Pri­or­i­ti­za­tion of Dis­man­tling of gov­ern­ment ar­rears

Zambian Business Times - - FRONT PAGE -

The Min­istry of Fi­nance in the re­cent an­nounced aus­ter­ity mea­sures, stated that dis­man­tling of ar­rears would be given pri­or­ity. This fol­lows the im­pact the ZMW12.7bn has had on the economic play­ers es­pe­cially com­mer­cial banks whose non-per­form­ing loans – NPLs have swelled over the last two years due to clients ex­posed to gov­ern­ment fail­ing to ser­vice debt obli­ga­tions. Gov­ern­ment an­nounced mea­sures to clear off do­mes­tic ar­rears which have chocked and led to most lo­cal com­pa­nies mostly owned by in­dige­nous Zam­bians to close down due to bank foreclosures on col­lat­eral pledged.

Min­is­ter of Fi­nance, Mar­garet Mwanakatwe con­firmed that the cur­rent stock of do­mes­tic ar­rears which is ZMW12.7bn (about US$1.3bn) as at De­cem­ber 2017. Mwanakatwe ad­mit­ted that the ar­rears have ad­versely af­fected economic ac­tiv­ity with banks non-per­form­ing loans go­ing above in­dus­try thresh­old of 10%, ef­fec­tively con­tract­ing pri­vate sec­tor lend­ing.

The Fi­nance Min­istry an­nounced a four (4) point plan of mea­sures to be ex­e­cuted in a quest to cure the es­ca­lated ar­rears vice. These will in­clude:

• Dis­man­tle of ar­rears by Min­istries to sig­nif­i­cantly re­duce the non-per­form­ing loans ef­fec­tively stim­u­lat­ing liq­uid­ity in the pri­vate sec­tor;

• Ex­pe­di­tion of non-con­tentious value added tax - VAT re­funds

• An­nual leave to be taken as op­posed to leave day com­mu­ta­tion in the public ser­vice to ease the bur­den on the state re­sources this will help curb un­nec­es­sary cash out­flows

The Min­is­ter em­pha­sized that only her min­istry has debt con­trac­tion pow­ers and will en­force com­mit­ment con­trols to curb ac­cu­mu­la­tion of new ar­rears.

A fur­ther look at the other rev­enue and ex­pen­di­ture mea­sures an­nounced re­veals that the civil ser­vice still has a long way as far as the dis­ci­pline of im­ple­men­ta­tion is concerned.

Some of the key ear­lier an­nounced mea­sures that were re-it­er­ated by the Min­is­ter of Fi­nance in­cludes at­tain­ing the land ti­tle tar­get of 300,000 ti­tles pi­lot be­fore its rolled out to other provinces, set up of a rev­enue mon­i­tor­ing sys­tem for the lu­cra­tive telecom­mu­ni­ca­tions mar­ket as well as tax­ing the pre­cious met­als ex­ports.

How­ever, our an­a­lysts re­view of the his­tor­i­cal bud­gets in re­la­tion to the mas­sive in­fra­struc­ture projects drive em­barked upon by the cur­rent PF gov­ern­ment such as link Zam­bia 8000 roads projects, the build­ing of one public univer­sity in each of the ten prov­ince and var­i­ous other projects have run into fund­ing prob­lems due to the drop of the cop­per min­eral loy­alty tax from the highs of 16% to the cur­rent lev­els of about 6%.

It is the min­eral roy­alty tax­a­tion that was en­vis­aged and planned to fi­nance the mas­sive in­fra­struc­ture projects but this rev­enue gen­er­a­tion line was cut down af­ter the drop in cop­per prices fol­low­ing the global fi­nan­cial cri­sis. The cop­per prices have since im­proved but the min­eral loy­alty rates have re­mained at lower lev­els ne­go­ti­ated dur­ing the de­pressed metal price times.

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