An empty purse budget.

Author:Kapepula, Nkandu
Position:Zambia's 1997 budget

Add a couple of noughts here, subtract a few there and, hey presto, out comes a healthy looking budget. Look behind the figures however, and this year's Zambian Budget begins to take on a very sick hue.

For most Zambians, the announcement of this year's Budget, worth K1,427.1bn was at best, cheerless. At worst, it points to za downward spiral that few can see the bottom of.

Although the figures show a 22.9% increase from last year's budget, in reality it reflects a decrease of 10.9% - if you take into account the kwacha's depreciation against the dollar. . This may explain why, at the end of the day, the reaction from ordinary citizens and the local business community has been down-right pessimistic - and they are not alone.

Judging by the warnings that have emanated from industry experts and a number of politicians from the ruling party, the Movement for Multiparty Democracy (MMD), Zambia is facing a financial disaster.

Nowhere is this more evident than in the yawning gap between revenue and expenditure. The suffocating external debt of $6.4bn has remained almost stagnant since 1991. Following the withdrawal of bilateral donors, Finance Minister, Mr Ronald Penza faces the Herculean task of trying to finance a deficit of K488.9bn through external loans.

The situation is made worse given that Zambia needs about $200m in balance of payment support and over $275m for project finance. The real nub of the matter however, is that prior to the budget, not one donor had pledged to support Zambia. Why? Because of a fallout over constitutional reforms and the establishment of an acceptable electoral system. Whereas Mr Penza fancies that a meeting of the Paris Club in March may provoke a change of heart over the issue of good governance, chances of this group of creditors rubber-stamping a democratic default is slim.

So, is Mr Penza's Budget a show of blatant insincerity? According to Mr George Chabwera, Chairman of the influential Zambia Association of Chambers of Commerce and Industry (ZACCI), the answer is 'yes'. "The Budget contains nothing new," he asserts. "Its only message is that belts must be tightened further and without delay." He accuses the Government of having ignored most of ZACCI's proposals. Although VAT has been reduced from 20% to 17.5%, it will not be put into effect until July 17. Even then it will still remains above 15% demanded by ZACCI.

Last year, budgeted VAT revenues were exceeded despite rampant tax avoidance. The...

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