DAILY PARLIAMENTARY DEBATES FOR THE FOURTH SESSION OF THE TENTH ASSEMBLY

Friday, 9th October, 2009

The House met at 1415 hours

[MR SPEAKER in the Chair]

NATIONAL ANTHEM

PRAYER

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BUSINESS OF THE HOUSE

The Vice-President and Minister of Justice (Mr Kunda, SC.): Mr Speaker, I rise to give the House some idea of the business it will consider next.

Sir, on Tuesday, 13th October, 2009, the Business of the House will begin with Questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. The House will then consider the Motion of Supply on the 2010 Budget.

On Wednesday, 14th October, 2009, the Business of the House will begin with Questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will consider Private Members’ Motions, if there will be any. After that, the House will continue with the policy debate on the Motion of Supply on the 2010 Budget.

Mr Speaker, on Thursday, 15th October, 2009, the Business of the House will start with Questions. This will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will go into the policy debate on the Motion of Supply on the 2010 Budget.

Sir, on Friday, 16th October, 2010, the Business of the House will commence with the Vice-President’s Question Time. Then, it will consider Questions for Oral Answer, if there will be any. This will then be followed by presentation of Government Bills, if there will be any. The House will then continue with the policy debate on the Motion of Supply on the 2010 National Budget.

Mr Speaker, I thank you.

Hon. Members: Hear, hear!

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MOTIONS

BUDGET ADDRESS

The Minister of Finance and National Planning (Dr Musokotwane): Mr Speaker, I beg to move that the House do now resolve into Committee of Supply on the Estimates of Revenue and Expenditure for the year 1st January, 2010 to 31st December, 2010 presented to the National Assembly in October, 2009.

Sir, I am the bearer of a message from His Excellency the President of the Republic of Zambia recommending favourable consideration of the Motion that I now lay on the Table, in accordance with the requirements of Article 117 of the Constitution, as amended.

I thank you, Sir.

Dr Musokotwane laid the paper on the Table.

Hon. Members: Hear, hear!

Mr V. Mwale: Ema Ministers aya!

Dr Musokotwane: Mr Speaker, as I begin this Budget Speech, I wish to pay tribute to the late John Mupanga Mwanakatwe, SC., a distinguished lawyer and former Minister of Finance. He will be remembered for his immeasurable contributions to Zambia. He served this nation with honour and dignity. His dedication to duty should be an inspiration to all of us. May his soul rest in peace.

Hon. Members: Hear, hear!

Dr Musokotwane: Mr Speaker, today is a historical day for Zambia. Through a constitutional amendment, the Government has been enabled to present the National Budget in advance of the financial year. This landmark decision will ensure that the Budget is implemented over a full twelve-month period. In addition to improving our budget execution, this will give added meaning to Parliament’s paramount role of deciding how public monies are spent.

Mr Speaker, for this, and through you, I would like to commend hon. Members of this august House for uniting across party lines to support this amendment.

Hon. Members: Hear, hear!

Dr Musokotwane: Sir, if my memory serves me correctly, it was only the Non-Governmental Organisation Bill that equally received thunderous support from this House.

Hon. Members: Hear, hear!

Mr Kambwili: Question!

 Dr Musokotwane: Sir, as the world takes stock of the impact of the economic crisis, it is evident that its effects have been widespread. Millions of households across the world have lost their businesses and jobs. Others have seen their hard earned savings wiped out over a few months. Gladly, green shoots of recovery from the depths of the recession are now showing and the race to rebuild the global economy has begun.

As Zambians, we must aim to be among the winners in this race provided, of course, that we focus our minds more positively and spend less time talking about negatives.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Just as millions of our farmers are ready to seize the opportunities of the forthcoming rainy season, as a nation, we must also be poised to take full advantage of the coming rebound in economic activity and global trade.

Sir, I presented the 2009 Budget earlier this year at a time of great economic uncertainty in the world. Under the circumstances, the responsibility of every Government, including the MMD Government, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … was to design appropriate response measures to the crisis. Today, hope is on the horizon. This hope has partly been due to the strong measures that the industrialised countries took to counter the crisis at the global level.

Mr Speaker, in part also, this Government took measures to stabilise our economy against the crisis and, therefore, we should not be shy to congratulate ourselves for a good job done.

Hon. Government Members: Hear, hear!

Dr Musokotwane: At the same time, we cannot afford to be complacent, but must remain focused on our drive for economic diversification.

Mr Speaker, to remind hon. Members, I mentioned the word ‘diversification’ thirteen times in my last Budget Address to emphasise this Government’s bold agenda to strengthen the resilience of our economy. By the time I finish this speech, I will have used the word fourteen times to re-emphasise our commitment to this effort …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … and in recognition that our work is unfinished. Sir, as an indication of my Government’s commitment to the diversification process, I have decided to retain the theme which I used in previous Budget, which is “Enhancing Growth through Competitiveness and Diversification.”

Hon. Government Members: Hear, hear!

(i) Global Economic Developments in 2009 and Outlook for 2010

Dr Musokotwane: Mr Speaker, preliminary indications are that the global economy is beginning to emerge from the raging recession that began late last year. Despite an expected stronger performance in the second half of 2009, global economic output is still expected to contract by 1.1 per cent this year. However, this contraction is significantly smaller than earlier estimates. In 2010, the global economy is expected to record positive growth of 3.1 per cent.

The global economic crisis has not spared Sub-Saharan Africa, with growth expected to drop sharply from 5.5 per cent in 2008 to 1.3 per cent in 2009. A recovery, however, is expected in 2010, with growth in the region projected at 4.1 per cent.

Sir, initial estimates had indicated that in 2009, commodity prices, particularly for metals, would remain at the low levels observed at the end of 2008, as a result of the crisis. The prices of most major commodities, however, rebounded towards the end of the first quarter of 2009, leading to upward revisions of projections.

Mr Speaker, in the case of copper, prices are expected to average US $4,190 per metric tonne, against initial estimates of US $3,500. This is a positive development which should boost foreign exchange earnings of copper exporting countries. The international price of oil, however, has risen from US $33 per barrel in early January 2009 to US $69 by end of September.

Sir, despite this improvement in international commodity prices, global trade volumes are expected to decline by 12 per cent this year and a modest growth of 2.5 per cent is projected in 2010. This sharp decline in trade volumes has had a significant impact on growth in Africa, particularly on commodity export-dependent countries such as Zambia.

With regard to inflation in the global economy, there has been a sharp fall as a result of the declining global demand for goods and services. It is estimated that in 2009, inflation in advanced economies will be a marginal 0.1 per cent, against the 3.4 per cent recorded in 2008. In Sub-Saharan Africa, inflation is projected to fall marginally to 10.6 per cent by the end of the year, compared with 11.6 per cent in 2008.

Sir, I will now present the developments in the domestic economy this year.

(ii) Developments in the Domestic Economy in 2009

Macroeconomic Performance

Mr Speaker, the performance of our economy in 2009 was largely influenced by the global economic crisis. It is now evident that the main effect of the crisis on our economy has been through external trade. This, in turn, has had other economic consequences, which I will explain later.

Sir, as buying power in industrialised countries shrank in response to the economic crisis, the price of our main export commodity, copper, rapidly declined to a low of US $2,811 per metric tonne in December 2008 from a record high of US $8,985 reached in July, 2008. In the light of reduced earnings, mining companies responded to this crisis in different ways. Firstly, almost all of them cut back on project developments in order to conserve cash. Jobs were lost. Secondly, Luanshya Copper Mine (LCM) and Munali Nickel Mine (MNM) were placed under care and maintenance. Again, jobs were lost. Thirdly, other mines were being threatened with closure, meaning that more jobs could have been lost, had this Government  not put up the bold measures that it did.

Hon. Government Members: Hear, hear!

Hon. Opposition Members: Question!

Dr Musokotwane: This is why under the 2009 Budget, this Government instituted tax and expenditure measures to safeguard mining operations.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This was meant to save jobs not only in the mines, but in related sectors as well. As a result of the measures we took which were complemented by improvements in metal prices, the LCM, which was under care and maintenance reopened. Jobs are back.

Hon. Government Members: Hear, hear!

Laughter

Dr Musokotwane:  The MNM, which was also closed, is about to reopen. More jobs will be created.

