and had, therefore, proposed to increase Pay-As-You-Earn (PAYE) exempt threshold by 25 per cent or K800,000 to K1 million per month.

“Proposed PAYE System:- Income band K1,000,000 and below tax rate zero percent; K1,001,000 to K1,735,000 per month tax rate 25 percent; K1,735,001 to K4,200,000 per month tax rate 30 per cent,” he said. “I propose to provide further relief by: (a) increasing the exempt portion of income paid at termination of employment from K25 million to K35 million; and (b) increasing the tax credit for differently-abled persons from K1.92 million to K3 million per annum.”

Dr Musokotwane zero-rated value added tax (VAT) on hammer mills and standard-rated property and casualty insurance, fee-based banking services such as manager/bank cheques, drafts and transfer and excess withdrawal fees.

“These two measures will result in a revenue gain of K109.9 billion,” he said. “All VAT measures will come into effect on 1st January, 2011.”

He removed customs duty on electricity and fire-fighting equipment but introduced customs duty of 15 percent on deformed bars and galvanised cold-rolled coils, hoping to raise K1.6 billion.

Dr Musokotwane observed that most shops give free plastic bags to shoppers, which harm the environment.

He said he had introduced an excise duty on plastic bags at the rate of 10 per cent to promote environmentally friendly behaviour and discourage the use of plastic bags.

“This will not apply to paper bags which are biodegradable,” Dr Musokotwane explained. 

“Road user charges are one of the main sources of financing for road maintenance under the Road Sector Investment Plan. Current charges, however, are too low to meaningfully contribute to the cost of road maintenance. I therefore propose to increase one of these charges, the motor vehicle licence fee, by 50 per cent. This measure will raise K40.7 billion and will take effect on 1st January, 2011.”

The Post

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