Zambia National Budget 2015

8/11/2019 Zambia National Budget 2015

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2015 BUDGET ADDRESS BY HON. ALEXANDER B. CHIKWANDA M.P,MINISTER OF FINANCE,

DELIVERED TO THE NATIONAL ASSEMBLY ONFRIDAY 10 TH OCTOBER, 2014

1. Mr. Speaker, I beg to move that theHouse do now resolve into Committee ofSupply on the Estimates of Revenue andExpenditure for the year 1 st January, 2015 to31st December, 2015 presented to the

National Assembly in October 2014.

2. Sir, I am the bearer of a message fromHis Excellency the President, recommendingfavourable consideration of the motion that Inow lay on the Table.

3. Mr. Speaker, on the 24 th of October,2014, Zambia celebrates its Golden Jubileethat marks half a century of politicalindependence. The nation has achieved muchover the past 50 years. We have had anunbroken period of political stability and

peaceful co-existence by putting into practiceour motto of One Zambia One Nation . Wehave advanced the cause of freedom and self-determination at home and abroad by fightingfor the liberation of our neighbours. We havealso advanced a generation of Zambians whoare contributing to the growth of our nation athome and in the diaspora. These areachievements worth celebrating.

4. Sir, one of Zambias many uniqueattributes has been its unparalleled politicaland social stability since independence in1964. This includes the period up to the1980s when Zambia was home to manyliberation movements from our neighbouringcountries and was, therefore, in the forefrontof their independence struggles.

5. From 1991, Zambia has been avibrant multi-party democracy having

discarded the one party system with a veryun-salutary governance track record. ThePatriotic Front came into power three yearsago through a peaceful transition. This

political stability and social harmony has been the platform upon which our strongeconomic growth and macroeconomicstability has been anchored.

6. Mr. Speaker, despite these significantmilestones, much still remains to be done tomake our independence more meaningful tothe lives of our citizens. The developmentchallenges we face as we enter the sixthdecade as a nation remain daunting. Overall,

poverty in Zambia remains high at about 60 percent even though it is much lower in urbanareas at around 23 percent. Some of the mostcritical challenges that the Government faces,therefore, are to create decent jobs and wealthto ensure greater provision of social safetynets.

7. Sir, Zambia has a very young population, and a growing labour force, withover 53 percent of the population below theage of 18 years and 90 percent of the

population below the age of 45 years. Beinga country of predominantly young people,Zambia can yield a demographic dividend ifour youth are equipped with skills andmeaningfully involved and deployed in thevarious productive sectors of the economy.

8. Mr. Speaker, these challenges aremade even more formidable in the face ofthreats posed by climate change, over-reliance on primary commodities, lowtechnological advancement, low productivity


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and rapid urbanisation. Over the past threeyears, the Patriotic Front Government hascontinued to strengthen the requisitemacroeconomic foundations fordevelopment. This has been done throughupgraded investments in all sectors includinginfrastructure which is necessary inaddressing the challenges of accelerateddevelopment.

9. It is in this context that the theme ofthe 2015 Budget is Celebrating ourGolden Jubilee as One Zambia One Nationby Making Economic Independence aReality for All.

10. Mr. Speaker, economic developmentthat facilitates prosperity for all can only havemeaning and sustainability if it is firmly

premised on fiscal prudence andresponsibility. This should be our legacy to

posterity.

11. Mr. Speaker, in framing the 2015Budget, it is the vision of bringing economicindependence to the millions of Zambiansthat has been our practical guide and moral

benchmark. My address today is in four parts.Part I provides an overview of the global anddomestic economic developments this year.In Part II , details of Governmentsmacroeconomic objectives and sectoral

policies and strategies for 2015 are presented.The main details of the 2015 Budget aregiven in Part III and my address is concludedin Part IV.

PART IGLOBAL AND DOMESTIC

ECONOMIC DEVELOPMENTS IN 2014

12. Mr. Speaker, the global economycontinues to recover but at a subdued pace.Output is projected to increase to 3.3 percentthis year, up from 3.0 percent in 2013. In

advanced economies, positive growth is projected for the United States of Americawhile in the Euro-zone there are concernsabout stagnation and deflation. The emergingeconomies such as China and India willcontinue with their positive growthtrajectory, albeit at a lower rate. In Sub-Saharan Africa, growth is projected todecline marginally from the 2013 level to 5.1

percent.

13. Sir, the performance of commodity prices varied in 2014. Copper prices averagedUS $7,097 per metric tonne during the firstnine months, down from US $7,752 permetric tonne in 2013. This reflects sluggishdemand particularly from China. Similarly,crude oil prices have marginally declinedduring the same period to an average of US$102.95 a barrel compared to US $103.22 in2013. It is also worth noting that the currentspot prices for crude oil are showing adownward trend of below US $100 per barrel.With regard to food items, prices for maincereal crops such as maize, wheat and ricedeclined while prices for meat and dairy

products increased.

14. Mr. Speaker, on the domestic front, preliminary projections are that real GDPgrowth will be higher than the projected 6.5

percent for this year. This will be mainlydriven by a good harvest in the 2013/2014farming season, increased electricitygeneration, investments in private and publicinfrastructure and growth in manufacturingas well as in transport and communications.

15. Sir, the growth recorded over the pastthree years has been accompanied by asignificant rise in employment. In my 2014Budget address, I informed this House thatGovernment s ambition was to create200,000 decent jobs in 2014. I wish to reportthat current estimates are that the Zambian


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economy will generate about 120,000 newformal sector jobs in addition to thousands ofother jobs being created in the informalsector. These jobs will mainly be in the

private sector, reflecting the growingcapacity of the private sector as the primaryengine of economic growth and job creation.

