Felix Nkulukusa outlines ‘August 2022 Budget Performance’ transparency

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By DERRICK SINJELA, HENRY CHUNZA and SAEED SIMON BANDA

In August, 2022, K11.9 billion was released to finance public service delivery with K3 billion as a wage bill for public service workers – including health, teaching, and service personnel, says Secretary to the Treasury, Felix Nkulukusa in a Ministry of Finance and National Planning Sunday, 18th September, 2022

Among the significant releases made in August, 2022, was K537.6 million which went towards payment of redundancy packages for former Indeni workers; K227.4 million for the Food Security Pack; K200.7 million for the Youth and Women Empowerment component under the Constituency Development Fund; K133.4 million for the operations of Grant Aided Institutions in Government ministries; K111.6 million to the Local Government Equalization Fund; K97.6 million for operations of universities; and, K67.5 million towards hospital operations in various regions.

Affirming frequent updates on Government spending Mr. Nkulukusa explained that K449.2 million was released to dismantle arrears for suppliers of goods and services and K399.6 million for dismantling of fuel arrears.

“The Treasury disbursed a subsidy of K100 million for payment of arrears under the Farmer Input Support Programme (FISP).

In the month under review, K500 million was released for the Social Cash Transfer Programme, and K300 million to the Public Service Pension Fund (PSPF).

“These actions not only affirm the Government’s commitment to alleviating the hardships faced by social cash transfer beneficiaries but also attest to the steadfast commitment to lessening the burdens faced by pensioners due historical delays in receiving their pension benefits. Additionally, K150 million was released to the Local Authorities Superannuation Fund for annuities,” Nkulukusa said.

To ensure that everyone is counted, a a plebiscite extended by a week, Nkulukusa says the Treasury released K175 million to the Zambia Statistical Agency for the Thursday 18th August, 2022 to Wednesday 14th September, 2022 Census of Housing and Population.

Further, other Government Ministries, Provinces and Spending Agencies were given K1.7 billion to facilitate service delivery, of which K114.7 million went towards the purchase of essential drugs and medical supplies in Public Health Institutions; K54.6 million to the Skills Development Fund; and, K30 million to payment of salaries for Tazara workers.

The Treasury released K758.5 million towards capital projects with K354.6 million for road infrastructure, K215.6 million for water and sanitation projects, and K188.3 million for other projects.

In line with the Government’s commitment to reduce indebtedness through payment of both domestic and external multilateral debt, Nkulukusa says a sum of K2.8 billion was released in the month under review (August 2022).

Giving a January to August, 2022 Budget Performance Overview, Nkulukusa updated citizens that
total domestic revenue collections amounted to K72.1 billion, of which K54.4 billion was from taxes and K13.5 billion from non-tax revenues.

Nkulukusa notes that total expenditure released was K94.3 billion.

Nkulukusa explained that the difference between revenues and expenditures was met from the International Monetary Fund (IMF) Special Drawing Rights General Allocation (received in August, 2021), domestic financing, and foreign financing targeted at externally financed projects.

On Revenue Performance and Total Revenues and Grants, Nkulukusa says total revenue and grant receipts amounted to K72.1 billion and were 3.5 percent above the budget target of K69.7 billion.

The Secretary to the Treasury says the tax revenue component for the January to August 2022 review period amounted to K54.4 billion, nontax revenue K13.5 billion, and grants, K4.2 billion.

Income tax collection for the period January to August, 2022, amounted to K35.3 billion against the target of K30.3 billion and was above target by 16.7 percent.

“The positive performance was mainly driven by high company tax collections on account of payments made by both mining and non-mining companies. The increased payments compliance under Pay As You Earn (PAYE) also contributed to the positive performance,” said Nkulukusa.

Company tax collections amounted to K17.5 billion against a target of K12.7 billion representing a positive collection variance of K4.72 billion or 37 percent over-collection.

“This positive performance was driven by increased payments of first quarter provisional income tax,” said Nkulukusa.

The Secretary to the Treasury says mining tax was K11.2 billion and well above the target of K8.8 billion.

“The positive outturn is attributed to higher declarations by major mining companies amidst high copper prices and well companies in the sector paying their final tax provisional payment for the year,” says Nkulukusa.

Further, non-mining tax collections amounted to K6.3 billion against the target of K4 billion with recorded surplus due to upward adjustments of annual provisional declarations made within 2022 by some companies.

Government through Zambia Revenue Authority (ZRA) collected PAYE worth K12 billion against the target of K11.6 billion representing a positive variance of 3.2 percent.

“The good performance is attributed to increased payment compliance by the Government and other institutions. Collections under this tax type will be boosted by the Governments’ recruitment of teachers and health workers, some of whom have already been added to the payroll,” explained Nkulukusa.

Nkulukusa pegged withholding tax collections amounted to K5.8 billion against a target of K5.9 billion.

“We are committed to enhance compliance by all payers of this tax type to ensure that positive performance is registered and sustained,” assured Nkulukusa.

