By Daily Revelation Editor
Former Commerce minister Bob Sichinga has described as completely mistaken, Secretary to Treasury Felix Nkulukusa’s pronouncement that the UPND administration is pursuing a contractionary fiscal policy, requiring less government spending, while increasing taxes at the same time.
A contractionary fiscal policy is said to be in action when the government reduces spending and increases the taxes at the same time. This results in little money available in the market, leading to reduction in the purchasing power and consequently a decline in consumption.
In a recent statement, Nkulukusa announced that Zambia’s economy was at crossroads “after strong positive growth in 2022 and 2023 averaging 5.3 percent growth but in 2024 was much lower, on account of the debilitating effects of the drought.”
“Fiscal policy will be contractionary, with the fiscal deficit projected at 0.7 percent of GDP by 2027 from 3.1 percent of GDP in 2025,” read Nkulukusa’s statement in part. “Domestic revenues are projected at no less than 21.2 percent of GDP by 2027. This will be achieved by enhancing tax policies and leveraging on technology to strengthen tax administration and improve tax compliance. Expenditures are projected at 24.8 percent of GDP in 2027 from 26.6 percent of GDP in 2025, on account of expenditure rationalisation and reduction of leakages. Social sector spending will continue to be a priority.”
Since the government is telling Zambians that they will spend less and tax more, Zambians demand to know in detail what the government will give up in terms of spending, and where the taxes will be increased from. Already, the formal sector is highly taxed already, with little to nothing in terms of surplus income, while the main foreign exchange earner, the mines, have been given tax holidays. Is the government perhaps going to have a re-look into mining taxation, since they are on a drive to push up taxation? Are they intending to milk more taxes from the already highly taxed formal sector in the country? These are some of the questions Zambians deserve answers and clarity on from the government. Or are they working on avenues to get the informal sector on to the tax band, and how do they intend to go about the same?
If they have probably realised that they will need to get more from the mining companies, then definitely 2025 should be discounted because they have already announced reduced mineral royalties in this year’s national budget.
But like Sichinga has explained, the approach from the government is mistaken, because when an economy is contracting in the manner this country’s economy is, the antidote for that is increased spending from the government. But if they can’t do that, perhaps they will need to finally listen to people’s cries about increasing taxation on the mines.
It will remain a pipedream for now to think that the government can run this country effectively without a major contribution from the mining sector. If anything, this is the right time for the country to actually make more from copper sales as the commodity is enjoying historically high international prices at around US$9000 per metric tonne. The metal is expected to play a huge role in the technologies of the future in the production of electric motor vehicles and other goods for example. We should avoid a future where we as a country will be made to reckon with lifeless holes, regretting that we should have gotten a fair share from our resources, long after the multinationals have gone, after having sucked all the wealth out of them.
Related
By Daily Revelation Editor
Former Commerce minister Bob Sichinga has described as completely mistaken, Secretary to Treasury Felix Nkulukusa’s pronouncement that the UPND administration is pursuing a contractionary fiscal policy, requiring less government spending, while increasing taxes at the same time.
A contractionary fiscal policy is said to be in action when the government reduces spending and increases the taxes at the same time. This results in little money available in the market, leading to reduction in the purchasing power and consequently a decline in consumption.
In a recent statement, Nkulukusa announced that Zambia’s economy was at crossroads “after strong positive growth in 2022 and 2023 averaging 5.3 percent growth but in 2024 was much lower, on account of the debilitating effects of the drought.”
“Fiscal policy will be contractionary, with the fiscal deficit projected at 0.7 percent of GDP by 2027 from 3.1 percent of GDP in 2025,” read Nkulukusa’s statement in part. “Domestic revenues are projected at no less than 21.2 percent of GDP by 2027. This will be achieved by enhancing tax policies and leveraging on technology to strengthen tax administration and improve tax compliance. Expenditures are projected at 24.8 percent of GDP in 2027 from 26.6 percent of GDP in 2025, on account of expenditure rationalisation and reduction of leakages. Social sector spending will continue to be a priority.”
Since the government is telling Zambians that they will spend less and tax more, Zambians demand to know in detail what the government will give up in terms of spending, and where the taxes will be increased from. Already, the formal sector is highly taxed already, with little to nothing in terms of surplus income, while the main foreign exchange earner, the mines, have been given tax holidays. Is the government perhaps going to have a re-look into mining taxation, since they are on a drive to push up taxation? Are they intending to milk more taxes from the already highly taxed formal sector in the country? These are some of the questions Zambians deserve answers and clarity on from the government. Or are they working on avenues to get the informal sector on to the tax band, and how do they intend to go about the same?
If they have probably realised that they will need to get more from the mining companies, then definitely 2025 should be discounted because they have already announced reduced mineral royalties in this year’s national budget.
But like Sichinga has explained, the approach from the government is mistaken, because when an economy is contracting in the manner this country’s economy is, the antidote for that is increased spending from the government. But if they can’t do that, perhaps they will need to finally listen to people’s cries about increasing taxation on the mines.
It will remain a pipedream for now to think that the government can run this country effectively without a major contribution from the mining sector. If anything, this is the right time for the country to actually make more from copper sales as the commodity is enjoying historically high international prices at around US$9000 per metric tonne. The metal is expected to play a huge role in the technologies of the future in the production of electric motor vehicles and other goods for example. We should avoid a future where we as a country will be made to reckon with lifeless holes, regretting that we should have gotten a fair share from our resources, long after the multinationals have gone, after having sucked all the wealth out of them.
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