16. Mr. Speaker, in 2014, the Treasurytook measures to consolidate the fiscal

position. These measures included actions tocontain the size of the public sector wage billand streamlining of expenditure towards

priority programmes. As a consequence, theend year budget deficit is expected to bewithin the programmed level of 5.5 percentof GDP compared to 6.5 percent in 2013.

17. Mr. Speaker, inflation was containedwithin single digits over the first nine monthsand was 7.8 percent in September 2014 from7.1 percent in December 2013. The slightincrease was due to the depreciation of theKwacha, mainly in the first half of the year,and the pass-through from upwardadjustments in fuel prices and electricitytariffs. With these pressures now largelyaccounted for, Government is confident thatfor the sixth consecutive year, inflation will

be contained to single digits in line withGovernments macroeconomic objectives.

18. Sir, the first half of 2014 experienceda rapid depreciation of the Kwacha againstmajor currencies, reaching a high of K7 perUS dollar in May. This partly arose from areduction in the supply of foreign exchangeto the market, particularly from the miningsector, and subsequent speculative behaviour.In response, the Bank of Zambia tightenedmonetary policy through a number ofmeasures, including adjusting upwards the

policy rate, increasing the statutory reserverequirement and extending its application toGovernment and Vostro accounts. Through

these measures, the exchange rate has nowstabilised around an average of K6.2 per USdollar.

19.

Sir, the tight liquidity conditionscame at the cost of a temporary rise in interestrates which constrained access to credit.Having achieved relative stability in theforeign exchange market, the Bank ofZambia has, since July 2014, eased liquidityconditions. As a result, the daily averageovernight interbank rate reduced to 12.8

percent as at end-September 2014 from 25 percent at end-June 2014. With a gradualincrease in liquidity, it is expected thatcommercial banks will pass on the benefits to

borrowers by reducing lending rates. Highinterest rates inhibit growth and ultimatelystoke up inflationary spirals.

20. Sir, the overall condition and performance of the financial sector wassatisfactory as at end-September 2014. Thefinancial sectors aggregate capital adequacyand earnings performance improved, whileasset quality and liquidity conditionsremained stable. With regards to theimplementation of the new capital adequacyframework for the banks, impressive progresshas been made in terms of compliance.

21. During 2014, trading activity on theLusaka Stock Exchange (LuSE) increased,reflecting improved investor sentiment and

participation on the local bourse. Marketcapitalisation increased by 8 percent to K62.9

billion while the All-Share index rose by 17

percent to 6,620.9 by end-September 2014.

22. Mr. Speaker, LuSE listingrequirements stipulate that no singleshareholder should control more than 75

percent of the equity in any company. This isto ensure that more of our citizens participatein the capital markets. I am therefore


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directing the Securities and ExchangeCommission to ensure that all listedcompanies comply with this requirement. Tocomply with the listing requirements,Government will itself reduce itsshareholding in ZCCM Investments HoldingPlc to 60 percent from 87 percent. The 27

percent shares will be sold to Zambiancitizens as a way of entrenching economicindependence of our people.

23. Mr. Speaker, the overall Balance ofPayments is expected to register a surplus ofUS $486.0 million in 2014 compared to adeficit of US $344.9 million in 2013. Thissurplus is attributed to improvements in boththe current and financial accounts. Highercopper export volumes and the receipt ofEurobond proceeds account for the expectedimprovements.

24. Mr. Speaker, consistent withimprovement in the overall Balance ofPayments position, gross internationalreserves are projected to increase to US $3.2

billion at end-December 2014, representing3.6 months of import cover, from US $2.7

billion or 3.0 months of import coverrecorded at end-December 2013.

25. Mr. Speaker, the stock ofGovernments external debt as at end-September 2014 was US $4.7 billion. Thisrepresents an increase of 34 percent from US$3.5 billion as at end 2013. The increase inthe external debt stock was mainly onaccount of the US $1 billion Eurobond thatwas issued in April as part of programmedfinancing in the 2014 budget. The totalexternal debt service for the first nine monthsof 2014 amounted to US $126.2 millionwhich is less than 3 percent of the domesticrevenues.26. Mr. Speaker, Zambias domestic debtincluding arrears as at end-September 2014

stood at K21.9 billion representing anincrease of 5.6 percent from K19.7 billion asat end-December 2013. The increase waslargely on account of programmed financingfor the 2014 Budget.

PART IIMACROECONOMIC OBJECTIVES,POLICIES AND STRATEGIES FOR

2015

27. Mr. Speaker, the Government in 2015will continue to focus on industrialisationtogether with job and wealth creation, so asto reduce poverty and inequality on asustainable basis. This will be achieved byinvesting in sectors that have been identifiedto best promote employment for our youthful

population, significantly increase productivity in the economy by empoweringour workers with the requisite skills for the21st century, contribute to higher andinclusive economic growth, and develop therural areas to narrow the urban-rural divide.These include the agriculture, tourism,manufacturing and construction sectors.Additionally, for inclusive growth, emphasiswill be placed on investing in the socialsectors.

28. Mr. Speaker, the specific broad socio-economic policy objectives for 2015 will beto:

(a) achieve a real GDP growthrate of above 7.0 percent;

(b) achieve an end year inflationrate of no more than 7.0

percent;(c) increase international reserves

to at least 4.0 months ofimport cover;

(d) raise domestic revenuecollections to at least 18.5

percent of GDP;


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These interventions will invariably lead towealth and job creation as SMEs hold thegreatest potential for job creation.

44. Sir, Government will also continueallocating funds to the Citizens EconomicEmpowerment Commission to supportvalue chain development. Out of the 1,526approved projects this year, 1,072 projectsvalued at K48 million have since beenfunded, 92 percent of which are in ruralareas, thus contributing to our efforts tonarrow the urban-rural divide. Of thefunded projects, 64 percent went to womenand youths.

