Big chunk of Zambia’s 2020 income to come from mystery sources

Lusaka/Maputo — Zambian finance minister Bwalya Ng’andu plans to obtain almost 10% of Zambia’s total income in 2020 from undisclosed sources, raising concern about the accuracy and sustainability of government spending plans for 2020.

The budget, which Ng’andu presented to MPs on September 27, contains 6.75-billion kwacha ($515m) of “exceptional revenue” that could further stretch the finances of Africa’s second-biggest copper producer if it does not materialise. Government debt has surged from 20% of GDP a decade ago to a projected 91.6% in 2019, prompting the International Monetary Fund (IMF) to warn that Zambia is at high risk of debt distress.

“There’s a process tagged to this and an announcement will be made as soon as process completion is attained,” a finance ministry spokesperson said in response to questions about the source of the funds.

“It would be great if the government gave an indication of this exceptional revenue before the budget comes into effect in January to avoid unnecessary speculation,” Lusaka-based economist Chibamba Kanyama said in an e-mailed response to questions on Wednesday. “I think all stakeholders want to ascertain the efficacy of that source so that we are more than guaranteed it will be realised.”

There are other concerns about the budget too. The government forecasts economic growth will slow to 2% in 2019, as a drought drastically curtails the hydropower generation that Zambia depends on for more than 80% of supply. Farm output has also plunged. Even if economic expansion increases to the government’s 3% target in 2020, revenues will still be constrained, according to Irmgard Erasmus, an economist at NKC African Economics in Paarl.

The spending plan “contains some budget targets that are hard to reconcile with the harsh economic reality”, she said in an e-mailed note. “Too-optimistic budgetary assumptions may result in a funding gap, which will most probably have to be plugged with further accumulation of external debt.”

Zambia plans to spend 106-billion kwacha ($8.11bn), according to the 2020 budget, a 22% increase on 2019's figure. Nearly one-third of that will be financed through domestic and foreign loans and grants. Still, Ng’andu forecasts the budget deficit will narrow to 5.5% of GDP from 2019’s target of 6.5%.

Bloomberg