By CHARITY MOONGA
FINANCE Minister Alexander Chikwanda says the Government will in 2016 limit domestic borrowing to maintain public debt within sustainable levels.
In his Budget presentation to Parliament yesterday, Mr Chikwanda said the Government would instead focus on accessing external financing with lower interest rates and longer repayment periods.
In addition, the Government would strengthen the project appraisal processes to ensure that borrowing is directed at projects with high returns.
To ensure timely repayment of the three Eurobonds issued in the international capital markets, the Government had established a Sinking Fund for the purpose of redeeming the bonds.
The treasury would act to ensure that the Government expenditure is primarily financed from domestic revenues.
In this vein, the Government has drastically reduced allocations for non-core recurrent allocations by more than 50 per cent and has taken measures to enhance revenue mobilisation.
“Consequently the fiscal deficit in 2016 is projected to reduce to 3.8 per cent of the Gross Domestic Product (GDP).
“To create room for private sector credit, more room for private sector credit, domestic borrowing by the Government will be limited to 1.2 per cent of GDP in 2016,” the minister said.
To further strengthen domestic tax administration, the Government would put in place measures that would require Value Added Tax (VAT) registered vendors to use electronic fiscal cash registers that would be interfaced with the Tax Online System.
This would allow real time capture of transactions for VAT compliance and reduce under-declarations.
The Government would also enhance monitoring of cargo movements transiting through Zambia to mitigate revenue leakages.
Overall, financial performance of the banking sector is expected to remain satisfactory in 2016 and the Government is working out modalities to further improve stability in the sector.
The inflation rate is expected to remain single digit in 2016 and upward pressure is expected to come from the effects of the depreciated exchange rate and higher demand for grain in the region.
El Nino is also likely to contribute to upward pressure on food prices, while international reserves are projected to remain at US$3.2 billion even in 2016.
Monetary and supervisory policy formulation would remain focused on supporting the Government’s broad economic objectives.
Under structural reforms, cooperatives would be enhanced in all districts and the Government would continue to uphold public financial management through the Public Finance Act, among others.
The Government is also reviewing the modalities for implementing the Constituency Development Fund (CDF) to ensure communities participate in identifying projects.