Hon. Government Members: Hear, hear!

Dr Musokotwane: The other mines which were threatened with closure are still operating.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, we saved and created jobs.

Sir, on the whole, it is estimated that 8,500 jobs were initially lost in Zambia, but over 1,500 have been regained since then.

Hon. Government Members: Hear, hear!

Dr Musokotwane: These are no mean achievements …

Hon. Government Members: Hear, hear!{mospagebreak}

Dr Musokotwane: … considering that other mining countries have lost even more jobs. In the Democratic Republic Congo (DRC), for instance, it is reported that over 200,000 jobs were lost in the mining sector. In South Africa, it is estimated that around 30,000 jobs were also lost.

Mr Speaker, this Government understands these economic relationships very well.

Hon. Government Members: Hear, hear!

Dr Musokotwane: I am, therefore, very concerned that our detractors …

Mr Lubinda: Aah!

Dr Musokotwane: … do not seem to appreciate the gravity of failing to secure mine jobs.

Interruptions

Dr Musokotwane: Through the statements they make, I suspect that the mining industry and the whole economy would have been in ruins today if it were them, and not us, in Government.

Interruptions

Dr Musokotwane: Sir, it is against this background that I wish to announce that the projected economic growth for 2009 is 4.3 per cent. This is a slight downward revision from the earlier projection of 5 per cent announced in my last Budget Address. Amidst signs of recovery, however, and should economic conditions continue to improve in this final quarter, the chances are extremely bright that the 5 per cent target will not only be attained, but exceeded.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Compared to the global growth estimates of negative 1.1 per cent and Sub-Saharan Africa growth projections of 1.3 per cent indicated earlier, even the harshest critic will find it difficult not to admire this Government’s commendable achievement.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, with regard to inflation, it was initially estimated that it would be brought down to 10 per cent by the end of the year from 16.6 per cent at the end of 2008. However, due to higher than expected food prices during the first half of the year as well as increases in the cost of non-food components such as energy and transportation, end of year inflation is projected at 12 per cent for 2009.

Sector Performance

Mr Speaker, the performance of the manufacturing sector has been negatively affected by low demand and the rising cost of imported inputs. As a result, growth in the manufacturing sector is estimated to decline to 1.0 per cent this year, against the 1.8 per cent outturn in 2008.

Sir, the tourism sector was also adversely affected by the global economic crisis, as evidenced by the sharp fall in passenger arrivals at major airports and a 23 per cent drop in tourist arrivals to our national parks. Preliminary estimates are that the sector will decline by 15 per cent this year.

The slowdown in the manufacturing and tourism sectors will be mitigated by growth in the mining, agriculture and construction sectors. The mining sector is expected to grow by 13.1 per cent this year, against the 2.4 per cent attained in 2008.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, copper production is expected to reach 662,000 metric tonnes this year, compared with 575,000 metric tonnes, in 2008, and just over 200,000 tonnes at the beginning of this decade. Growth in the mining sector benefited substantially from improved copper prices, the conducive business environment and the commencement of production at Lumwana Copper Mine. Let us also not forget that the Government’s steady involvement in stabilising the sector contributed a lot to this growth.

Hon. Government Members: Hear, hear!

Mr Kambwili: Question!

Dr Musokotwane: I wish to commend our hardworking miners who remained patient during this difficult time in spite of provocation.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, the agriculture sector is expected to grow by 5.2 per cent this year, compared to 1.9 per cent in 2008. This growth is on account of the bumper maize harvest this year. Maize production rose by 26.7 per cent to 1.9 million metric tonnes, compared with the 1.5 million metric tonnes recorded in 2008.

Mr Speaker, this is the largest harvest Zambia has recorded in ten years and I wish to commend our hard working farmers for this exceptional achievement.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This is why the Government will continue providing support to our small-scale farmers, through the Farmer Input Support Programme (FISP), which will enable them to attain higher production levels in the years to come.

Dr Musokotwane drank some water.

Hon. Government Members: Boma!

Dr Musokotwane: Mr Speaker, despite initial signs of a weaker performance, the construction industry in the country has remained fairly robust this year. Growth in the construction sector is projected to be at 10 per cent in 2009, as a result of increased public and commercial infrastructure investments and the continued high demand for housing. The expanded production of cement by local manufacturers, leading to improved supply, will also aid growth in the sector.

External Sector Performance

Mr Speaker, there has been a sharp fall in the level of international trade this year, with the value of imports and exports falling by 26 and 19 per cent, respectively, during the first half of the year. The reduction in imports was largely attributed to the steep depreciation of the kwacha during the first half of the year, while exports were affected by the weaker global demand for metals.

Preliminary figures indicate that Zambia’s current account deficit is projected to reduce to US $484 million in 2009, from the US $1,050 million recorded in 2008. This is largely attributed to the decline in imports, which are expected to fall by 24 per cent by the end of the year. This also reflects, in part, the slowdown in investment expenditure owing to the effects of the global crisis.

Sir, metal export earnings are estimated to reach US $2,780 million by the end of the year. This is 30.5 per cent lower than the US $4,001 million recorded in 2008, and it is mainly due to the lower world metal prices this year, particularly during the first quarter. Volumes of metal exports, however, are projected to increase by 9.6 per cent to 648,489 metric tonnes from the 591,735 metric tonnes recorded in 2008.

Sir, non-traditional export earnings are expected to reach US $820 million this year and will be 6.4 per cent lower than the US $876 million earned in 2008. Notwithstanding an improvement in the competitiveness of our non-traditional exports as a result of a weaker kwacha, reduced global demand for commodities as well as supply constraints are expected to reduce non-traditional export earnings this year.

Sir, our gross international reserves increased to US$1,789 million by the end of September 2009, compared to US$1,085 million at the end of December 2008. This was mainly on account of the receipt of US$789 million in additional funds from the International Monetary Fund (IMF). Of these additional funds, US$162 million has been received through augmented access under our ongoing Poverty Reduction and Growth Facility Arrangement.

The remaining US$627 million has been added to our reserves through the increased special drawing rights allocations, resulting from the resolution of the G-20 group of countries to increase allocations to eligible member countries. Consequently, international reserves are expected to rise to about five months of import cover by the end of the year. This level of reserves has not been attained in the last thirty-eight years.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, during the first half of this year, the exchange rate of the kwacha depreciated against major international currencies. This was largely on account of the continuing adverse effects arising from the global financial crisis in 2008. During the second half of the year, however, the kwacha began to appreciate as a result of improving investor confidence in the Zambian economy.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, amidst these developments, the performance of the kwacha was mixed. The average exchange rate of the kwacha against the US dollar closed at K4,655 in September, 2009, compared with K4,883 in December, 2008, representing an appreciation of 5 per cent. The kwacha, however, depreciated by 3 per cent against the Euro, 5 per cent against the British pound sterling and 26 per cent against the South African rand.

Monetary and Financial Developments

Mr Speaker, broad money growth in 2009 is projected to decline to 10.7 per cent, from the 21.8 per cent recorded in 2008. This is mainly due to a decline in domestic credit growth which is projected to slow down to 12.3 per cent from the 37.8 per cent recorded in 2008. The lower growth in domestic credit is mainly attributed to weaker domestic demand and stricter lending conditions by commercial banks.

Sir, during the first three quarters of 2009, interest rates on Government securities were generally stable. The monthly average interest rate on Treasury bills decreased marginally to 16.8 per cent by end of September, 2009, compared with 17.1 per cent recorded in December, 2008. The monthly average interest rate on Government bonds was at 19.5 per cent in September, 2009, compared with 17.6 per cent in December, 2008. The average commercial banks lending rate, however, increased to 29.6 per cent in September, 2009, from the 26.8 per cent recorded in December, 2008.

Interruptions

Dr Musokotwane: Sir, during the period under review, trading activities at the Lusaka Stock Exchange (LUSE) also reflected the effects of the global financial crisis. Similar to the performance of many global equity markets, the LUSE All-share index recorded a decline, particularly during the first four months of the year. The share index, has however, recovered from a low of 2,096.7 in April, 2009, to close at 2,807.3 at end of September, 2009. Market capitalisation, which had fallen to K18,583.4 billion in April, recovered to K22,651.0 billion by the end of September,  2009.

