Press Release by JCTR :
JCTR ASKS: WILL THE 2010 BUDGET MEET THE NEEDS OF THE PEOPLE, ESPECIALLY THE POOR?
The possibility of Zambia attaining 5% economic growth by the end of 2009 if economic conditions continue to improve is commendable. It is important however, to note that growth for its sake is not sufficient. “What is significant is how this growth can lead to sustained poverty reduction by creating quality jobs and investing in human capital, especially education and health”, says Miniva Chibuye, Coordinator of the Social Conditions Programme of the JCTR. The success of every budget is not only measured by how well it will improve the economy but also how responsive it will be to the needs of the poor. Growth should therefore be treated as a means to an end and not an end in itself. “As such”, says Ms. Chibuye, “the strength of the recently presented 2010 budget lies in how well it aligns itself to the objectives of the country’s Fifth National Development Plan (FNDP) coming to a close at the end of 2010 as well as other important international commitments such as the Millennium Development Goals”.
As investment in formal education, skills development and health increases the potential of generating opportunities for growth, spending in these important sectors should be prioritised. The following observations were made from the 2010 budget address made on 09 October 2009 in Lusaka :
The progressive increase of the education budget from the 2009 17.2% to 19.9% of the total national budget is a positive development. Moreover, this allocation is in line with the recommended 20% committed in the Cairo Protocol although it falls slightly short of the 22.4% planned for in the FNDP. If properly applied, the budget certainly will sustain the achievements made so far on the education MDG target. “However”, says Ms. Chibuye, “while the quantitative measure of education expressed through ‘years of schooling’ is important, the elements of quality measured by the levels of literacy, numeracy and general cognitive development should not be ignored”. This is even more so after the latest alarming rates of child health by the Zambia Demographic Health Survey, which revealed that 45% of the Zambian children are stunted, a sign of unbalanced and in most cases inadequate diets. To achieve quality education therefore, more allocation should have been made towards school health and nutrition, particularly scaling up the school feeding programmes. Among other things, successful implementation of school nutrition programmes improves attendance and the cognitive development of children. These are essential elements for the future of the country’s economic potential.
Likewise, attainment of economic goals and full human development requires a healthy nation to work productively and creatively. Hence, the value of investing in health by any economy is unquestionable. In this regard, the drastic cut in the budget from 11.9% in 2009 to 8.2% in 2010 attributed to the withdrawal of support from cooperating partners is a cause for deep concern. The health situation within the country is already desperate going by drug shortages and lack of well trained health personnel, particularly in rural areas. Unless the government revises the health budget, the FNDP’s vision of “providing Zambians with equity of access to cost-effective, quality health care as close to the family as possible” will not be achieved by the end of 2010. This also has the possibility of reversing the commendable progress made towards the 2015 MDG target on health. It is our hope that as the budget is being debated in parliament, this issue will be given the serious attention that it deserves.
When it comes to the budgetary allocation to social protection, the JCTR has noted with concern that about 44% of the total budget for social protection has been provided as grants to the public service pension fund to cater for early retirement from the civil service. While this is important, social protection should be distinguished from social security benefits. The pension fund is better placed within the Ministry of Labour rather than Ministry of Community Development and Social Services. However, it should be realised that social grants such as cash transfers when properly implemented has a positive effect on reducing poverty and inequality. According to Ms. Chibuye, “the 2010 allocation for social protection is unlikely to cover the targeted 20% of the population suffering from critical levels of poverty and deprivation. The consequence of this is that the vulnerable population will have little opportunity to participate and contribute to long term growth prospects within the country”.
Furthermore, the ever rising cost of living within Lusaka and other towns in Zambia presents to the country an extremely serious challenge upon which all efforts must be concentrated. For example, the JCTR Basic Needs Basket, a survey of the cost of living for an average family of six showed an increase in the cost of basic food and essential non-food items. In Lusaka, the total cost of basic food items and essential non-food items such as housing, water and electricity for the month of September was K2, 260,680 compared to K2, 235,730 in August. This upward adjustment was largely as a result of price increases in the staple mealie meal, green vegetables and dairy products. The total cost of basic food items was K801, 850 signifying a nominal increase of K14,550 when compared to the August cost of food amounting to K787,300. Whether people can access their basic needs or not has serious implications on individual and family well-being and consequently, the future development of the country.
Because poor households devote over 50% of their income to buying food items, the sustained increase in food prices substantially reduces their income. Relating this to the tax measures provided for in the budget, the increase in the income tax threshold by K100, 000 from K700, 000 to K800, 000 while the tax bands were left unchanged is welcome. However, in light of the high cost of living, the K100, 000 is likely to be eroded by not only the high cost of food but also the proposed 3% increase on excise duty for diesel effective in January 2010 and the recent unprecedented increase in the cost of electricity. In real terms therefore, the tax relief will not have a positive increase in the purchasing power for the employees, especially those with lower wages. The constant recommendation to broaden the tax base to also include the informal sector should be implemented if some relief is to be provided to the few formal sector employees.
Furthermore, in line with the budget theme of “Enhancing Growth Through Competitiveness and Diversification”, it is imperative that other productive sectors such as agriculture are prioritised away from the traditional mining sector. Investment in agriculture is key as it acts as both a strong driver for economic growth and a source of poverty reduction. An analysis of the 2010 budget shows an aggregate increase in allocation to the sector from K1, 096.3 billion to K1, 139.0 billion. However, as a percentage of the total budget, the sector allocation has reduced from 7.2% in 2009 to 6.8% in 2010. This falls short of the 10% commitment made in the Maputo declaration or the 9% of the budget planned for in the FNDP by 2010. While the revision from Fertiliser Support Programme to Farmer Input Support Programme will cover more people, it is necessary to recognise that this may not necessarily lead to increased yield. To help achieve this, the government should deliberately support the implementation of sustainable agriculture practices and increase funding under extension officers.
The JCTR reminds the government that the success of this budget is very dependent upon the full implementation of these programmes and may need revision of allocations, especially within the health sector and social protection. Indeed, investment in these social sectors breeds multiplier effects to the rest of the economy.
[For more information, contact the Social Conditions Programme of the Jesuit Centre for Theological Reflection, P. O. Box 37774, Lusaka, Zambia; Tel: 260-211-290410; fax: 260-211-290759; e-mail: email@example.com; internet: www.jctr.org.zm]