45. In addition, Government has alreadyembarked on the design of industrialclusters that are going to be established ineach district as a way of realising economicindependence for our citizens. The clusterswill provide industrial workshops fromwhich our entrepreneurs will be able tomanufacture various products, thus

promoting value addition, particularly in theareas of metal fabrication, timber and agro-

processing, aquaculture and automotiveindustry.46. Mr. Speaker, the Government willcontinue to facilitate infrastructuredevelopment to support the growth of themanufacturing sector through the

promotion of multi-facility economic zones

and industrial parks.

Tourism

47. Mr. Speaker, Zambias tourismsector has immense potential for increasingrevenue collection and delivery of decent

jobs to our citizens due to its labourintensive nature. I am glad to inform thisaugust House that growth in this sector has

been positive in recent years. In 2013,

tourist arrivals increased by 6.5 percent toover 900,000. Preliminary data for 2014show that this number will be surpassed asend-June 2014 arrivals of over 455,000were 5.2 percent higher than the same

period last year.

48. Sir, to unlock the massive potentialfor employment in the sector, Governmentwill continue to improve airportinfrastructure, electricity connectivity andaccess roads to tourist areas, particularlythose along the Northern Circuit, LowerZambezi and Kafue National Parks.

49. Mr. Speaker, as regards airportinfrastructure, Government is expandingand upgrading the Kenneth KaundaInternational Airport in Lusaka and will

construct a new airport at Simon MwansaKapwepwe in Ndola. Further, plans areunderway to rehabilitate a number ofaerodromes across the country to increaseaccess by air.

M in in g Sector

50. Mr. Speaker, mining sector production in the first eight months of 2014at 448,673 was about 50,000 metric tonneslower than the corresponding period in2013. The lower outturn was largely onaccount of a significant fall in outputrecorded at one of the major mines due tothe temporary suspension of miningoperations as a result of operational


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challenges. The depletion of oxide ore atsome mines and stockpiling of concentratesalso contributed to the lower output.Despite these operational constraints,

copper production is projected to bemarginally higher than the 2013 productionof about 790,000 metric tonnes.

51. Sir, Government is promoting thedomestic auctioning of gemstones in orderto obtain maximum benefits from theresources and to promote transparency andaccountability in the sub-sector. This is insupport of the diversification and growth ofthe mining sector, evidenced by gemstonesales of over US$ 50 million in the first eightmonths of this year. It will also contribute todomestic revenue collection, therebyenhancing our fiscal position as we makeeconomic independence a reality for all.

Economic Infrastructure Development

52. Mr. Speaker, as emphasised by HisExcellency the President in his address tothis august House, infrastructuredevelopment is an indispensable pillar inour efforts to raise the productivity of our

businesses, diversify the economy and promote inclusive growth. In this regard,the PF Government has made tangible

progress in developing key infrastructure inthe transport and communications and

energy sectors.

Transport and CommunicationInfrastructure

Roads

53. Mr. Speaker, the Government hascontinued implementing the roadinfrastructure programme under the LinkZambia 8000, Road Tolling and the Lusaka400 Road Projects. Equipment for PaveZambia 2000 has since been procured anddistributed to all provinces and manufactureof pavers has commenced in 7 provinces.Governments expectation is the rapid

acceleration of this project in 2015 whichwill provide further income opportunitiesfor our unemployed youths.

54. Sir, under phase one of the linkZambia 8000 Road Project, a total of 22

projects valued at K9.8 billion, covering alength of 2,260 km are underimplementation countrywide. Includedunder this programme are the Kasama-

Mporokoso, Mbala-Nakonde, Chama-Matumbo, Chongwe-Katoba basic School,and the Isoka-Muyombe-Lundazi-Chamaroads. Additionally, works on the Kitwe-Chingola Dual Carriage Way are advancedat 40 percent, the Pedicle road at 48 percent,and the Mansa-Luwingu road at 37 percent,while 19.5 km of the Kawambwa-Mushotaroad and 60 km of the Bottom road have

been completed. I wish to also inform thisaugust House that the procurement processfor the engagement of a contractor for theKalabo-Sikongo road has commenced.Works have also been completed on theKasama-Mbesuma and Kalulushi-Lufwanyama roads.


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55. Mr. Speaker, Government is alive tothe reality that maintaining our roadnetwork in a good state entails investing inroad maintenance and rehabilitation. In this

regard, 63 km of the Lusaka - Chirundu roadhas been rehabilitated. Further, 52 km of the91 km road from Luangwa Bridge to Feirahas been upgraded to bituminous standardwhile maintenance works will sooncommence on the Chinsali-Nakonde road.

56. Sir, Government is also constructinga number of bridges to ease movement ofour people and open up our rural areas. Inthis regard, Government recently completedand commissioned the Michael ChilufyaSata Bridge in Chiawa. Further, 22 out ofthe 26 bridges on the Mongu-Kalabo stretchare under construction with seven bridgesalready completed. The construction of theMufuchani Bridge in Kitwe is alsounderway. I wish to also report that thecontract for the construction of the

Kazungula Bridge has been signed and thecontractor is mobilising.

57. Mr. Speaker, the Government isoperationalising the road tolling programmeas an innovative and self-financingmechanism for sustainable roadrehabilitation and maintenance. This

programme is being implemented at 8weighbridges and 18 ports of entry targetingvehicles with weights above 6.5 tonnes. Sofar, K187.4 million has been raised fromthis programme in 2014.

Railways

Mr. Speaker, Government is committed toimproving the railway network to reduce theheavy load on our roads. I wish to report that

of the targeted 442 km of the Livingstone-Chingola line, a total distance of 117 km has been rehabilitated, while 133km will becompleted by the end of 2014.

58. Furthermore, progress has beenmade in refurbishing passenger coachesresulting in improved service that hasattracted over 7,600 passengers per weekcompared to less than 5,000 under the

concessionaire. In addition, the volume ofcargo transported has increased to over400,000 tonnes during the first half of theyear from about 280,000 tonnes during thesame period in 2013.

