What should we expect in 2015 budget?

THE tone for next year’s budget which will be presented this afternoon has already been set and I am sure most Zambians are eagerly waiting to hear what is contained in the copper briefcase.
Government has indicated its inclusive and pro-poor growth so that benefits of a stable macroeconomic environment, higher economic growth and single-digit inflation improve standards of living for the Zambian people.
To attain this, government’s fiscal strategy will include creation of additional fiscal space primarily by strengthening domestic resource mobilisation efforts.
As the 2015-2017 medium-term expenditure framework (MTEF)  outlines, Government wants to invest in education and skills development and by mobilising financial resources for areas that have a direct impact on improving people’s quality of life.
Given this, I would expect more investment in education and skills development, health care, agricultural support, citizen empowerment, employment creation, provision of public infrastructure and social amenities.
This will be done through effective streamlining of tax and non-tax policy and administration measures as well as continuing to limit non-priority spending.
President Sata’s speech when he opened Parliament gave a hint on the direction of the budget. He outlined the importance of job creation through investment in priority sectors.
The President’s speech says despite sustained economic capacity in the economy to create jobs, unemployment has remained a major challenge.
Against this background, the Government has worked out an  industrial and job creation strategy.
This will focus on specific growth sectors such as agro-processing, manufacturing, tourism, the booming construction sector, creative industries, information technology, steel production, metal fabrication and clothing and textiles.
The budget will also re-orient expenditure towards pro-poor programmes such as infrastructure development in education, health, agriculture and water supply and sanitation.
Creation of additional fiscal space suggests an expanded budget compared to this year’s K42.6 billion budget which Finance Minister Alexander Chikwanda presented to Parliament in 2012.
Going by the MTEF, the total expenditures for 2015 are  projected to be K44.3 billion in 2015 against revenue of K35.9 billion. This figure does not include amortization (debt servicing).
Over the medium term about K10.8 billion is proposed to spent on constitutional and statutory expenditure and interest payments on domestic and external debt.
Because of the gap between expected revenues and expenditures, Government expects to incur an overall fiscal deficit of 4.4 percent of GDP in 2015.
The broad macroeconomic economic objective will be to attain growth of higher than 7 percent, maintain single digit inflation, accumulate reserves of 4 months import cover by 201, increase domestic revenue to over 18 percent of the total goods and services produced(GDP).
Other objectives are to contain domestic borrowing to less than 2.2 percent by 2017,  speed up diversification, promote Zambia as a favourable investment decision and speed up interventions in education, health and water and the sanitation sectors.
To create room for the additional fiscal space, Government will reinforce domestic resource mobilisation efforts, through effective streamlining of tax measures.
This is why the 2015 budget can be expected to contain stringent measures to curb tax evasion and stiffened sanctions for tax evasion.
This is in line with what is contained in the MTEF. Government intends to also introduce measures to make local products competitive, restrict ministries from importing goods that can be made locally and make it mandatory for Government projects to have local content including projects funded by loans.
But whether Value Whether Value Added Tax and other import duties on raw material will be reduced as this has been the cry of farmers and other business to become competitive remains to be seen. But perhaps this may just be the case.
It should also be expected that Government is proposing to reduce expenditure on personal emoluments as a share of domestic revenues from 52.5 percent in 2014 to 45.8 percent in 2017.
Under the Farmer Input Support Programme (FISP) the 2015 budget should see an increase in order to ensure food security.
With an increase in the number of beneficiaries from 900,000 to 1,000,000, Government projects to spend K1.3 billion in 2015. Last year the FISP got an allocation of K500 meaning it will  more than double.
An allocation of K167.1 million has also been proposed for the Food Security Pack (FSP) to support the vulnerable but viable farmers, with K52.8 million proposed for 2015, K55.7 million for 2016 and K58.7 million for 2017.
Expenditure on the non–financial assets or capital expenditure  has been projected at K11.2 billion in 2015.
The money will mostly go towards infrastructure development programmes identified. Over the medium term the MTEF says Government  has allocated K12.7 billion to accelerate road programmes under the Link Zambia 8000 programme and enhance work on township roads under the Pave Zambia 2000 project.
Recapitalisation of State-owned Enterprises is projected to be allocated K328.8 million to be provided in 2015.
It remains unclear whether government will want to realign some taxes in the mining sector but what is clear is that the sector will continue playing a dominant role in the economy.
Government wants to promote diversification to other minerals. These include gold, gemstones, iron, nickel, gold and manganese.
The budget may apparently not make major shifts from the current one in terms of priority because of the need for continuity of the various infrastructure projects as well as the importance attached to, health infrastructure, education and skills development.
As for the formal employees, businesses and farmers who are hoping for tax relief or reduction in Value Added Tax, they should just hold their breath and wait for Mr Chikwanda since this is his show.

The author is Zambia Daily Mail Editorials Editor.