Sir, despite the global financial crisis and its adverse impact on the banking system globally, the overall financial condition of the banking sector in Zambia, as at end of September, 2009, was satisfactory and all banks remained adequately capitalised.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Notwithstanding the satisfactory condition of the financial sector, the quality of loan performance declined with the percentage of non-performing loans projected to rise to 13 per cent by the end of this year, compared with 7.2 per cent in December, 2008. This decline in loan quality is, however, mitigated by the adequate capitalisation of commercial banks.

The decline in loan quality, however, did not deter interest in our banking sector. To this end, five new commercial banks were granted licences to start their operations in Zambia. Two of these banks have already started operations while the remaining three are expected to do so shortly. This is a clear demonstration of the confidence that investors continue to have in the Zambian economy under the Movement for Multi-party Democracy (MMD) Government.

Interruptions

Budget Performance in 2009

Dr Musokotwane: Mr Speaker, the impact of the global crisis on Zambia has had negative effects on our fiscal operations. Domestic revenues are projected to underperform by K692 billion or 6.4 per cent by the end of the year. The withholding of the sector and general budget support by some co-operating partners has further weakened our fiscal position. In order to safeguard key programmes in the roads, education and health sectors, the Government has increased domestic borrowing while simultaneously reducing domestic expenditures on low priority areas.

Sir, let me now give some details on the performance of the 2009 Budget. Hon. Members of this august House will recall that they approved a total expenditure of K15,279 billion for this fiscal year. This is now projected to be lower by 8.3 per cent at K14,013 billion by the end of the year.

Mr Speaker, total revenue and grants for the 2009 fiscal year are now projected to reach K11,648 billion. This is a reduction of 13.2 per cent from the original budget estimates. By the end of September, total revenue and grants amounted to K8,413 billion. Of this amount, domestic revenue collections were K7,315 billion against the target of K7,955 billion, a shortfall of 8.1 per cent.

The lower revenue collections were mainly attributable to the underperformance of trade taxes, where significant reductions were recorded. In particular, excise duty underperformed by 35.9 per cent, import Value Added Tax (VAT) by 28.9 per cent and customs duty by 18.9 per cent.

Mr Speaker, in contrast, domestic taxes performed well and are expected to be above target by 7.4 per cent by the end of the year. This is on account of an exceptional performance of mining tax revenue which is projected to be above target by 40.4 per cent. In view of the emerging upturn in economic activities, revenue collections are expected to reach K9,954 billion by the end of the year.

Sir, in line with low revenue collections, total expenditures were consequently below the projected level for the first three quarters. The situation was, however, mitigated by the higher than projected domestic borrowing to cushion the revenue shortfall. As a result, domestic borrowing is projected to increase to 3.0 per cent of gross domestic product (GDP), from earlier estimates of 1.8 per cent. By the end of September, a total of K10,513 billion had been released, which was 13.6 per cent below the budgeted figure of K12,167 for the first nine months. For the remainder of the year, we expect additional expenditures of K3,500 billion.

Sir, to protect key programmes in the health, education and roads, we have had to realign our expenditures. This has entailed constraining operational expenditures across Government departments and agencies. In terms of budgetary releases for domestically financed capital programmes, a total of K658 billion has been released towards road projects, K128 billion for health infrastructure and K215 billion for education infrastructure by the end of September. The Government will ensure that these programmes are fully funded by the end of 2009.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, allow me to now present the Government’s economic objectives and policies for the Year 2010.

(iii) Economic Objectives and Policies for the 2010 Budget

Macroeconomic Objectives

Mr Speaker, Zambia has continued to enjoy respectable economic growth averaging close to 6 per cent per annum since 2003. This is unprecedented in the last three decades. In spite of the global economic crisis, this growth has, by and large, remained intact except for the slight dip this year. As the world regains its economic confidence now that the recession is ending, the Government’s economic agenda, in 2010 and beyond, is to overcome the current dip and restore growth to the pre-crisis levels and push the growth even further.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This will be done by continuing with our economic diversification programme, thereby laying a solid foundation for higher sustained growth and building resilience to external shocks.

Sir, the Government recognises that poverty is still widespread in our country despite the growth in the past six years. It is undeniable, however, that this growth has brought about some positive changes as evidenced by the phenomenal expansion in the construction of houses, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … registration of new businesses and purchases of motor vehicles.

Hon. Government Members: Hear, hear!

Dr Musokotwane: From the experiences of countries that have made strong progress in poverty reduction, such as the Asian Tigers and China, we know that strong growth has to continue for some time before poverty can be substantially reduced.

Mr Speaker, the substantial improvement in economic performance over the last decade is a testimony of the spirit of hard work and common purpose that our country has adopted.

Hon. Government Members: Hear, hear!{mospagebreak}

Dr Musokotwane: It is imperative that we do not lose the ground that we have gained. It is, therefore, essential that we continue to pursue business-friendly macroeconomic policies in order to strengthen and sustain the investor confidence needed for economic growth and job creation.

Lieutenant-General Shikapwasha: Hear, hear!

Dr Musokotwane: Sir, the Government’s macroeconomic policies in 2010 will continue to focus on consolidating the recovery of the domestic economy, the rapid diversification of Zambia’s economic base and the protection of key social expenditures in sectors such as education and health.

In this regard, Sir, the Government’s macroeconomic objectives in 2010 are:

(a) to exceed 5 per cent growth;

(b) to reduce end-year inflation to 8.0 per cent; and

(c) to limit domestic borrowing to 2.0 per cent of GDP.

Mr Speaker, domestic growth in 2010 will continue to be driven by the mining, construction and agricultural sectors, along with a recovery in tourism, wholesale and retail trade. Growth from these sectors will be augmented by improved metal exports, leading to improvements in the balance of payments position. I wish to restate, however, that any improvements in metal export earnings will not deter this Government from its goal to promote rapid diversification of the country’s export base.

Dr Musokotwane drank some water.

Hon. Government Members: Boma!

Dr Musokotwane: Mr Speaker, the Government remains steadfast in its commitment to ensure that the exchange rate continues to be determined by market fundamentals. As hon. Members are aware, at least, the ones from earlier generations such as Hon. Matongo, Zambia experienced a copper price shock in the mid-1970s. In the face of uncertainty about the length of the present global economic crisis and the duration of the low copper prices, a depreciated kwacha was a necessary market correction measure to prevent a prolonged balance of payments crisis such as the one we experienced in the mid-1970s.

That crisis, characterised by shortages of foreign exchange and queues for essential commodities, lasted until the 1990s. In contrast, and, once again as Hon. Matongo will attest, nothing of the sort has happened, so far, and …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … nothing of that sort will happen under this Government, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … which is resolute in its commitment to an open and vibrant Zambian economy.

Monetary and Financial Sector Policies

Mr Speaker, the monetary policy in 2010 will continue to focus on sustaining macroeconomic stability and returning to single digit inflation. In light of recent experiences with the global economic crisis, it became evident that the current framework, based on monetary aggregates, provides little room for our monetary policy to counter adverse cyclical conditions through lower interest rates. In this regard, the Bank of Zambia (BOZ) is reviewing its monetary policy framework with a view to shifting from the strict use of monetary aggregates to short-term interest rates as the anchor for our monetary policy.

Sir, with regard to the development of financial markets, BOZ, in consultation with stakeholders, will introduce an overnight lending facility to commercial banks. This will increase liquidity in the economy and its markets so as to improve the effectiveness of the monetary policy.

Another innovation will be the introduction of a framework to facilitate secondary market trading of Government securities and other debt instruments. This will provide additional liquidity to investors and provide information that will improve the efficiency of financial market operations.

Mr Speaker, to promote financial stability and safeguard the economy against lagged effects of the global financial crisis, BOZ is revising the lender of last resort policy. The policy will be aligned with accepted international standards. BOZ will ensure that the lender of last resort policy remains effective and relevant under prevailing circumstances. In addition, the Government is working on a financial sector contingency plan which will deal with problems of a systemic nature. These initiatives will be ready in 2010.

Dr Musokotwane drank some water.

Hon. Government Members: Hear, hear, boma!

