TREASURY BRIEF

Republic of Zambia

HIGHLIGHTS

OF

THE

JANUARY

TO

MARCH

2013

BUDGET

PERFORMANCE

Lusaka, Monday, 17th June, 2013. The Ministry of Finance has commenced the issuance of treasury information briefs which are aimed at assisting the public in monitoring and evaluating the implementation of the budget in a pragmatic manner on a quarterly basis. Speaking on issuance of the first treasury brief for the first quarter (January March) of 2013, Secretary to the Treasury Fredson Yamba said Government raised a total of KR5.1 billion in terms of revenues and grants while expenditure totalled KR8.1 billion. The balance was financed through programmed domestic and foreign borrowing. Revenue Performance i. During the first quarter of 2013, Government projected to collect a total of KR5.9 billion as revenues and grants. A total of KR5.1 billion was collected but was below target by 13.6 percent. The performance was particularly affected by lower than expected collections on company income tax. Total domestic revenues collected during the period under review amounted to KR5 billion of which tax revenues amounted to KR4.7 billion and non-tax revenues amounted to KR245.7 million. During the period under review, Government projected to raise a total of KR5.3 billion as tax revenues.. Income tax revenues amounted to KR2.6 billion and were below the target of KR2.9 billion representing an under performance of 9.4 percent. This was affected by collections from mining corporate tax collections that were below target by KR416.6 million or 41.7 percent. Mining corporate tax was lower than projected due to higher capital allowance claims declared by the tax paying mining corporates. In spite of the poor collection in corporate income tax, collections under Pay As You Earn (PAYE), withholding tax and mineral royalty were above target by 3.4 percent, 11.7 percent and 21.2 percent, respectively. Value Added Tax (VAT) recorded a collection of KR1.2 billion while Customs and Excise totalled KR949.6 million. Government expected to receive KR351.6 million as grants for both budget and project support during the period under review. A total of KR146.8 million was, however, receipted from the European Union and DFID, of which KR65.2 million was direct budget support, and KR81.6 million was project support.

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Expenditure Performance i. During the period under review, a total of KR8.1 billion was released against a target of KR8.2 billion. The released funds went towards facilitating constitutional and statutory expenditures such as salaries and grants, as well as programme implementation coordinated by various Ministries Provinces and Spending Agencies (MPSAs). Under constitutional and statutory expenditures, a total of KR2.6 billion was spent on payment of salaries and wages including other salary related emoluments for public service workers and constitutional office holders.

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FIRST QUARTER BUDGET PERFORMANCE

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Monday, June 17, 2013

TREASURY BRIEF

iii.

In terms of debt service payments, a total of KR816.3 million was released of which KR441.7 million was spent on domestic debt service (that is, Government bonds and Treasury Bills), while KR374.6 million was for external debt. Other notable expenditures included KR825.7 million for road construction and maintenance which represented 32.7 percent of the domestically financed Road Sector Budget. In addition, KR247.7 million was released for the Farmer Input Support Programme (FISP) outstanding bills arising from the 2012/2013 farming season. During the 1st quarter of 2013, the Treasury disbursed an additional US $ 289.0 million from the sovereign bond proceeds leaving a balance of US$94.0 million yet to be released. The table below outlines the releases made. Amount released in USD 120, 000, 000 69, 000, 000 100, 000, 000 289, 000, 000 Amount released in ZMK 618, 532, 000 365, 824, 200 530, 180, 000 530, 180, 000

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Description Zambia Railways Rehabilitation ZESCO distribution networks Road infrastructure TOTAL

Challenges i. During the period under review, the Treasury faced challenges in terms of lower than projected revenue inflows. This was particularly in respect of company income tax which underperformed. This turn of events resulted in the Treasury having to scale down some planned releases for the quarter. Further, the non-existent of mechanisms for independent verification of production from the mining sector undermined possibilities of maximising revenue collections from the sector. This is expected to be addressed in the coming quarters through institutional coordination mechanisms being put in place by the Government.

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Outlook i. In the second quarter, the Treasury expects to raise KR6.8 billion and plans to spend KR7.2 billion with a balance of KR0.4 billion to be financed by programmed borrowing. The strategic focus for the quarter is on capital related projects. In this regard, significant outlays are expected to be channelled to road, health, education and tourism (UNWTO) infrastructure including the Constituency Development Fund (CDF).

Conclusion The key lesson learnt from budget performance in the first quarter points to the need for enhancing revenue collection measures so as to effectively implement and manage development programmes, the Secretary to the Treasury said. He also expressed hope that during the rest of the year, the treasury will continue to closely monitor and evaluate budget and economic affairs to ensure that national development programmes are on course in all MPSAs.

FIRST QUARTER BUDGET PERFORMANCE

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Monday, June 17, 2013

TREASURY BRIEF

I take this opportunity to encourage all the MPSAs to continue promoting best practice and ensuring sustained transparency and accountability in the utilization of public resources, for the general improvement in the well-being of the people of Zambia, said Mr. Yamba. Issued By: Chileshe Kandeta Public Relations Officer

Ministry of Finance

FIRST QUARTER BUDGET PERFORMANCE

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Monday, June 17, 2013