PF-Government Should Present 2012 Budget in 2011

We are hereby disagreeing with Mr. Lawrence Chileshe, a Business Consultant who has advised the PF government to postpone the 2012 Budget presentation before parliament....Our reasons are that;

1. In as much we would agree with Mr Chileshe's rationale that the Minister need to align the 2012 Budget to the PF Manifesto we contend that the period is sufficient enough for technocrats in the Ministry of Finance to work through various areas that need adjustment to suit contentious PF policy, program and structure changes..However this requires that the government start work now.

2. That differing Budget presentation this year consequently affects its implementation thereby defeating the very policy change that was instituted to avoid overlaps in Expenditure disbursements and fund utilization by various departments and programs. This we saw under Mwanawasa when government departments started spending the money in October due to procurement procedures that take long...    

In discussing Policy we also would like to urge the PF Cabinet especially the Ministry of Finance to critically adopt the below said Policy advances by MMD as submitted to IMF.

DEYOS Directorate of Policy Research has extracted below information from the letter of Intent by the former Minister of Finance Dr. Situmbeko Musokotwane to Mr. John Lipsky acting Managing Director at IMF......We have sort to agree on the four key Structure reform areas that we implore the PF to continue pursuing as regard to Economic reforms.


"During the period under review, the Government launched the 2011–2015 Sixth National
Development Plan (SNDP). The plan's main areas of emphasis are the binding constraints
to growth and poverty reduction in Zambia: inadequate infrastructure and human
development. Invest me nt s  in  the se  areas will  be  increased  in  line with  the
Government's strategic objectives of accelerating economic diversification and meeting
its Millennium Development Goals through inclusive growth to ensure job creation and
poverty reduction.
With the assignment of a credit sovereign rating of "B+" by Fitch and Standard and Poor's in
February 2011, the Government intends to enter the sovereign bond markets to raise
finances to support the implementation of the Plan. The amount to be raised will take into
account the need to maintain debt sustainability objectives.
The ECF arrangement has played an important role towards the consolidation of
macroeconomic stability particularly during the global economic and financial crisis. It has
also created a platform for accessing technical assistance from the IMF and other
institutions and provided important signals on Zambia's economic performance and
prospects. With the ending of the current programme in June 2011, the Government is
discussing the way forward regarding further programme engagement with the Fund.
The Government authorizes the IMF to publish this letter, the attached Memorandum of
Economic and Financial Policies and the related Staff Report, including placement of
these on the IMF website subject to removal of market-sensitive information, following the
IMF Executive Board's conclusion of the review."
/s/
Situmbeko Musokotwane, (Dr.), MP
Minister of Finance and National Planning


Key Areas of the former MMD Government Policies as Submitted together with the Letter of Intent as extracted above...


1. Work is ongoing in implementing the Treasury Single Account (TSA) across
expenditure categories. As at end-January 2011, government attained 99.4 percent of the
monthly wage bill and 100 percent of foreign debt service transacted through the TSA. This
brings the total expenditure processed through the TSA to 40 percent. With regard to the
remaining grants, capital and domestic debt expenditure, a plan has been drafted to
consolidate domestic debt transactions into the TSA structure, whilst further consultations are
underway with various stakeholders for capital transactions. It is expected that the remaining
expenditure categories will be processed through the TSA by end-June, 2011 bringing total
expenditure processed through the TSA to 60 percent.

2. In March 2011, Zambia was assigned a sovereign credit rating of B+ by Fitch
and Standard and Poor’s Ratings. With this assignment, government intends to issue its
debut sovereign bond in 2011. The bond issue will be used on infrastructure development, in
particular roads and power projects. In this context, the government will carefully consider
maturity and exchange rate risks, and the debt sustainability and cashflow implications. The
government intends to take appropriate measures for a successful bond issue, which include
the procurement of legal and financial advisors, and the use of collective action clauses, and
will consider phased issuance.  

3. Work on the legislative arrangement is currently underway and so far, the
following has been done; (1) Amendments have been proposed in the draft Bank of Zambia
Act to include the provisions of the LOLR policy; (2) The Deposit Protection Bill has also
been finalized and is with the Ministry of Finance and National Planning; (3) Proposals are
underway to enhance crisis prevention by the inclusion of Prompt Corrective Actions in the
draft Banking and Financial Services (BFSA) Act; (4) Proposals to broaden bank resolution
options have also been included in the draft BFSA; and (5) Proposals to include provisions to
facilitate cross-border sharing of supervisory information have also been included in the draft
BFSA.

4. The government remains committed to improving the management of public
finances. The pilot implementation of the Integrated Financial Management System (IFMIS)
has been successful in its first pilot site. IFMIS has been in use at the Ministry of Finance and
National Planning since January 2010, with most financial transactions being processed
through the new system. The rollout of IFMIS to the next seven MPSAs commenced in
January 2011. These are: Ministry of Education; Ministry of Transport and Communications;
Ministry of Foreign Affairs; Ministry of Works and Supply; the provincial administration in
Eastern and North-Western provinces; and the Office of the Auditor General. By end 2011
we envisage rolling out IFMIS to another 8 MPSAs.  

We call upon the new Minister of Finance to pursue these four key structure reforms for purposes of maintaining and improving macroeconomic fundamentals.

DEYOS-ZAMBIA
Directorate of Policy Research
Suite 508, Musi-O-Tunya House
Livingstone, Zambia
deyos.zambia@gmail.com