Action Aid Zambia says the 2021 National Budget must underscore progressive fiscal reform to enhance domestic revenue mobilization while prioritizing expenditure.

Organization Country Director Nalucha Ziba told Money FM News that the 2021 financial plan must demonstrate the need to ensure sustainable spending specifically on key and strategic sectors which will assure both citizens resilience to the socio-economic impact of Covid-19 and economic recovery.

Ms. Ziba observed that the Covid-19 as well as high public debt levels present a fiscal challenge for the provision of public services, hence the national budget must clearly identify priority expenditure.

“Both Covid-19 and high public debt levels present a fiscal challenge for the provision of public services. 2021 national budget must, therefore, clearly identify priority expenditure. With limited resources, the 2021 national budget must demonstrate the need to ensure sustainable spending specifically on key and strategic sectors which will assure both citizens resilience to the socio-economic impact of Covid-19 and economic recovery. This is in line with observations made by the President in His State of the Nation Address on 11th September 2020, that “economic recovery post Covid-19 era must be a national priority.”

“Though Zambia has not been hit as hard as other countries, we, however, observe that COVID-19 has exposed starkly the underfunding of the health sector in Zambia. We wish to remind the government amidst the battle against Covid-19 which is far from over, the 2021 national budget should seek to secure adequate funds for the health sector to assure the country’s ability to respond or mitigate possible surge in the Covid-19 cases and continuation of the provision of other health care services,” Ms. Ziba stated.

She explained that the organization expects to see a significant allocation of funds towards education, health, social spending and economic recovery because income security in social spending promotes dignified life more especially during the Covid-19 pandemic.

Ms. Ziba said government must increase the budgetary allocation towards social protection from an average of 2.8% in the past ten years to at least 5% of the total 2021 National Budget.

Meanwhile, Ms. Ziba said the budgetary allocation to the agriculture sector should focus more on Res earch and Development, Irrigation Development, as well as Extension services in order to transform the sector in terms of improved productivity in the context of climate change.

“The 7NDP has identified agriculture as the main vehicle for achieving economic diversification and job creation. We, however, note with dismay that budgetary allocation towards this critical sector has not only been insignificant but that also it has dwindling in the past five years. In 2020 the agriculture sector only received 3.7%; this is usually couple with erratic disbursement.”

“We also observe that major part of the agriculture budgetary allocation usually goes to activities such as purchase of Maize under Food Reserve Agency and the politicized Farmer Input Support Program. Indaba Agriculture Policy Research Institute (IAPRI) observes that in the 2019 Agriculture Budget, 50% of the allocation went to FISP, 23% FRA, 16% Personnel Emoluments, 7% other and 4% Operational Funds (RDCs). With FISP Program there have been several challenges observed such as poor targeting. Consequently, despite the Program running for many years the benefits have been minimal,” Ms. Nalucha noted.
She said the organization also expects the 2021 national budget to offer tax relief to businesses that have been hard hit by Covid-19 in order to trigger economic recovery.

“In the wake of Covid-19, most businesses including SMEs have severely been impacted, we therefore, and/or waiver to the most hit sectors. This will enable businesses time to recover. We expect the 2021 national budget to offer tax relief the impacts of COVID_19 hence triggering economic recovery. Any tax relief, however, must be targeted, cost effective and temporal,” she added.

And Ms. Ziba stated that her organization anticipates the government to introduce the long-awaited capital gains tax and categorical net-wealth tax to further expand tax or revenue base, as Personal Income in PAYE is largest contributor to Zambia tax revenue.

She observed that the current personal Income tax largely targets working and middle-class taxpayers leaving out the higher earners who typically make most of their money from investments and property holdings.

“Net wealth tax, will, therefore, not only increase government revenue but also make the tax system more progressive and fairer. Additionally, though Covid-19 has been a thorn to the Zambia economy and the majority people not only in Zambia but around the globe, some industries or sectors have, however, benefited significantly from the pandemic. ActionAid, therefore, expected the introduction of variable Profit Taxes or an excess profits tax in the 2021 national budget for the most profitable industries during the COVID_19 pandemic period,” she said.

Finance Minister Dr. Bwalya Ng’andu is this Friday expected to present the 2021 National Budget.