THE World Bank has urged Government to broaden revenue collections as raising K42.1 billion from domestic revenue to finance the 2016 budget will be difficult due to reduced production by the mining sector in Zambia, and the continued volatility in global economic dynamics.
Last Friday, Minister of Finance Alexander Chikwanda announced that Government has proposed to spend K53.1 billion in 2016, of which K42.1 billion will be financed through domestic revenues.
Commenting on the budget, World Bank Zambia senior economist Gregory Smith said the Zambian economy is facing tough times ahead due to external and internal factors.
“There are tough times ahead, not only for Zambia. Many countries, including developed ones around the world, are experiencing similar economic setbacks, but issues to do with the budget deficit are internally induced, and this can be corrected by Government.
“The budget speech seems to be a good document, although I have not seen the yellow book that will outline a detailed expenditure programme of items. However, raising domestic revenue to 20.4 percent [K42.1 billion] of total budget [K53.1 billion] in 2016 will be difficult due to volatile global economic headwinds and reduced copper production by the mines, hence Government should diversify its revenue collections,” said Dr Smith.
He further said the strengthening of the US dollar is hitting several currencies.
“This may result in higher rates of defaults on Eurobonds by several countries that issued sovereign bonds,” said Dr Smith.
Nevertheless, Zambia has established a sinking fund with an allocation of K536.2 million in 2016 that will be used as a reservoir to service Eurobonds when the first loans are due in 2022.