Finance Minister Dr. Bwalya Ng’andu has said that Zambia’s revenue collections under the 2020 budget are expected to be low due to the slowdown in economic activity caused by the persistent outbreak of Covid-19.
Speaking at a press briefing on the impact of the Coronavirus on the Zambian economy at Mulungushi Conference centre today, Dr. Ng’andu disclosed that the country’s Gross Domestic Product (GDP) growth is projected to drop from 3.2% as earlier anticipated to about 2% despite a significant recovery in the agricultural sector due to the outbreak of Covid-19.
Collections under VAT, Customs Duties, Income Tax and Mineral Royalty are expected to decline. Revenue collected in Mach 2020, thus far stands at K2.7 billion against the target of K4.5 billion. This trend could continue if the pandemic persists,Dr. Ng’andu said.
Dr. Ng’andu further reviewed that the continued depreciation of the kwacha against major convertibles is resulting in higher debt service as well as increased expenditures and as such other expenditures in the 2020 budget will be clambered down.
The Minister further noted a sharp decline in the prices of copper from USD6,165 per metric tonne recorded in January to USD4,754 dollars per metric tonne as of March 25, 2020 signifying a 23% descent.
He stated that Copper export earnings and mineral royalty tax collection are expected to decline considerably by more than USD1 billion in 2020 should the pandemic persist.
Following the deterioration in terms of trade from the fourth quarter of 2019 as a result of the decline in copper prices, the kwacha has been on a depreciation trend and has come under more intense pressure as a result of the Coronavirus which has impacted most emerging markets due to flight to safety resulting in the strengthening of the US dollar,he said.
He said annual inflation rate is likely to remain above the target range of 6- 8% and currently stands at 14% as announced by the Zambia Statistical Agency yesterday.
Dr. Ng’andu challenged businesses and retail outlets to avoid taking advantage of the pandemic to distort prices and thereby worsen the inflation spiral.
He said government has since implemented a number of first line measures such as the approval of K659 million Contingency Response Plan under the Ministry of Disaster Management and Mitigation Unit and set up an Epidemic Preparedness Fund of K57 million under the Ministry of Finance.
In the same vain, government is expected to release K2.5 billion to reduce domestic arrears owed to domestic suppliers of goods and services, reduce outstanding arrears of pensioners under Public Service Pension Fund (PSPF) and retirees under Ministry of Justice.
In addition, 140 million will be released to pay local contractors in the road sector. Government will also suspend excise duty on imported ethanol for use in alcohol based sanitisers and other medicine related activities subject to the guidelines to be issued by Zambia Revenue Authority,Dr. Ng’andu said.
He affirmed that government would work with major retail outlets in building domestic value chains that encourage the sale of domestically produced goods in view of the anticipated difficulties in importing goods especially with the lockdown announced by South Africa which will have adverse effects on wholesale and retail trade as well as manufacturing and mining.
Dr. Ng’andu further said government would issue a statutory instrument for classification and positioning of loans directives to encourage financial service providers to deliver relief to the private sector and facilitate long term lending to productive sectors of the economy.
He noted that globally, the preliminary assessment by the International Monetary Fund (IMF) indicates a substantial slowdown in economic growth.