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2010 National Budget Not Inspiring

Last updated on December 16, 2011

The 2010 national budget unveiled in a speech delivered to the Zambian National Assembly on October 9, 2009 by the Honorable Minister of Finance and National Planning is not inspiring at all, given the depth of socio-economic woes the country has been facing since the 1970s. It is not possible for our beloved country to make any headway in socio-economic development with such a mild budget, not even by the year 2030 when the MMD government is dreaming of turning Zambia into a middle-income country.

For reasons of brevity, let me comment on a few highlights of the budget.

*Inflation and Taxes*:

The attainment of single-digit annual inflation (of 8%) is a target that would be appropriate for countries that have already achieved a high level of job creation and socio-economic development. Zambia is clearly not one of such countries.

There is a need to reduce PAYE, VAT and interest rates in order to stimulate both the supply of goods and services and the demand for goods and services and, in the process, bolster job creation and eco nomic growth. We need to reverse the recurrent emphasis on sta bili zing inflation at the expense of job creation and econom ic growth.

Value-added tax, for example, could have been reduced to 12.5% from 16%. The increase in the PAYE exempt threshold from K700,000 to K800,000 is not adequate; this should have been increased to at least K1,000,000. And the income bands should have been expanded to make them fairer to tax payers as

follows:

*2010 Income Bands and Tax Rates*:

K0 – K800,000 per month 0%

K800,001 — K1,335,000 per month 25%  K1,335,001 — K4,100,000 per month 30%  K4,100,001 and above per month 35%    *Proposed **Income Bands and Tax Rates*:    K0 – K1,000,000 per month 0%  K1,000,001 — K1,435,000 per month 10%  K1,435,001 — K1,970,000 per month 15%  K1,970,001 — K2,370,000 per month 20%  K2,770,001 — K3,170,000 per month 25%  K3,570,001 — K3,970,000 per month 30%  K3,970,001 and above per month 35%    Lower taxes and interest rates could have functioned as an effective economic stimulus that could have spurred economic activity and job creation, as well as create a new class of tax payers. There is really no other obvious way in which a country can jump-start an economically beleaguered economy like ours.    *Dependency on Foreign Investors*:    There is too much emphasis in the budget on creating opportunities for foreign investment with little or no emphasis on promoting small and medium-sized enterprises (SMEs) by Zambians. As the United Nations Economic Commission for Europe has maintained, a growing body of empirical evidence supports the widely held view that SMEs are instrumental to socio-economic development. They can, as such, play an important role in improving the socio-economic welfare of a lot of people in a country.    There are many ways in which SMEs can positively contribute to the improvement of the socio-economic well-being of a country’s people, such as the following:

(a) They can create employment opportunities for talented citizens and family members who cannot find jobs in large business establishments;

(b) They can function as a vehicle through which a country’s government can economically empower its people by enabling them to participate actively and directly in their country’s commercial and industrial activities;

(c) They can facilitate the generation of wealth for all sectors of the national economy and thereby reduce existing income disparities;

(d) They can contribute to the improvement of the social and economic welfare of people in their host communities through the provision of various kinds of needed goods and services; and

(e) They can function as the backbone of a country’s economy if they are mainly operated by citizens, as they would be both indigenous and permanent, as Andrew Sardanis has maintained.

*Negative Thoughts*:

If Zambians “spend lots of their time on negative thoughts,” as the Minister has claimed in his budget speech, it is because over 65% of them cannot find jobs and are eking out a mere living. I cannot imagine people who are wallowing in abject poverty singing empty praises glorifying a government that is incapable of addressing their basic needs.

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