Zambia believes cut in donor support won’t affect budget

Zambia’s finance minister Situmbeko Musokotwane said on Saturday reduced support from western donors towards the 2011 national budget will not derail its implementation as he expects more revenue from mine taxes.

Zambia expects donor funding of its budget to drop to 7.7 percent in 2011 from 14.5 percent in 2010 and analysts say this is mainly due to donor concerns about corruption and abuse of public funds.

Musokotwane said the government would use taxes to mobilise the required financing for Zambia’s 2011 budget of 20.5 trillion Zambian kwacha, up from 16.7 trillion kwacha in 2010.

“We expect more money in taxes next year from mining and corporate tax,” he told a media briefing.

In 2010 Zambia raised 244.3 billion kwacha from a mineral royalty tax and expects 404.7 billion kwacha in 2011, as well as 1,858.4 billion from another mining tax and 554.8 billion kwacha from payments of tax arrears.

“There are some bilateral donors who have kept quiet on their support and of course we can’t force them,” Musokotwane said.

Western donors have expressed concern about corruption and have frozen aid to Zambia three times in the last 18 months or so.

Zambia — Africa’s largest copper producer — would also borrow locally and abroad, particularly for capital projects, but would not fall back into unsustainable debt, Musokotwane said.

He said annual copper production would reach one million tonnes by 2012 and the country needed to raise its power generation and improve infrastructure like roads to sustain the higher output.

“We need to borrow this money so that we can invest in infrastructure to keep the economy going,” Musokotwane said.

Musokotwane said in a budget speech to parliament on Friday the government planned to borrow $400 million on concessional and non-concessional terms in 2011.

On Saturday Chibamba Kanyama, a member of the think-tank Economic Association of Zambia (EAZ) said social investment programmes would be a challenge to implement with little donor support.

Kanyama said Zambia also risked reaching a level where it would be forced to service its debt at the expense of domestic spending.
Source: Reuters