59. Sir, the rehabilitation of storagefacilities at Chipata Station has beencompleted and Zambia Railways Limitedhas since commenced operations on the

Chipata- Mchinji railway line. This routewill enhance regional trade through the

Nacala Corridor.

60. Mr. Speaker, the 162 km Mulobezirailway line together with livestock wagonsand passenger coaches are also beingrehabilitated. Work on the Copperbelt inter-mine railway network is progressing well atKonkola and Nchanga mine plants.Rehabilitation works along the Luano-Chililabombwe line are also nearingcompletion.

61. Mr. Speaker, Government willcontinue to support TAZARA to ensure that


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it facilitates the movement of goods and passengers and enhances local and foreigntrade links. Government is, therefore,resolving the policy constraints relating to

the operation of TAZARA by harmonizing positions with our Tanzanian partners.

Energy Infrastructure

62. Sir, the energy sector continues togrow and contribute positively to economicgrowth. Government has moved proactivelyto reduce the power deficit in the electricitysub sector which has potentially been amajor hindrance to our future economic

prosperity. We have just brought on stream360 megawatts of power having completedthe Kariba North Bank hydro powerextension project.

63. Mr. Speaker, another 120megawatts at the Itezhi-Tezhi Hydro PowerPlant and 300 megawatts of thermal power

being developed in Sinazongwe by the private sector will come on stream next yearto further enhance our power generationcapacity. In addition, Government willcontinue to undertake extension andrehabilitation works on the transmissionand distribution networks under the PowerRehabilitation Project.

64. Sir, the construction of the Pensulo-Kasama and the Pensulo- Msoro -Chipata330kv transmission lines is expected to becompleted next year.

65. Mr. Speaker, the 750 megawattsKafue Gorge Lower Project, including the

two 330kv transmission lines, is back oncourse following the strengthening of thegovernance structure for the project in linewith international good practice. It is

expected that by the end of 2014, the procurement process for the Engineering,Procurement and Construction Contractor,the Transaction Advisor and Fund Managerwill be finalised. Governments expectationis that execution of this project willaccelerate in 2015.

66. Mr. Speaker, Governments policyin the petroleum sub sector is to ensure astable supply of fuel in all parts of thecountry. To this end, the programme of

building provincial depots will continue.The Mpika Fuel Depot has beencommissioned, while the Solwezi andMongu Fuel Depots are expected to becompleted in 2015. The identification ofadditional sites in the remaining provincesis in progress.

67. Sir, in order to deal with challengesin this sector, the Government is reviewingthe petroleum supply chain and thefinancing options. Further, alternativesources of fuel supply are being pursued toreduce costs. Discussions at bilateral levelwith oil producing countries for the supplyof crude and finished products havecommenced to streamline the procurement

process by eliminating middlemen.

Social Sector Policies

68. Mr. Speaker, to advanceGovernments commitment to social


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justice, its social sector priorities in 2015will remain focused on improving access toand enhancing delivery of education, healthand water and sanitation services as well as

accelerating implementation of social protection programmes.

Education and Ski ll s Development

69. Mr. Speaker, Government willcontinue to focus on increasing equitableaccess to quality education and empowerour youths through skills training. In orderto increase access, and improve progression

rates to higher levels of learning,construction of education facilitiesespecially at secondary and tertiary levelswill remain paramount. Emphasis will also

be placed on enhancing early childhoodeducation.

70. Sir, to improve the quality ofeducation, Government will continue the

programme of upgrading teacherqualifications to meet the minimumstandards required. The training of teachersin science, mathematics and technologysubjects will be scaled up to address theinadequate number of teachers in thesefields. Government will continueimplementing the revised educationcurriculum that puts emphasis on life skillsto align student qualifications to the needsof industry and the wider economy.

71. Mr. Speaker, the Government willalso continue with the school feeding

programme to promote the cognitivedevelopment of young children, particularlythe disadvantaged.

Health

72. Mr. Speaker, in line with theGovernments objective of bringing costeffective quality health services as close as

possible to all Zambians, Government willcontinue to increase the availability offrontline health personnel, enhanceinfrastructure and improve the provision ofdrugs and medical equipment. Sir, thehealth status of Zambians continues toimprove under the PF Government asrevealed by the 2013/2014 ZambiaDemographic Health Survey.

73. Sir, in order to address humanresource constraints in the health sector,Government has been implementing the

National Training Operational Plan since2013. The current number of frontlinehealth personnel stands at 13,147. In 2015,Government plans to recruit additional staffso that the overall number of health

personnel increases by over 2,000, bringingthe total number to over 15,000.

74. Sir, Government has commencedthe construction of two new traininginstitutions in Senanga and at LevyMwanawasa General Hospital in Lusaka. Inaddition, 27 other health traininginstitutions are under rehabilitation andexpansion. This is expected to accelerate thesupply of health personnel by increasing thenumber of graduates to 10,000 per yearfrom the current 5,500.

75. Mr. Speaker, 30 district hospitalsare also under construction in various partsof the country and a further 8 will be started


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before the end of this year. In addition, the programme to construct 650 health posts isunderway and will be completed by the endof 2016.

76. Sir, to further improve the quality ofhealth care and reduce referrals both locallyand abroad, Government is well advancedwith its modernisation programme toupgrade the health facilities at theUniversity Teaching Hospital, LivingstoneGeneral Hospital and Kitwe and Ndolacentral hospitals. Under this programme,Government is procuring specializedequipment including CT scans, MagneticResonance Imaging machines andCATHLABs.

