The 2020 National Budget’s Measures not Enough to Guarantee Adequate Liquidity in the Market

For Immediate Press Release I 14th October 2019

The Zambia Tax Platform is concerned with the measures set out in the 2020 national budget aimed at stimulating the domestic economy. It is evident that the private sector in the country has continued to struggle despite being recognized as the engine of growth. Government arrears of have contributed to tight liquidity in the economy, while borrowing from the domestic market has crowded out access to finance for businesses to expand. The long term pressure placed on the private sector by the accumulated domestic arrears has also contributed to the declining growth rate of the economy.

Domestic arrears have increased to K20.2 billion Kwacha in 2019 from K15.6 billion in 2018, a staggering 29 percent rise given the already struggling economy. Government has proposed to spend only K2.3 billion in 2020 toward the dismantling of domestic arrears. This means only 11 percent of the bill will be settled by end of year 2020. This amount is not sufficient considering that suppliers have been affected and their businesses slowed down due to non-payments by Government.

It is critical that government prioritizes a consolidated approach to creating an enabling environment for the private sector to flourish especially SMEs who constitute more than 90% of the formal sector. Government needs to consider the following:

  1. To increase allocation for dismantling domestic arrears to not less than 40% of the total arrears  to mitigate the slow-down in investment into the productive sectors.
  2. To offer SMEs rebate on turnover tax against potential jobs created. ( such as a 1% rebate on tax for every 5 formal jobs created) This would promote job creation while according government an immediate increase in revenue from PAYE.
  3. To immediately consider setting up an SME Development Fund to spur economic recovery by directing 2% of corporate tax into the fund.

Zambia Tax Platform Coordinator

Ibrahim Kamara

ANNEX

The following organisations are the Zambia Tax Platform members:

  1. Action Aid Zambia
  2. Centre For Trade Policy and Development (CTPD)
  3. Zambia Civic Education Association (ZCEA)
  4. Consumer Unit and Trust Society (CUTS)
  5. Caritas Zambia
  6. CSO SUN (Civil Society for Scaling Up Nutrition)
  7. Green Life Conservation of Zambia (GLCZ)
  8. Jesuit Centre for Theological Reflection (JCTR)
  9. Civil Society for Poverty Reduction (CSPR)
  10. The Policy and Governance Centre (PGC)
  11. Southern Africa Cross Boarders Trade Association (SACBTA)
  12. Young Volunteers for the Environment
  13. The Non-Governmental Gender Organization Coordinating Council (NGGOCC)
  14. Diakonia
  15. Zambia Council for Social Development (ZCSD)
  16. Save the Children Zambia
  17. Transparency International Zambia (TIZ)
  18. Economics Association of Zambia
  19. Water Aid
  20. STOP ZAMBIA
  21. Development Finance Associates
  22. OXFAM

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