On Value Added Tax (VAT) collection during the period January to August, 2022, Nkulukusa says K12.2 billion against a target of K15 billion and was below target by 18.7 percent was collected.

“Both Domestic VAT and Import VAT were below target, thereby contributing to the general underperformance of this tax type against the overall target.
Domestic VAT underperformed due to low payment compliance by Withholding VAT Agents. Import VAT also underperformed partly due to reduced taxable value of imports,” said Nkulukusa.

Insurance Premium Levy collection amounted to K168.1 million against a target of K34.2 million and was above target, which Nkulukusa described as a positive performance due to increased insurance renewals.

Customs and Excise Duty collections amounted of K6.6 billion against a target of K8.2 billion and were below target by 19.2 percent.

“Customs duty collections under this tax type amounted to K3.6 billion against a target of K4.3 billion, representing an under collection of K910.2 million or 15.7 percent. The negative performance was attributed to revenue forgone due to tax concessions because of SI number 2 and 3 of 2022,” said Nkulukusa.

Excise duty collection amounted to K3 billion against a target of K3.9 billion, representing an under collection of K761.8 million or 23.1 percent under collection.

The outturn below target is principally attributed to suspension of excise duty on diesel and petrol that came into effect in 2021.

Export duty collections amounted to K51.1 million against a target of K90.7 million.

This performance was caused by below target collection on exports of copper concentrates.

Non-Tax Revenue
collections under this category amounted to K13.5 billion against a target of K14.8 billion and were below target by 8.7 percent.

The underperformance is mainly attributed to under collections in mineral royalty due to lower declarations by selected mines which resulted from decreased output and reduced copper prices on the international market.

There was also under collection in road tolls due to reduced vehicle traffic by the mining sector.

Notwithstanding the dim performance of non-tax revenue, the Treasury gladly received a dividend from the Bank of Zambia (BoZ) amounting K1.3 billion.

Nkulukusa says
K4.2 billion was received as grants from Cooperating Partners against a target of K1.2 billion, and was above target by 244.8 percent for programmes under the Ministry of Green Economy and Environment, Community Development (Social Cash Transfer), Health, Agriculture, and Education.

EXPENDITURE PERFORMANCE FROM JANUARY TO AUGUST 2022 – Personal Emoluments

The Government released K24.4 billion for expenditure relating to the Public Service Wage Bill and overseas allowances.

This is in order to achieve the timely payment of salaries for various public service workers, including teaching, medical and other service personnel.

The expenditure was 3.4 percent below projection mainly due to lower releases towards other emoluments (overseas allowance) on account of the appreciation of the exchange rate.

In order to support operations of various public institutions, the Government released K9.9 billion for general government operations, which was 40 percent above the projection due to higher releases towards drugs and medical supplies and the Census of Population and Housing which received K2.9 billion and K563 million respectively.

Other notable releases included K86.2 million for by-elections and K250 million to the Compensation Fund.

On Debt Service, Nkulukusa says interest payments amounted to K21.1 billion and were below target by 24.3 percent due to the ongoing debt standstill on external debt.

Domestic interest amounted to K20.7 billion while external interest stood at K 468.7 million.

Releases to transfers and other payments amounted to K13.1 billion and were 2.1 percent below the target.

Other notable expenditure during the period January to August, 2022, included: K5.4 billion as grants for universities, hospitals and all other grant-aided-institutions; K2.4 billion for the Constituency Development Fund; K1.5 billion grant for the Zambia Revenue Authority; K1.2 billion for arrears under the Farmer Input Support Programme; K903.3 million for the Food Security Pack Programme; K892.8 million for the Local Government Equalization Fund; and, K790.4 million for grants to schools in line with the free education policy.

On ‘Social Benefits’ releases stood at K4.5 billion above target by 20.3 percent arising from the disbursements towards payment of retirees benefits and annuities under the Public Service Pension Fund, K2 billion, and the Local Authorities Superannuation Fund, K150 million.

The rest, K2.3 billion, went towards the implementation of the Social Cash Transfer Programme – with help from Cooperating Partners.

Transactions in Non-Financial Assets

A total of K14.3 billion was released for non-financial assets during the period under review.

Nkulukusa explained that this outturn was 31 percent above the target due to higher releases towards infrastructure projects.

Notable releases included: K7.1 billion for priority foreign financed projects; K3.1 billion for road projects; K2.2 billion for other capital projects; and, Water and Sanitation K643.3 million.

Transactions in Financial Assets & Liabilities during the January to August 2022 review period, Government released K5.2 billion for financial assets and liabilities.

“This outturn was 20.8 percent above target arising from the higher releases on dismantling of liabilities, where a sum of K5.1 billion was released. This amount went towards dismantling of fuel arrears and other arrears to various suppliers of goods services. Further, the balance of funds amounting to K176.2 million went to the Citizen’s Economic Empowerment Commissions’ Programmes,” said Nkulukusa.

Nkulukusa pegged total amortization at K1.7 billion of which K570.7 million went towards domestic debt principal payment for commercial bank facilities and K1.1 billion towards external debt principal payments, mainly for multilateral creditors.