Dr Musokotwane: Mr Speaker, I am pleased to inform this august House that Zambia’s ranking in the latest World Bank’s Doing Business Report has risen by ten places, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … putting it ahead of a number of major economies. For example, Hon. Guy Scott will be pleased to know that Zambia is ranked 19 places higher than Greece and just one place below China.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This is a tremendous improvement and is a reflection of this MMD Government’s commitment …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … to reducing the cost of doing business and promoting financial sector development. This, however, is not enough and the Government will, next year, start the implementation of the second phase of the financial sector development plan. This is expected to improve access to credit and reduce the high cost of borrowing, which, in turn, will reduce the cost of doing business further.

Fiscal Policy

Mr Speaker, over the last five years, Zambia’s fiscal deficit has been brought under strict limits to ensure sustainability of public debt over the long run. This prudent fiscal management during years of higher growth has now afforded us with the ability to take a more expansionary fiscal stance in 2010, particularly in view of the need to surpass recent trend growth rates of 6 per cent.

Sir, the economic growth that Zambia has enjoyed has placed on it greater demands for investments in infrastructure and social spending, yet revenues have not grown at the same pace. Tax revenue as a proportion of the GDP has declined from a high of 19.2 per cent in 2000 to the 15.2 per cent projected for 2009. This has posed a major challenge to the financing of our development programmes, especially for investments in infrastructure and social spending.

Mr Speaker, Zambia’s case is not unique, as many countries around the world are facing revenue shortfalls in the aftermath of the global economic crisis. Nevertheless, the Government’s position is that reduced revenue collections from an extraordinary event like this crisis, equally calls for extraordinary, but sensible measures to improve the situation.

Foreign Debt Policy

Mr Speaker, preliminary estimates indicate that the Government’s stock of foreign debt is expected to grow by US $60 million to US $1,160 million by the end of 2009. This is well within sustainable limits and in line with Government’s debt policy. While we will continue to contract concessional debt as a first option, however, for high return investments, the Government may consider seeking non-concessional financing.

Competitiveness

Mr Speaker, this Government is unwavering in its commitment to promote economic diversification. This diversification drive will be undertaken through targeted fiscal interventions that I will outline shortly, as well as through structural reforms that will unshackle the constraints to doing business. In my last Budget Address to this House, I outlined a number of structural measures aimed at enhancing national competitiveness. These were as follows:

(a) accelerating the regulatory reform process through the review of business licensing procedures. This has been done and a number of Bills will shortly be presented to this august House for approval;

(b) introducing a legal framework for public-private-partnerships (PPP). This has been done and the Government has moved to swiftly review and initiate proposals for public-private partnerships in key areas of infrastructure development, such as roads, bridges and energy projects;

Mr Speaker, this Government House approved this Bill, so where is the question?

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, …

(c) revising electricity tariffs to enhance investment in the energy sector while ensuring improvement in service delivery levels by Zambia Electricity Supply Corporation (ZESCO). This has been done and I will elaborate shortly; and

(d) reducing international telecommunication gateway licensing fees to regional averages in the telecommunications. This is ongoing and I will elaborate shortly.

Mr Speaker, with regard to the electricity subsector, the Government approved a new multi-year tariff adjustment framework aimed at inducing operational efficiency and increasing the profitability of the sector. This will attract private investment in electricity generation and consequently reduce load-shedding. In addition, ZESCO has embarked on a countrywide programme to install prepaid meters, most of which are now locally manufactured. The public utility firm is also in the process of improving its cost structure for the benefit of its customers.

Mr Speaker, the alignment of international gateway licensing fees with regional averages will be implemented by the end of this year. With the arrival of fibre optic connectivity in Zambia, however, the usage of satellite based telecommunications gateways will soon become obsolete and the cost and standard of services are expected to improve substantially.

Mr Speaker, in addition, the Government has recently announced its intention to divest up to 75 per cent of its equity in Zambia Telecommunications Company Limited (Zamtel). Furthermore, we may consider divesting the remaining 25 per cent through the sale of shares on the LUSE. This is a historic move which will also go a long way to improving the quality of service and reducing the high costs in the telecommunications sector.

Mr Kambwili: Question!

Dr Musokotwane: Mr Speaker, this MMD Government does not merely talk about job creation and competitiveness.

Hon. Government Members: Hear, hear!

Dr Musokotwane: It acts decisively to attract job-creating investments across all sectors of our economy.

Hon. Government Members: Hear, hear!

Dr Musokotwane: For example, in agriculture, the Government has signed a memorandum of understanding with Man Ferrostaal for a US $400 million investment in the cultivation and refinement of Jatropha in Northern Province.

Hon. Government Members: Hear, hear!

Dr Musokotwane: In the property development sector, the National Pensions Scheme Authority (NAPSA) is investing US $200 million in a major residential and commercial property development at the Levy Junction in the heart of Lusaka.

In the minerals sector, Zhongui Mining Group is investing more than US $3 billion in mineral exploration and development in the North-Western Province.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Altogether, the current value of projects in the pipeline through the Zambia Development Agency (ZDA) is over US $6.2 billion, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … which will have the potential to create jobs for tens of thousands of Zambians.

Infrastructure

Sir, the provision of infrastructure will remain a priority for this Government in 2010. As I will elaborate later, the focus will be on building and rehabilitating roads, bridges, electricity generation projects, schools and hospitals, among others.

Mr Speaker, in a further effort to reduce the cost of doing business, the Government is working with co-operating partners and regional governments to improve and expand regional transportation networks. Projects such as the Kazungula Bridge and the Nacala Corridor are expected to commence in 2010 as part of the North-South Corridor Programme which will improve cross-border infrastructure and reduce regional trading costs.

Public Financial Management

Mr Speaker, recent revelations of financial mismanagement in the Ministry of Health have greatly tarnished the substantial progress that has been made in improving the management and care of Government’s financial resources. This is a shameful attack against a sector that serves many poor people and is unacceptable. The Government has provided all the support required by the investigating agencies so that they get to the bottom of the matter. To hasten the detection and prevention of financial irregularities in Government, I am increasing resources available to the offices of the Auditor-General and the Anti-Corruption Commission (ACC).

Hon. Members: Hear, hear!

Dr Musokotwane: This will equip them with the human capital and operational resources needed to effectively carry out their mandates. In addition, the Government will move swiftly to introduce a financial intelligence unit to enhance the fight against financial crime.

Mr Speaker, I wish to take this opportunity to warn that any public servant who dares to misappropriate public resources that he or she will face the full force of the law.

Hon. Opposition Members: RP!

Dr Musokotwane: Sir, the Government will continue to strengthen systems and build capacity within its agencies to undertake the monitoring and evaluation of programmes. It will also step up its efforts to disseminate information on public expenditure on a regular basis. In 2010, all ministries and Government agencies will, again, publish their work plans so that the general public can follow the progress of projects on the ground. These measures reaffirm the Government’s commitment to increased transparency and accountability.

Mr Speaker, in our efforts to improve budget execution, we presented the Constitutional (Amendment) Bill earlier this year. To continue with these improvements, a treasury single account will be introduced in 2010 which will further improve budget execution and cash management of public finances. By streamlining financial management, we will reduce the amount of idle balances held across hundreds of accounts at commercial banks which are accruing unnecessary bank charges. In addition, planning and budgeting legislation will be introduced in this House, in conformity with the constitutional amendment.

Mr Speaker, I will now present the 2010 Budget.

Hon. Government Members: Hear, hear!

(iv) The 2010 Budget

Dr Musokotwane: Sir, having presented this Government’s strategic focus for 2010, I will now outline how budgetary resources will be used to position our country strategically so that it can take full advantage of the upturn in the global economy. This Budget, therefore, will entail constraining lower priority expenditures and directing more resources to programmes that are aimed at stimulating growth and diversifying the economy.

Mr Speaker, the Government proposes to spend K16,718 billion or 22.5 per cent of GDP in 2010. To finance these expenditures, the Government will raise domestic revenues of K12,107 billion representing 72.4 per cent of the budget and expects to receive grants from our cooperating partners amounting to K2,427 billion or 14.5 per cent of the budget. The balance of K2,184 billion or 13.1 per cent will be financed through domestic borrowing of K1,487 billion and foreign borrowing of K697 billion.

Sector Policies and Supporting Expenditure

Mr Speaker, as in the previous years, expenditure on general public services will account for the largest share of the 2010 Budget at 32.1 per cent. This is slightly higher than the 31.8 per cent share in 2009, and it is as a result of the need to finance certain key expenditures such as voter and national registration at a cost of K129 billion, the national census at a cost of K98 billion and the constitution making process at K50 billion.

