Zambia Outperforms Budget Expectations For First Quarter

Zambia’s budget performance for the first quarter of 2020 was better than anticipated, financial experts have observed, especially considering the negative impact of Covid-19 on both revenue collection and government expenditure. 

The Public Financial Management Consult said revenues, grants and domestic financing totalled K18.1 billion: just under a percentage above target. The majority of tax instruments were also above target, except for VAT.

Senior Economist Bright Chizonde says the government spent a total of K17.4 billion during the quarter, with non-discretionary expenditure accounting for over 90% of that figure. 

The economist observed that the negative impact on revenue during this first quarter was mitigated by a large portion of the economy remaining operational. VAT was the only tax instrument that experienced a decline as many shops and non-essential businesses have been closed in Zambia.

However, Mr Chizonde said the government would need to be more fiscally disciplined as the second quarter of 2020 is expected to be even more challenging. 

Debt repayments and resources needed to combat Covid-19 are still likely to increase, he said, while the depreciation of the Kwacha was only pronounced towards the end of the first quarter, making the next few months trickier still.

Mr Chizonde therefore warned the government to take urgent steps to sure up its position, as revenues are expected to reduce further while the exchange rate remains at risk of plummeting even lower.

He advised the government to put some construction projects on hold and seek further external assistance in order to free up resources for combatting Covid-19.