77. Mr. Speaker, improving the supplyof medical drugs and logistical systemsremains a priority of the Government inorder to ensure timely and adequatesupplies. In line with this, the Government

embarked on the establishment of sixregional hubs under Medical Stores. TheChoma and Chipata regional hubs arealready operational and a third, in Mongu,will be operational by the end of 2014. Theremaining three are expected to beoperational in 2015.

Water Supply and Sani tation

78. Mr. Speaker, the PF Governmentremains committed to ensuring that allZambians have access to clean water supplyand sanitation services. I am pleased toreport to this House that out of the 2,000

boreholes planned for this year, 1,514 had been drilled as at end-September, 2014. In

addition, 10 piped-water schemes and 921 boreholes had been rehabilitated. As a resultof these interventions, rural access to cleanand safe drinking water has increased to 64

percent from 61 percent of the population in2013.

79. Mr. Speaker, in 2015 Governmentwill continue interventions aimed atincreasing rural access to clean and safedrinking water from the current 64 percentto 67 percent. This will be achieved byconstructing an additional 2,500 water

points, mainly boreholes. Government willalso rehabilitate an extra 2,000 existingwater points during the same period.

80. Sir, to ensure adequate access tosanitation facilities, Government hastrained and rolled-out total sanitationapproaches in 44 districts. This has resultedin 1.3 million people in rural areas havingaccess to adequate sanitation facilities. In

2015, Government will continue promotingcommunity-based approaches and theconstruction of institutional sanitationfacilities. With these interventions, ruralaccess to sanitation facilities is targeted toincrease to 45 percent from the current 43

percent.

81. Mr. Speaker, Government in 2015will increase access to clean and safe

drinking water in urban and peri-urbanareas from the current 83 percent to 85

percent of the population. This will beachieved through the rehabilitation andconstruction of water supply infrastructurein the various urban towns under the 11water and sewerage utility companies.


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82. Sir, Government is also committedto improving sanitation facilities in urbanand peri-urban areas. As such, designs forwater supply and sanitation improvements

under the Lusaka Water Supply, Sanitationand Drainage Project have been completedwhile rehabilitation works on the water andsewerage systems under Southern andMulonga Water and Sewerage Companiesin Livingstone and Chingola havecommenced.

83. Mr. Speaker, promoting sustainablesolid waste management is critical toensuring environmental protection. In 2015,Government will provide resources to localauthorities to enable them procure refusetrucks and other solid waste managementequipment country wide. Local authoritieswill be encouraged to embark on waste-to-energy projects through the Public PrivatePartnership arrangements.

Social Protection84. Mr. Speaker, Government remainscommitted to ensuring adequate social

protection for its citizens. The provision ofsustainable and equitable pension benefitsas well as other social safety nets forvulnerable members of society is, therefore,at the core of Governments social

protection policy.

85. Sir, our public pension system ischaracterised by huge actuarial deficits, lowannuities and unsustainable entitlements.To address these challenges, an inter-ministerial committee was constituted toreview the pension system. The committee

has since completed its review and maderecommendations to redesign the pensionrules and framework and harmonise thesocial security legislation. Government is

now considering these recommendations.

86. Mr. Speaker, to effectivelycontribute to the eradication of hunger andextreme poverty in rural households,Government scaled up the Social CashTransfer Scheme in 2014. As at June 2014,over 145,000 individuals had beensupported of which more than 80 percentwere female. It is projected that by the endof 2014, about 190,000 beneficiaries will bereached. This Scheme will continue in 2015as a tangible demonstration ofGovernments resolve and commitment toeradicate hunger and extreme poverty.

87. Mr. Speaker, Government remainscommitted to implementing other socialsafety nets including the Women

Empowerment Programme, the FoodSecurity Pack, the Public WelfareAssistance Scheme, medical grants and the

bursary scheme for students. In 2015,Government will review some of these withthe aim of rationalising coverage tomaximise their impact.

Debt and Aid Policy

88. Sir, Government remains committedto maintaining a sustainable debt level. Inthis regard, Government conducted a DebtSustainability Analysis in June this yearwhich indicates that the countrys debt

position remains sustainable. The net present value of Zambias external debt at


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23 percent of GDP remains below theinternationally accepted threshold of 40

percent of GDP.89. Mr. Speaker, I wish to assure this

House that the PF Government will exercisefiscal prudence in contracting debt.Borrowing will therefore be restricted tofinancing only critical capital investments.To avoid burdening future generations withunsustainable debt, Government willfurther strengthen domestic revenuemobilisation so that an increasing

proportion of our budget is financed fromdomestic resources.

90. On the domestic front, Governmentwill limit its borrowing to not more than 2

percent of GDP to ensure that fiscal policydoes not crowd out the private sector. Thiswill further support the lowering of interestrates in the domestic market. Heavy

borrowing by Government pushes up the costof Treasury instruments, in the process

raising commercial bank interest rates whichimpedes all business, particularly Small andMedium Enterprises borrowing anddampens the impetus for job creation.91. Sir, as I indicated in my last Budgetaddress to this august House, the revision ofZambias aid policy has become imperative.This is in view of the general global declinein Official Development Assistance and theshift by bilateral Cooperating Partners from

direct budget support to sector and projectsupport.

92. I am pleased to inform the Housethat Government has made progress indrafting the new policy which will focusmore on strengthening trade relations,

enhancing private sector exchanges and partnerships to build capacity in the various priority sectors of the economy in line withthe Revised Sixth National Development

Plan.

Fiscal Policy

93. Mr. Speaker, substantial progresshas been made in 2014 to consolidate thefiscal position. The end-year overall deficitis projected to be within the target of 5.5

percent of GDP, down from 6.5 percent in2013. In 2015, the Treasury will continue toexercise prudent fiscal management withthe overall deficit targeted to further fall to4.6 percent of GDP.