Mr Kambwili: Question!

Dr Musokotwane: These allocations are essential and are a demonstration of this Government’s commitment to the democratic process.

Hon. Government Members: Hear, hear!

Dr Musokotwane: These programmes will collectively consume 1.7 per cent of the 2010 Budget.

Sir, in line with the Government’s development agenda, expenditures to the education, economic affairs and health functions will also have a significant share of this budget at 47.3 per cent, collectively. Other functions include defence at 7.9 per cent, public order and safety at 4.6 per cent, and housing and amenities at 3.9 per cent.

Sir, the details of expenditures in the 2010 Budget, classified by function, are as follows:

2010 Budget Functional Classification K’ Billion

Function and Sub-Function Allocation  % of 
 (K’Billion) Budget
General Public Services  5,369  32.1
Executive 487.9
     o/w Local Authority Grants 135.2
             Constituency Development Fund 100.0 
 Legislation 442.0
     o/w National Constitution Conference 50.0
General Government Services 4,070.8
     o/w Domestic Interest 1,188.0
            External Debt Interest and Amortisation  392.4
            Voter and National Registration 128.5
             National Census  97.6
Centralised Administrative Services 368.2
Defense 1,326.0 7.9
Public Order and Safety  771.5 4.6
Economic Affairs 3,217.8 19.2
General Economic, Commercial and Labour 
Affairs 126.8
Agriculture, Forestry and Fishing  1,139.0 
Fuel and Energy 269.5
Mining  24.2
Transport 1,522.5
      o/w Roads 1,461.9
Communication  15.1
Tourism 120.8 
Environmental Protection 148.5 0.9
Housing and Community Amenities 659.1 3.9
      o/w Water Supply and Sanitation 433.7
Health 1,362.5 8.2
      o/w Infrastructure 134.0
Recreation, Culture and Religion 97.5 0.6
Education 3,320.9 19.9
      o/w Infrastructure  553.5
 Social Protection  445.0 2.7
Grand Total 16,717.8 100.0

 
Agriculture and Livestock

Mr Speaker, despite a significant improvement in the performance of the agricultural sector, the Government will relentlessly continue to improve the productivity of the sector and raise the incomes of the millions of Zambian farmers. The Government views the improved performance of agriculture and livestock as one of its most powerful tools to reduce poverty and stem the rural-urban divide. As a demonstration of this commitment, I have increased the total allocation to the agriculture and livestock sectors to K1,139 billion in 2010 from K1,096 billion allocated in 2009.

Mr Speaker, in my last Budget Address, I announced that the Government would undertake a comprehensive review of the Fertiliser Support Programme (FSP), now known as the Farmer Input Support Programme (FISP). This review has been undertaken and some recommendations have been implemented to improve its design for the 2009/2010 farming season.

Sir, this year, the Government has rationalised the distribution of fertiliser and seed for small-scale farmers. As a result, the number of our small-scale farmers that will benefit from the FISP will double to 534,000 eligible small-scale farmers. This will mean that they will now receive four 50 kg bags of fertiliser and one 10kg bag of seed, instead of eight 50 kg bags of fertiliser and two 10kg bags of seed, to ensure optimal utilisation.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This rationalisation is aimed at increasing the coverage of the programme.

Sir, the efficiency of distribution has been improved through the usage of institutions at the agricultural camp levels rather than at the district level, as was the case previously, and through the increased participation of community organisations. Furthermore, farmers receiving fertiliser will be targeted for support from agricultural extension workers to ensure that their fertiliser is applied correctly and efficiently. With these interventions, the Government expects crop yields, which have not been very satisfactory in the past, to improve.

The Government remains committed to this vital form of input support to small-scale farmers. In this regard, I have allocated K430 billion for the programme in 2010. With these measures, I hope that the next time Hon. Muntanga, who has just walked out, talks to his farmers, he will talk more about progress in his constituency.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, in continuing with our support to small-scale farmers, K100 billion has been allocated to the Food Reserve Agency (FRA). These resources will augment the agency’s ability to be used in purchasing of grains from farmers, particularly those in remote areas. It will also enhance the FRA’s capacity to provide farmers with market access to ensure future food production and household food security. In addition, I have allocated K10 billion towards the Food Security Pack initiative designed to protect vulnerable households from high food prices.

Hon. Government Members: Hear, hear!

Dr Musokotwane: As an additional food security measure, the Government, this year, rehabilitated silos in Lusaka, to improve grain storage and protection against damage. Next year, 2010, the Government will continue the rehabilitation of silos in Kabwe and Ndola. Furthermore, three new storage sheds will be constructed in Serenje, Mbala and Mufumbwe while six hard-standings will be upgraded in Chambeshi, Chisamba, Kalomo, Petauke and Kapiri-Mposhi.

Sir, on the marketing side, the Government will introduce the Agricultural Marketing Bill during this parliamentary session. This Bill is intended to enhance access by small-scale farmers to markets and ensure that transactions take place in a fair manner. The Bill will also include provisions for warehouse receipting, thereby allowing farmers to access finance against the value of their produce and enabling them to purchase inputs for the subsequent farming season.

Mr Speaker, in order to increase investment and productivity in the sector, the Government announced this year that it would step up the development of farm blocks where large scale and smallholder productions would co-exist in a symbiotic relationship. The first of these, the Nansanga Farm Block in Serenje District, is close to completion. To this end, all the budgeted resources of K42 billion to the farm block for access roads, electricity lines and water development, have been released in 2009.

Hon. Members: Hear, hear!

Dr Musokotwane: Most of the works have been done. In 2010, the Government will complete the remaining works at the farm block, particularly relating to the construction of additional roads and bridges. For this, I have allocated K26 billion in the 2010 Budget. An additional K3 billion has been allocated for the construction of dams.

Sir, the Government has already begun to aggressively market Nansanga Farm Block to investors. From the promotion efforts that have been undertaken this year, substantial interest has already been expressed in the block.

Mr Speaker, in 2010, the Government will also commence similar infrastructure development at Luena Farm Block in Kawambwa district.

Hon. Members: Hear, hear!

Dr Musokotwane:  This farm block is an area with vast potential for the development of the sugar industry.

Hon. Members: Hear, hear!

Dr Musokotwane: I have provided K3 billion for preliminary works in 2010.

Sir, the recent creation of a specialised Ministry of Livestock and Fisheries Development will ensure that this vital subsector receives focused attention from this Government. The potential of the livestock subsector is immense and will be supported through targeted interventions aimed at controlling animal disease and improving veterinary services. Through these interventions, beef will become our next copper.

Hon. Government Members: Hear, hear!

Dr Musokotwane:  Greater attention will also be placed on the development of the fisheries industry, through the construction of aquaculture centres for the breeding of fingerlings that will be used for restocking.

Sir, to support the livestock sector, the Government will continue with the creation of disease-free zones to facilitate livestock exports. The first zone is expected to cover Central Province, Lusaka Province and parts of the Copperbelt Province. Work has commenced on the renovation of a number of laboratories, the construction of checkpoints into the proposed disease-free zones and the establishment of breeding centres. In 2010, this work will continue and I have allocated K13 billion for disease-free zone programmes.

Sir, the disease burden around these zones will also be targeted through the establishment of extension service centres in the livestock disease prone areas of Western, Southern and Eastern provinces. For this, and other livestock and fisheries activities in the provinces and districts, I have allocated K95 billion.

Hon. Government Members: Hear, hear!{mospagebreak}

Dr Musokotwane: The full details are available in the work plan for the newly created ministry.

Mr Speaker, with the disease-free zones soon to be established, Hon. Shakafuswa can sleep well knowing that his cows are safe.

Hon. Government Members: Hear, hear!

Tourism

Dr Musokotwane: Mr Speaker, the tourism sector was the most affected by the global financial crisis in 2009. The sector, however, is expected to pick up in 2010 on the back of a global recovery and the upcoming football world cup in South Africa next year. Growth in the sector is projected at 15 per cent in 2010, compared to an estimated contraction of the same magnitude in 2009.

Sir, in my last Budget Address, I announced that the focus of the Government’s interventions in the tourism sector would be on the construction of vital infrastructure in tourism areas. This will continue to be our focus in 2010 and in the medium-term.

