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RISING FISCAL DEFICIT DUE TO HIGH GOVT. EXPENDITURE, SAYS CUTS

THE Consumer Unity and Trust Society (CUTS), says government expenditure has outpaced its resource mobilisation which has led to an increasing fiscal deficit that stands at 9.1 percent of the gross domestic product (GDP) as  at the end of 2019.

Meanwhile, CUTS in partnership with other organisations will on Wednesday 23, 2020 virtually launch the Fair Tax Monitor (FTM), a tool originally developed by Oxfam and the Tax Justice Network Africa (TJNA) that seeks to provide reliable evidence based on an analysis of the national tax regimes.

CUTS Communications and Advocacy Officer Njavwa Simukoko says Zambia’s fiscal performance remains a challenge as debt levels were recorded at over 70 percent of GDP in 2019.

“This is due to Zambia’s limited domestic revenue sources. As the debt has continued to escalate, Domestic Resource Mobilisation (DRM) has become a top Government agenda to ensure that Zambia is better placed to fund its development.

Efficient and effective tax collection therefore is important to a country like Zambia because it is the biggest source of long-term financing for sustainable development and the determinant of good governance in terms of high-quality service provision, holding the Government to account, and citizens participation in the management of public funds,” Mr Simukoko said this is a statement issued in Lusaka and made available to the Techwatch News.

He added that DRM is expected to be much lower than expected in 2020 following the Covid-19 pandemic.

Mr Simukolo continued, “To bridge the gap, the Government has turned to domestic and external financing. The result of this has been an accumulation of domestic arrears and unsustainable external debt.

The significant depreciation of the Kwacha against the US dollar by over 40 percent in 2020 further exacerbates the burden of external debt servicing for the Zambian government, shrinking the country’s fiscal space, leaving inadequate resources to respond to the economic shock seen in 2020”.

He said for citizens, this means that they will experience increased inflation rates reflected by higher prices of goods and services in the economy.

And Mr Simukoko said the Zambia’s FTM report is key in speaking to the importance of strengthening the tax base to respond to economic shocks such as the one brought about by the COVID-19 pandemic.

He further showed that it is expected that the findings of this study will go a long way in influencing tax policy formulation and evaluation in Zambia to make the tax system more fair and progressive.

Mr Simukoko said this is important because Zambia’s current fiscal position has weakened the Government’s budgetary commitments towards key developmental sectors such as healthcare, education, agriculture, and social protection.

The FTM report seeks to highlight these and many other issues and provides solutions and recommendations to the government and other relevant stakeholders.

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Written by Arthur Mwansa

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