94. Sir, this lower fiscal deficit is a fine balance between ensuring macroeconomicstability and the need to fund critical publicinfrastructure that supports a higher andsustainable growth trajectory. The deficit

will over the medium term continue to bereduced to around 3.3 percent of GDP by2017. In recognition of this effort, I am gladto inform this House that internationalrating agencies recently revised Zambiasoutlook from stable to positive, andaffirmed the countrys ceiling at B+.

95. Mr. Speaker, key to the achievementof our fiscal deficit target will be the

continued control of the recurrentexpenditure of the budget. Further, limitingexpenditure on maize marketing, ensuringcost reflective fuel pricing and rationalisingcapital expenditure will be essential incontaining the deficit.


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96. Mr. Speaker, to further strengthenthe fiscal position in 2015, Government willimprove the efficiency with which itcontrols its resources through the fulloperation of the Treasury Single Account.This will ensure better cash managementand avoid idle balances in the bankingsystem. Consequently, the need forGovernment to borrow unnecessarily on themoney markets to finance its operations will

be curtailed.

97. Sir, a strengthened fiscal positionwill also arise as a result of a continuation ofGovernments effort to modernise taxadministration with e-based tax and customsadministration systems that will enable tax

payers to declare and pay taxes online. Thiswill enhance the operational efficiencywithin Zambia Revenue Authority andreduce the cost to taxpayers of complyingwith their tax obligations.

98. Mr. Speaker, the reform of landtitling procedures and the roll out of theZambia Integrated Land Management andInformation System is expected to becompleted in 2015, thereby boosting non taxrevenues. As a consequence of these efforts,and changes in tax policy which I will detaillater, the revenue to GDP ratio in 2015 is

projected to rise to 18.5 percent from 17.2 percent projected for end-2014.

99. Sir, there are some concernsregarding the application of Value AddedTax (General) Administrative Rule Number

18 on proof of export requirements. It has been noticed that some exporters have notcomplied with the requirements of Rule 18and this has led to non-payment of VATrefunds. It is Governments desire that theseconcerns are resolved expeditiously andamicably.

Monetary and Financial Policies

100. Mr. Speaker, in order to support poverty reduction and economic growth,

monetary policy in 2015 will remainfocused on achieving single-digit inflationrates of no more than 7 percent. Higherinflation adversely affects the poor majorityof our people who have no way of

protecting their incomes. Consequently, theBank of Zambia will control inflationthrough increased use of market-basedmonetary tools that avoid economicdistortions. Further, a liberal foreignexchange system will be maintained, withthe Central Bank s interventions limited tosmoothing out short-term fluctuations in theexchange rate.

101. Sir, increased access to formalfinancial services remains a priorityobjective for this Government. Todemonstrate its commitment, Government

will continue to implement the variousinitiatives enshrined in the financial sectordevelopment programme. Initiatives toextend financial services to ordinarycitizens and small business enterprises will

be prioritised around two broad strategies.The first of these is the development of aregulatory framework for agency bankingaimed at encouraging financial institutionsto bring banking services to the vast numberof unbanked Zambians. The second is theimplementation of the National Strategy onFinancial Education to provide ordinaryZambians with financial knowledge.


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implement the results of this review hascommenced. Consequently, in 2015, a LocalGovernment Equalisation Fund (LGEF) will

be established to provide a stable, buoyant and

predictable source of revenue from CentralGovernment, to supplement LocalGovernment revenues. This will enablecouncils to deliver better municipal servicesand invest in local development projects.

109. Sir, financing of the Fund will be based on a revenue sharing arrangement,where Central Government will allocate aminimum of 5 percent of total income taxes.Allocations to individual councils will beformula-based to ensure equity andtransparency. The release of grants tocouncils will be conditional on observance ofgood public financial management practicesand delivery of essential municipal services.

Private Sector Development Reforms

110. Mr. Speaker, in order to reduce thecost of doing business for the private sector,Government will operationalise the

provisions of the Business Regulatory Actof 2014 to ensure that the principles of thelaw are complied with when introducinglicences. In this regard, Government willwork towards institutionalising regulatoryimpact assessments to rationalise licencesand streamline procedures.

PART IIITHE 2015 BUDGET

111. Mr. Speaker, in 2015, Government

proposes to spend K46.7 billion or 24.6 percent of GDP. This will be financed fromdomestic revenues of K35.1 billion which is75.2 percent of the total Budget and 18.5

percent of GDP. Grants from cooperating partners of K1.2 billion or 2.6 percent of thetotal budget will complement domesticrevenues. Domestic borrowing is projected to

be 2.0 percent of GDP translating to K3.8 billion while K4.2 billion is a combination of

foreign programme and project financing.The balance of K2.4 billion is earmarked

proceeds from the 2014 Eurobond.

2015 Expenditure Allocations by Function

112. Sir, in line with the sector policiesoutlined in Part II, I now discus thesupporting expenditure allocations byfunctions of Government.


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2015 EXPENDITURE BY FUNCTION

Function2015 Budget

K'million Percentage ofBudgetGeneral Public Services 12,040.18 25.80%

Public Affairs and Summit 68.86Constitution Making Process 29.26Constituency Development Fund 210Local Government Equalisation Fund 586.76Domestic Debt Interest 2,896.16External Debt Interest 2,391.68Compensation and Awards 100

Defence 3,247.21 7.00%Public Order and Safety 2,180.02 4.70%

Economic Affairs 12,746.64 27.30%Empowerment Funds 123.7Sovereign Wealth Fund 100Farmer Input Support Programme 1,083.17

Strategic Food Reserve 992.9Rural Electrification Fund 70.71ZESCO Power Rehabilitations 600Roads Infrastructure 5,626.51O/W GRZ Contribution 3,226.34

Environmental Protection 174.96 0.40%Housing and Community Amenities 798.71 1.70%

Water Supply and Sanitation 540.99Health 4,464.09 9.60%

Drugs and Medical Supplies 753.52Medical Infrastructure and Equipment 268.24

Recreation, Culture and Religion 323.63 0.70%Education 9,433.33 20.20%

School Infrastructure 1,069.53University Infrastructure 650

Social Protection 1,257.80 2.70%Public Service Pension Fund 805Social Cash Transfer 180.59O/W GRZ Contribution 150Food Security Pack 50

Grand Total 46,666.56 100.00%

General Publ ic Services

113. Mr. Speaker, K12.0 billion or 25.8 percent of the budget has been allocated forGeneral Public Services. To ensure thatGovernment meets both its domestic andexternal debt obligations, K2.9 billion andK2.4 billion have been providedrespectively. Other notable expenditureallocations under this category include

K669.4 million for grants to LocalAuthorities of which K586.8 million is forthe Local Government Equalisation Fund.