Sir, in our continued efforts to transform the northern tourism circuit into a high quality tourism destination, I allocated K51 billion in 2009 towards infrastructure projects in the area. These resources have been released in full.

To continue with this programme in 2010, I have allocated K95 billion towards the development of the northern tourism circuit.

Hon. Members: Hear, hear!

Dr Musokotwane: Of this, K20 billion will be used for the continued construction of the road from Mbala to Kasaba Bay, K70 billion which will come from the Rural Electrification Fund will go towards the electrification of the area and K5 billion is for the reconstruction of the Kasaba Bay Airport. A further provision of K1 billion has been made for the restocking of the Nsumbu National Park. Once the Kasaba Bay project is finished, it will be such an attraction that even hon. Members, who are skeptical about these projects who I will not mention this time, will be very pleased to visit the areas and …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … admire the beautiful sunset and puku on the Lake shore.

Sir, in addition to these allocations, I have provided K83 billion towards the Support to Economic Expansion and Diversification Project aimed at fostering growth in the tourism sector. A further K6 billion will be used for tourism marketing activities and K6 billion will be used to finance the operations of the National Museum Board. Additionally, K4 billion has been allocated towards the Zambia Wildlife Authority (ZAWA).

Sir, I have also allocated K22 billion towards the construction of access roads to and within national parks, including the continued development of the Kafue National Park spinal road network.

Mr Speaker, in 2007, this august House passed the Tourism and Hospitality Act to provide for the development of the tourism industry through enhanced tourism planning, management and co-ordination. It is the Government’s desire to establish the Tourism Development Fund, in accordance with Section 62 of this Act. This is for purpose of product development, marketing, training and research, and to support participating local councils to develop tourism related infrastructure.

Sir, tourism promotion requires urgent attention for Zambia to reap the full benefits from its tourism potential. In view of revenue constraints, the Government will, in the course of this sitting of Parliament, introduce legislation for a tourism levy to be collected in 2010. In the medium-term, this will become a major source of finance for the sector.

Manufacturing

Mr Speaker, the growth of the manufacturing sector is an essential part of this Government’s agenda for national development. The expansion of manufacturing activities will, over the medium-term, improve Zambia’s growth prospects and competitiveness and reduce its dependence on imports through a wider base of locally produced goods and services. In this regard, the Government will continue to place emphasis on this vital sector through the construction of arterial infrastructure and investment facilitation through the Zambia Development Agency (ZDA).

Mr Speaker, there has been substantial progress in the development of the US $900 million Chambishi Multi-facility Economic Zone. Eleven manufacturers have begun operations and another five are expected to do so in 2010. As the pace of operations accelerates, hundreds of jobs will be created.

Sir, in my last address to this august House, I had announced that development of the Lusaka South Multi-facility Economic Zone would commence in 2009. To support the construction of access roads to the zone, I had allocated K30 billion and these resources have been released in full. In 2010, a further K20 billion has been provided to complete infrastructure development at the Lusaka South MFEZ. Furthermore, the master design plan for the Lusaka East MFEZ will be completed by the end of this year and construction is expected to start in 2010.

Energy

Mr Speaker, in the energy sector, improving the supply of, and access to, electricity remains a key strategic focus for this MMD Government.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Considerable momentum will be gained in 2010, as the construction of a number of electricity generation projects is expected to commence.

Sir, work is ongoing at the Kariba North Bank Extension Project. At Kafue Gorge Lower and Itezhi-tezhi, feasibility studies have been completed and the Government is in the process of finding suitable finances for these projects. Development of these projects will commence next year and will be completed over the medium-term. Combined, these projects will add in excess of 1,000 mega watts of electricity supply.

Sir, while these large projects will almost double the country’s ability to generate electricity over the medium-term, there is an urgent need to improve the supply of electricity in the farthest parts of our country. We cannot wait to bring reliable electricity supply to these areas. Given the high cost of building lengthy distribution networks, the Government has commenced the development of a number of mini-hydro projects aimed at supplying smaller local areas with electricity.

Mr Speaker, given the great expense of constructing these facilities, the Government will actively seek private sector participation through the public-private-partnership framework. A number of projects have been identified and we expect to start the tendering process shortly. Public resources in 2010 will instead be focused on stepping up rural electrification programmes, for which I have allocated K235 billion.

Hon. Government Members: Hear, hear!

Transport and Communications
 
Dr Musokotwane: Sir, the development of the transportat sector is one of the pillars of this MMD Government’s development agenda. Last year, I significantly increased the budgetary allocation for the development of road infrastructure in line with our firm commitment to reduce the cost of doing business and improve access to rural areas.

Hon. Government Members: Hear, hear!

Dr Musokotwane: To continue with this commitment, I have allocated K1,462 billion towards the construction, rehabilitation and maintenance of our road networks in 2010.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Allow me, Sir, to highlight certain key projects that these resources will be used for. The first phase of the Zimba/Livingstone Road will be completed later this year and work has already commenced on the second phase. I have allocated K195 billion for the completion of this major project which will not only improve access for tourists, but also enhance the smooth movement of goods across our southern borders. Once completed, I am sure that, Hon. Musokotwane, Regina that is …

Laughter

Dr Musokotwane: … will now be able to make frequent visits to her constituency to monitor development programmes as she will be encouraged by the smooth drive.

Hon. Members: Hear, hear!

Dr Musokotwane: Mr Speaker, some other projects that will be undertaken in 2010 include the upgrading of the Choma/Chitongo, Chembe Bridge-Mansa, Mongu/Kaoma/Tateyoyo, Kasama/Luwingu and Luansobe/Mpongwe roads, at a cost of K146 billion. I have also allocated K61 billion to improve the condition of urban roads within Ndola and Kitwe. A further K604 billion, representing over 40 per cent of the roads budget, will be used to undertake routine maintenance and rehabilitation works. Full details of these and other projects are available in the work plan for the Road Development Agency (RDA).

Sir, let me remind hon. Members that it is not possible for me to indicate every road which we shall work on right now. For more details, please, consult the work programme of the RDA. A further K106 billion has been allocated to the rehabilitation of feeder roads and river crossings across the country.

Hon. Members: Hear, hear!

Dr Musokotwane: In our tireless efforts to improve access to markets and other services for our rural communities, I have more than doubled the allocation to rural road development in all the nine provinces to K45 billion.

Hon. Members: Hear, hear!

Dr Musokotwane:  This translates to K5 billion for each provincial rural roads unit, compared with the K2 billion that was allocated in 2009.

Mr Speaker, I have also allocated K16 billion for the rehabilitation of airports and airstrips across the country. Of this amount, K5 billion is for Kasama Airport, K4.9 billion for Solwezi Airport, K4.2 billion for Mansa Airport, K0.5 billion for Nyangwe Airstrip in Lundazi District and K0.6 billion for Serenje and Senanga aerodromes.

Hon. Government Members: Hear, hear!

Health

Dr Musokotwane: Mr Speaker, despite the immense pressures of finding adequate resources to cater for all national priorities, this MMD Government remains steadfast in its commitment to bring healthcare to the far-flung areas of this great nation. Access to quality health services has significantly improved in our country as a result of the interventions by this Government with the assistance of our co-operating partners. This is evidenced by the falling incidence of malaria, lower maternal, infant and child mortality rates, and reduced prevalence of HIV/AIDS, among others.

Sir, disbursements to the health sector, are however, expected to be lower than what was in the 2009 Budget. This is due to the suspension of aid by co-operating partners, which has jeopardized the progress that has been made. As a consequence of the continued uncertainty regarding co-operating partners’ commitment to supporting the sector, the Government has moved swiftly to realign domestic resources to mitigate the shortfalls in the health sector both in 2009 and 2010.

