Highlights from the budget speech of Hon E Kasonde, Zambian Minister of Finance and National Planning delivered to the National Assembly, 1 March 2002
11.1 External Debt
Zambia’s total external debt at the end of 2001 stood at US $&.3 billion up from US $6.3 billion at the end of 2000. The rise was mainly due to creditors not extending expected debt relief, which would have reduced total debt to US $5.9 billion.
On reaching Decision Point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative in December 2000, Zambia expected all creditors to immediately extend interim debt relief Although some did, (International Monetary Fund, World Bank, African Development Bank, Canada, France, united Kingdom and Japan) many creditors have yet to do so.
11.2 Progress on the Poverty Reduction Strategy Paper
Zambia completed a draft Poverty Reduction Strategy Paper (PRSP) in September 2001, consulting stakeholders including civil society, academia, NGOs and traditional leaders. The draft was presented to a national stakeholder forum in October 2001 and is now being finalised for submission to Cabinet.
The primary goal is sustained medium term economic growth of five to eight per cent to allow for increased real spending on poverty reduction programmes. The PRSP regards four sectors, agriculture, tourism, manufacturing and mining as having potential for sustained poverty reduction. Strategies to realise their potential include investment, export promotion, public spending on infrastructure development and maintaining a stable macro-economic environment.
11.3 Poverty Reduction Expenditure in 2001
In 2001 a total of K186 billion was spent on poverty reduction programmes. Expenditure concentrated on rural development programmes including road construction, electrification, irrigation and control of livestock diseases. Funds also went to providing educational materials, vocational skills, primary health care, drug purchases, malaria control programmes and water and sanitation facilities. Less than 53 per cent of the amount budgeted for HIPC Initiatives was spent due to difficulties in finalising financing arrangements and the need to set up monitoring and accounting mechanisms.
11.4 2002 Budget Targets and Priorities
Maintaining macro economic stability faces three grave challenges, Anglo American Corporations withdrawal from Konkola Copper Mines, the failure to achieve food self sufficiency and enhance food security and the HIV/AIDS pandemic. With the theme ‘Food Security Through Production and Job Creation’ the budget for 2002 aims to achieve real GDP growth of at least 4 percent, lower annual inflation to 13 per cent by year end, limit the budget deficit to 3 per cent of GDP and increase international reserves by US $129 million.
For 2002 K450 billion is targeted specifically at priority poverty reduction programmes identified through the PRSP. Government is setting up a HIPC Initiative monitoring committee of stakeholders to monitor use of HIPC resources. An annual report of these activities will be prepared for public information and discussion.
Agriculture is seen as the primary engine for broad based economic growth and poverty reduction. Government is providing funds to facilitate the supply of fertiliser (K 100 billion) and to subsidise fertiliser for small scale but commercially viable farmers to produce maize (K50 billion). It will also distribute input packs to help them grow subsistence food crops (K10 billion).
Under the Poverty Reduction Programme K27.8 billion is allocated for feeder roads, K1.5 billion for canals and K 5 billion for rural electrification. Basic school students from vulnerable households get bursaries to the value of K5 billion in addition to K12 billion allocated to the Public Welfare Assistance Scheme that assists vulnerable people to access health care and primary schooling. (See Will the Poor go to school? Cost sharing in education in Zambia in this newsletter)
The full text of the budget speech is available at classwww.zamnet.zm/budget2002/index.html
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