114. Sir, to ensure the continuation ofinfrastructure development in the newlycreated provinces and districts, K500million has been provided in 2015. FurtherK210 million has been allocated for theConstituency Development Fund. I have


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also provided K100 million to cater forcourt cases decided against Government.

115. Sir, the constitution making process

has continued keenly and in earnest, as theGovernment discusses the matter with allinterest groups to achieve consensus on

both the process and content. I haveallocated K29.3 million towards this

process.

Economic Affair s

116. Mr. Speaker, Government proposes

to spend K12.7 billion or 27.3 percent of thetotal budget to support the economic sectorsand lay the basis for further prosperity forour people. In this regard, an allocation ofK5.6 billion has been set aside for roadinfrastructure, including the Link Zambia8000 and the Pave Zambia 2000 projects.

117. Mr. Speaker, diversification frommaize remains paramount in attaining more

inclusive growth and economicindependence. In this regard, K254.9million has been allocated towards the E-Voucher System which will allow farmersmore flexibility of choice in the inputs theyreceive. A further, K1.1 billion has beenallocated to the Farmer Input SupportProgramme (FISP). In 2015, it is expectedthat 1,000,000 farmers will access inputsthrough the E-Voucher and FISP

programmes.

118. Sir, Government will continue promoting private sector participation ingrain marketing by limiting grain purchases

by the Food Reserve Agency to the 500,000

metric tonnes required for the strategic foodreserve. In this regard, I have providedK992.9 million for strategic food reserves.

119. Mr. Speaker, to promote irrigatedagriculture and increased access to waterresources, I have allocated K164.5 milliontowards the construction and rehabilitationof dams to achieve our target of anadditional 17,500 hectares under irrigation

by 2016.

120. Sir, to promote livestock andfisheries, I have allocated K307 million forlivestock disease control measures andaquaculture development.

121. Mr. Speaker, to address thechallenges posed by the ever growingdemand for electricity, I have providedK600 million to ZESCO for powergeneration, transmission and distribution. Afurther K70.7 million has been allocated to

increase the number of rural communitiesacross the country connected to the nationalgrid under the Rural ElectrificationProgramme.

122. Mr. Speaker, to continue nurturingthe entrepreneurial spirit of our people byempowering them with required finances soas to increase their effective participation inthe economy, I have allocated K123.7million to various empowerment funds thatcater for the youth, women and SMEs.

123. Mr. Speaker, a culture of livinghand-to-mouth does not safeguard theinterest of posterity. We have the duty and


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resposibility to secure the future of the nextgenerations. In this regard, I have allocatedK100 million for the establishment of asovereign wealth fund. Going forward, a

significant propotion of the dividends fromstate-owned enterprises that will fall underthe Industrial Development Corporationwill form part of the fund.

Education and Ski ll s Development

124. Mr. Speaker, I propose to spendK9.4 billion or 20.2 percent of the total

budget in the education sector. In an effort

to reduce the pupil teacher ratio, 68 percentof this amount will go towards therecruitment of 5,000 teachers and sustainingthe current establishment. I have also

provided K1.1 billion for infrastructuredevelopment for early childhood, primaryand secondary education.125. Sir, K650 million has been allocatedto commence construction of additionalstudent accommodation at the University of

Zambia, Copperbelt University,Mulungushi University and Evelyn HoneCollege, and to continue the construction ofnew universities. The new Universities thatare earmarked for completion in 2015 arePaul Mushindo, Chalimbana and Palabana.

126. Mr. Speaker, Government willembark on the construction of KingLewanika and Luapula Universities in2015. I wish to inform this august Housethat Robert Kapasa Makasa, Mukuba andKwame Nkrumah Universities are almostcompleted.

127. To supplement the budgetaryallocation, the Government will continue toexplore opportunities for Public PrivatePartnerships as an alternative form of

financing of tertiary educationinfrastructure.

128. Sir, a further K79.6 million has beenallocated towards the construction of ninetrades training institutes across the countryof which three will be completed in 2015 inIsoka, Kalabo and Mwense. In addition,K28.5 million has been allocated towardsthe procurement of research anddevelopment equipment as well as thecommencement of the construction of a

National Science Centre in Chongwe, aFisheries Centre in Samfya and a MineralResearch Centre in Solwezi.

129. Sir, to address the challenges facingour vulnerable school leavers to accesstertiary education at our colleges anduniversities, I have raised the allocation to

bursaries by 27.9 percent to K200.2 millionfrom the 2014 allocation of K156.5 million.The cost of publicly provided tertiaryeducation per student is among the highestin the SADC region. There is need,therefore, to review the cost of providingtertiary education in Zambia.

130. Mr. Speaker, following thesuccessful piloting of the school feeding

programme, I have allocated K32 million towiden the roll-out of this programme furtherin 2015.


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Health

131. Sir, in line with Governmentsobjective of providing equitable access toquality health care, I have allocated K4.5

billion or 9.6 percent of the overall budgetin 2015 to the Health Sector. Of thisallocation, K268.2 million has beenallocated for the construction andrehabilitation of health infrastructure invarious parts of the country.