Mr Speaker, following the alleged misappropriation of resources in the health sector, we have had several meetings with co-operating partners on the resumption of funding to the sector. As a result of these meetings, a joint action plan was developed and agreed to so that we could determine the way forward. On its part, the Government has met all its obligations under the first phase of the plan and we await a favourable response from our co-operating partners.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, due to this non-commitment of resources from our co-operating partners, the allocation to the health sector has reduced by 25.1 per cent to K1,363 billion in 2010. In terms of the domestically financed budget, however, the allocation has increased by 18.6 per cent from the K1,151 billion allocated in 2009. This increased allocation, despite the lack of support from co-operating partners, is a clear demonstration of Government’s unwavering commitment to improving health services in the country.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, in 2009, I had allocated K136 billion towards infrastructure development in the health sector. A total of K128 billion has been released so far towards the completion of nine district hospitals and twenty-one health posts across the country.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Sir, despite reduced funding to the sector, the construction and rehabilitation of health infrastructure will continue. For 2010, I have allocated K134 billion towards the continued construction, expansion and rehabilitation of sixteen district hospitals, and the construction of staff houses. The full details of these infrastructure projects are available in the work plan for the Ministry of Health.

Mr Speaker, in addition, I have allocated K84 billion for drugs and medical supplies in 2010. For the prevention and treatment of HIV/AIDS, I have allocated K34 billion. In addition, K20 billion has been allocated towards the procurement of essential medical equipment. To achieve this Government’s commitment to expand access to quality healthcare, we must continue to recruit essential and frontline medical staff. In this regard, I have allocated K14 billion for recruitment in the health sector.

Hon. Members: Hear, hear!

Education and Skills Development

Dr Musokotwane: Mr Speaker, this Government has placed a high priority on the education and development of our children. While Zambia is well on track to meeting the millennium development goal of providing universal education by 2015, we must now aim higher to raise the standards of education and provide better opportunities for our children.

In achieving this goal, the role of communities and the private sector has become more critical than ever. The growth of community schools has played a vital role in increasing access to education. Over the medium-term, the Government will continue to support the development of community schools and engage the private sector to establish education centres within the public-private partnership framework.

Over the last five years, we have devoted substantial resources to the education sector. In order to continue with this policy, I have allocated K3,321 billion to the education sector for next year …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … representing an increase of 26.4 per cent from resources allocated in 2009.

Mr Speaker, in my last Budget Address, I had allocated K277 billion of our domestic resources for infrastructure development, of which as of now, K215 billion has been released in full. These resources have been used to complete the construction of twelve basic schools this year. An additional twenty high schools are in the advanced stages of construction. Furthermore, the 2,500 additional classrooms for basic schools across the country that were planned for this year will be completed by early next year.

Sir, armed with the resources for 2010, the Government will continue to develop infrastructure such as schools and teacher training colleges. I have, therefore, allocated K554 billion for the construction of educational infrastructure in 2010. This will be used to construct an additional 2,900 classrooms that will provide additional school places for another 250,000 students across the country.

Hon. Government Members: Hear, hear!

Dr Musokotwane:  Most of these classrooms will be built using the community mode of contracting. In addition, K21 billion has been allocated towards the procurement of educational materials, including books and desks. Details of these projects are available in the work plan for the Ministry of Education.

Sir, in order to continue support to tertiary institutions, I have allocated K318 billion to the three public universities. Of this amount, K165 billion will be used to finance their operations, while K30 billion will be used for infrastructure development. Additionally, K115 billion will be used to provide bursary support to enable deserving students to access higher education. A further K84 billion has been allocated to support operations and infrastructure development at Technical Education and Vocation Entrepreneurship Training (TEVET) institutions.

Mr Speaker, this MMD Government is working …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … to improve opportunities for our children.

Hon. Government Members: Hear, hear!

Dr Musokotwane: I am sure, Mr Speaker, that Hon. Chazangwe can bear me witness on what I have said as he is a seasoned politician and former headmaster.

Hon. Government Members: Hear, hear!

Water Supply and Sanitation

Dr Musokotwane: Mr Speaker, the Government will continue to increase access to clean water and sanitation for our people in both urban and rural areas. In this Budget, I have allocated K434 billion to water supply and sanitation facilities. These are more than double the resources that I had allocated in 2009. Of this amount, K198 billion has been directed to the National Urban Water Supply and Sanitation Programme, which will enable Government to rehabilitate urban water supply and sanitation facilities. In addition, K117 billion has been allocated towards the National Rural Water Supply and Sanitation Programme. This will go towards the construction of 1,000 boreholes, 300 demonstration pit latrines and the rehabilitation of 700 boreholes.

Public Order and Safety

Mr Speaker, maintaining law and order through a professional police service and a strong legal system is critical to attracting investment, thereby creating job opportunities for our people. In 2010, I have increased the allocation towards the maintenance of public order and safety by 26.3 per cent to K772 billion. Of this amount, K38 billion will go toward the construction of court houses in all nine provinces, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … while K37 billion has been provided for the construction of police houses and expansion of infrastructure at Mwembeshi Prison. Furthermore, resources have been provided for the continued recruitment of police officers in 2010. With these interventions, Mr Speaker, senior counsels like Hon. Chifumu Banda will be happy that court sessions in rural areas will no longer be conducted under trees, but descent houses.

Hon. Government Members: Hear, hear!

Social Protection

Dr Musokotwane: Mr Speaker, in these difficult financial times, it is important to ensure that resources going towards social protection are safeguarded. In 2010, therefore, this sector will receive an increase of 19 per cent. Of the K445 billion allocated for social protection, K194 billion has been provided for grants to the Public Service Pension Fund to cater for early retirement from the civil service. A further K172 billion has been allocated as Government’s employer contribution to the fund.

Local Government

Mr Speaker, …

Dr Musokotwane drunk water.

Hon. Members: Hear, hear, boma!

Dr Musokotwane: … decentralisation of service delivery functions to districts is one of the key goals of the Public Sector Reform Programme. The ultimate aim is to devolve these functions to local councils over the medium-term as the capacity of these institutions improves. A critical element of capacity development in councils is financial empowerment through fiscal decentralisation. To this end, in 2010, the level of grants to councils has been raised to K135 billion, an increase of 23 per cent over 2009.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Of these resources, K69 billion will be disbursed as recurrent grants to councils. To enhance transparency and accountability, the grants will be disbursed through a formula and will have three objectives:

(a) to compensate rural councils for revenues lost from the abolition of unfair and unpopular crop levies;

Hon. Opposition Members: Question!

Dr Musokotwane: Mr Speaker, …

(b) to assist rural councils to cover their operational costs; and

(c) to improve service delivery performance in all councils.

Sir, for the other grants to councils such as capital grants, restructuring grants and grants in lieu of rates we have allocated each of them K22 billion. In 2010, the capital grant will be apportioned to support the continuation of the Lusaka Drainage Project which the Patriotic Front (PF) dominated council has failed to work on.

Hon. Government Members: Hear, hear! 

Dr Musokotwane: From 2010, …

Hon. Government Members: Boma!

Dr Musokotwane: … however, the capital grant will also be disbursed based on a formula, similar to the recurrent grant.

Mr Speaker, in addition to these resources, K100 billion has been allocated to the Constituency Development Fund (CDF).

Hon. Government Members: Hear, hear!

Dr Musokotwane: This represents an increase of 11.1 per cent from the K90 billion allocated in 2009, which has all been released in full.

Hon. Government Members: Hear, hear!

Revenue Estimates and Measures

Dr Musokotwane: Mr Speaker, …

Interruptions

Dr Musokotwane: … the following is a summary of the revenue estimates and financing to support the 2010 expenditure:

Total Resource Envelope for the 2010 Budget
 (K’Billion)
Tax Revenues   11,385 
     Direct Taxes 5,730.1
         Company Tax 1,363.3 
          PAYE 3,249.9
          Other Income Taxes     872.6
          Mineral Royalty Tax     244.3
Value Added Tax 2,939.7
          Domestic VAT    500.3
          Import VAT 2,439.4
Customs and Excise Duty 2,715.5
          Customs Duty 1,300.3
           Export Levies       17.9
           Excise Duty 1,379.3
               o/w Fuel Levy     290.6
Non-Tax Revenues  721.8
        User Fees and Charges    348.7 
        Exceptional Revenues    152.7
        Dividends, Interest and other Levies      11.4
        Other     209.0
Total Domestic Revenue  12,102.1
Domestic Borrowing     1,487.0
Total Domestic Revenues and Financing   13,594.10
  Foreign Grants 2,426.6
        General Budget Support    980.4
        Sector Budget Support    213.3
        Sector-Wide Approaches    432.1
        Project Support    800.8
  Foreign Financing    697.1
        Budget Support Loans    171.0
        Project Loans    526.1
Total Foreign Grants and Loans   3,123.7
Total Revenue and Financing  16,717.8{mospagebreak}

Revenue Measures

(1)  Tax Measures

Mr Speaker, as I have mentioned earlier, the recession has affected every country in the world. In Zambia, the effect has mainly been felt in the reduction of tax revenues. To protect our development agenda, however, adequate resources must be mobilised. These are difficult times and, in difficult times, we must uphold our commitment to fiscal prudence.