132. Mr. Speaker, an allocation of K753.5million has been set aside for the

procurement of essential drugs and medicalsupplies. Sir, I am pleased to inform thisHouse that K52.5 million has been allocatedfor the net recruitment of over 2,000 health

personnel.

H ousin g and Communi ty Ameniti es

133. Mr. Speaker, Government hasallocated K798.7 million for housing andcommunity amenities, of which K541million will be for the rehabilitation andconstruction of water supply and sanitationinfrastructure in the rural, peri-urban andurban areas.

Publi c Order an d Safety

134. Sir, K2.2 billion has been allocatedto maintain public order and safety. Key

interventions will involve modernisation ofour security wings; recruitment of security

personnel including immigration and prisonofficers; rehabilitation of prison

infrastructure; and construction andrehabilitation of staff houses.

Social Protection

135. Mr. Speaker, I have provided K1.3 billion for social protection of which K805million is for the Public Service PensionFund, K180.6 million for the social cashtransfer scheme and K50 million for the

food security pack. The allocation to social protection translates to 2.7 percent of theoverall expenditure in 2015.

Other fun ctions

136. Sir, K3.7 billion has been allocatedto the remaining functions of Defence,Environmental Protection and Recreation,Culture and Religion. Of this amount, K3.2

billion is for Defence.

REVENUE ESTIMATES ANDFINANCING

137. Mr. Speaker, to support the expenditureI have highlighted above, Government expectsto raise a total of K46.7 billion in revenues andfinancing as detailed below:


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Total Revenue and Financing for the 2015 Budget

(K million) Percentof GDPPercent

of Budget

Total Tax Revenues 31,282.67 16.50% 67.00%Income Tax 11,793.25 6.20% 25.30%Company Income Tax 2,399.44

PAYE 7,466.90Withholding & other 1,926.91Mineral Royalty 5,936.88 3.10% 12.70%

Value Added Tax 6,576.73 3.50% 14.10% Domestic VAT 157 Import VAT 6,419.73Customs and Excise 6,974.80 3.70% 14.90%Customs duty 3,341.38

Excise duty 3,633.42o/w Fuel Levy 903.13

Non-Tax Revenues 3,822.68 2.00% 8.20% Fees & Fines 468.58 Exceptional 3,083.73 Dividends & On-lending 270.37Domestic Revenue 35,104.35 18.50% 75.20%

Domestic Borrowing 3,771.95 2.00% 8.10%Earmarked Bond Proceeds 2,417.95 1.30% 5.20%

Total Domestic Revenue and Financing 41,294.25 21.80% 88.50%

Total Foreign Grants and Financing 5,372.31 2.80% 11.50%Grants 1,213.59 0.64% 2.60%

General Budget Support 0 Project Grants 1,213.59Foreign Financing 4,158.72 2.20% 8.90%

Programme Loans 1,482.59 Project Loans 2,676.13TOTAL REVENUE AND FINANCING 46,666.56 24.60% 100.00%

REVENUE ESTIMATES ANDMEASURES

Revenue Measures

138. Mr. Speaker, the proposed revenue

measures have been framed in the context ofGovernments aim to consolidate its fiscal

position and make the tax system simpler andmore effective. This entails, inter alia,accelerating the modernisation of taxadministration and restructuring the currentmining tax regime in order to capture more

resources to address public expenditureneeds.

139. Mr. Speaker, to ease tax complianceGovernment in 2004 introduced a

presumptive tax for individual operators of public service vehicles at specific amounts based on vehicle sitting capacity. However,these amounts have not been adjusted in thelast ten years and have consequently beeneroded by inflation. I therefore propose to


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147. Mr. Speaker, the proposed changesto the mining tax regime will not apply tomining of industrial minerals.

148. Sir, the expected additionalrevenues, in 2015, as a result of these newmeasures are estimated at K1.7 billion.

HOUSE KEEPING MEASURES

149. Mr. Speaker, I also propose to carryout amendments to the Customs and ExciseAct, the Value Added Tax Act, the IncomeTax Act, the Property Transfer Tax Act and

the Mines and Minerals Development Actso as to update, strengthen, and removeambiguities in certain sections of taxlegislation in order to make taxadministration more effective. The

proposed amendments to these Acts arehousekeeping in nature and are revenueneutral.

150. Mr. Speaker all the above tax and

revenue measures will take effect from 1stJanuary, 2015.

PART IVCONCLUSION

151. Mr. Speaker, as I conclude myaddress, let me stress that we have in therecent years made some noteworthyachievements to grow the economy. Toeradicate the insidious incidences of

poverty which are a slur on our collectiveconscience we will need double digitgrowth rates. This will entail major changes

in our mind sets particularly as it relates toradical improvement in our work culture,sense of duty and responsibility.

152.

Our modest achievements so far are a product of our collective wisdom ofunflinching unity in diversity. We are anoasis of peace, stability and above all ofhuman fellowship in a troubled world

bedevilled by fratricidal feuds and wars

153. Let us continue to rally behind ourPresident, Michael Chilufya Sata, whosetransformative development agenda has in a

very short time of three years changedZambia in palpably significant ways. We areall equal stakeholders in Zambia and there isno room for by-standers. Sustainabledevelopment of Zambia makes it aninescapable moral imperative for each andevery one of us to be active agents ofdevelopment. However different our viewsmay be, and this is the core and essence of ademocratic society, the development ofZambia is our common and collectiveagenda.

154. We should all ardently pray that theGood Lord, in His infinite mercy andunfailing compassion, will preserve andguide our President and indeed the entireleadership of this great nation to always bea beacon of hope and human fellowship andto evolve into a role model country.

155. Mr. Speaker, I beg to move.

Zambia National Budget 2015

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