Sir, in this regard, the Government proposes the following revenue measures for 2010, in order to ensure that the Government’s fiscal programme remains on course.

Mr Speaker, hon. Members of this august House will recall that in 2008, the Government reduced excise duty on diesel from 30 per cent to 7 per cent in order to mitigate record high international fuel prices. International oil prices have since fallen significantly, to around US $70 from a peak of over US $150 per barrel in 2008. I, therefore, propose a small increase of 3 per cent on the excise duty on diesel, to bring the effective rate to 10 per cent. This is in recognition of the revenue shortfall in the 2010 Budget. At this level, our tax on diesel will still be among the lowest in the region. We expect a revenue gain of K59 billion from this measure.

Sir, in 2006, hon. Members may also remember that the Government introduced a Carbon Emissions Tax on both imported and domestic motor vehicles. This tax is supposed to be payable annually on domestic vehicles. However, due to administrative challenges, the Zambia Revenue Authority (ZRA) has not been able to collect this tax on domestic motor vehicles. This measure will now be implemented in 2010 and is expected to raise K31 billion.

Sir, the above measures will take effect on 1st January 2010. 

Mr Speaker, this Government is deeply concerned about the burden that taxation places on our hardworking taxpayers in the formal sector, especially those in the low-income brackets. We are committed to reducing the tax burden on employees, but this can only be achieved gradually in order to sustain ongoing development programmes in view of the revenue constraints imposed by the global economic crisis.

Sir, I therefore propose to increase the Pay-as-You-Earn (PAYE) exempt threshold from K700,000 per month to K800,000 per month …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … while leaving the tax bands unchanged. This means that those earning below K800,000 per month will be exempt from this tax. This measure will return K85.0 billion to the pockets of our workers.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, for 2009, this august House approved an increase in the tax credit for differently-abled persons from K600,000 to K900,000 per annum. To affirm our commitment to provide further relief to the differently-abled, I propose to increase their tax credit to K1,560,000 per annum in 2010.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This will result in a minimal revenue loss.

Sir, the above measures will take effect on 1st April, 2010. In line with the changes to the Budget Cycle, we will be consulting with stakeholders to harmonise the tax year with the fiscal year so that measures in future will become effective on the 1st of January. This cannot be done now.

Sir, malaria has remained the number one killer in Zambia. While there have been substantial reductions in the incidence of malaria this decade, we must continue to tackle this disease. In an effort to continue the fight against this scourge, we have, in the past, removed taxes on mosquito nets and on the materials and insecticides used in their manufacture. I now propose to remove import duty and zero-rate insecticide treated curtains for VAT purposes. This measure will result in a minimal revenue loss.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, the sale of commercial property is currently exempt for VAT purposes. In order to further encourage development of commercial infrastructure, I propose to standard rate the sale of commercial property. This will not only broaden the tax base, but also mitigate cash flow by allowing developers to claim input VAT on a monthly basis while the output VAT will only be payable at the time of sale of these properties.

Mr Speaker, the penal bonds system was introduced some years back to safeguard Government revenue and has been applicable to manufacturers of excisable goods. This requires them to buy bond guarantees from financial institutions. This system has proven to be costly to businesses as it adversely affects their cash flow. With the modernisation of our tax administration, sufficient measures are now in place to safeguard tax revenue and there is no longer any justification to continue with this system. I, therefore, propose that the penal bond system be abolished.

Sir, in line with this Government’s resolve to support the Keep Zambia Clean and Healthy campaign, and to encourage investment by reducing the cost of capital items for businesses, I propose to remove customs duty on cranes and garbage dumpers. This measure will result in a revenue loss of K4 billion. The above measures will become effective on 1st January 2010.

Mr Speaker, I also propose to carry out amendments to the Customs and Excise Act, Value Added Tax and Income Tax Act in order to update, strengthen and remove ambiguities in certain tax provisions of tax legislation and make tax administration more effective. These are housekeeping measures which are revenue neutral.

(2) Non-Tax Measures

Mr Speaker, as I indicated earlier, the Government needs as much resources as it can mobilise to meet our development objectives. I, therefore, propose to increase fees payable under the Lands Act as follows:

(a) consideration fees  by 50 per cent;

(b) ground rents by 80 per cent; and

(c) consent fees by 100 per cent.

Interruptions

Dr Musokotwane: Mr Speaker, none of these fees will exceed more than K500, 000
per month with I am sure Hon. Lubinda can afford very easily.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This measure will raise K11.1 billion and will become effective on the 1st of January 2010.

Mr Speaker, in conclusion, seven years ago, Zambia faced severely testing times when the Anglo-American Corporation pulled out of the Konkola Copper Mine. This threatened the jobs of thousands of miners and placed the future prosperity of the Copperbelt in jeopardy. We emerged from that crisis stronger than before, demonstrating that we are a resilient nation and a tenacious people who can successfully rise to meet the most challenging obstacles that confront them.

Mr Speaker, 2009 has been a similarly challenging year, but, again, under the able leadership of this MMD Government, …

Hon. Government Members: Hear, hear!

Dr Musokotwane: … Zambia and her people have weathered the storm well. While growth in the developed world dipped into negative territory and for Sub-Saharan Africa fell to 1.3 per cent, Zambia is poised to achieve commendable growth of at least 4.3 per cent this year.

Hon. Government Members: Hear, hear!

Dr Musokotwane: This is a tribute to the hard work of our farmers and miners, the ingenuity of our private sector and the steady hand of Government under the leadership of His Excellency the President, Mr Rupiah Bwezani Banda.

Hon. Government Members: Hear, hear!

Dr Musokotwane: The challenge for 2010 is for us to be united in our resolve to rededicate ourselves to economic diversification and building on the resilience shown by our economy in the dark days of global economic turmoil, so that, as a nation, committed to becoming a middle income country in the next two decades, we can take full advantage in the rebound of international trade and revived global growth. The race to rebuild individual economies and indeed the global economy has now begun in earnest. We, Zambians must again rise to meet the challenge to be winners in this global race and in doing so we must focus our minds on positive action to diversify our economy and spend less of our energies on talk, and negative talk at that.

Sir, the budget I have laid before the House today positions the Zambian economy to take full advantage of this global rebound. In the context of tight public finances, it focuses resources on targeted programmes that will raise the productivity of millions of our small-holder farmers, add value through the manufacturing sector to the output from our mines and farms, and place Zambia as one of the pre-eminent destinations for world tourism. These are the key objectives for Government as we strengthen our resolve to diversify our economy and build an economic base upon which rapid and sustainable growth can be attained.

The attainment of a resilient and diversified economy with the capacity for sustained and rapid growth is not an option for this Government, Mr Speaker, it is an article of faith.

Hon. Government Members: Hear, hear!

Dr Musokotwane: We must achieve this goal if Zambia is to take its rightful place among the nations of the world, masters of our own destiny and dependent on none. It is indispensible to our resolve to achieve the millennium development goals by 2015 and to surpass them thereafter to become a middle-income country by 2030.

Mr Speaker, it is indeed true and unfortunate that many of our people spend lots of their time on negative thoughts. Unfortunately, this does nothing to solve our development problems. The vast majority of people in our country are youthful. These young people tend to get inspiration from their elders. If we the adults tend to project predominantly negative thoughts on them, then we should face the real possibility that many of our offsprings will inherit the same disposition in life: to complain, to talk, but then achieve nothing tangible.

Yet we know that it is the young people in any society that have the most active minds. Well nurtured, they can achieve a lot even under difficult conditions. The renowned great scientist Albert Einstein achieved most of his breakthroughs at the youthful age of twenty-five. Great musicians such as Wolfgang Mozart and others here in Zambia make it to the top during their youthful years. Indeed, even great spiritual leaders such as Jesus Christ were young people.

Laughter

Dr Musokotwane: Mr Speaker, what the Government is saying is this: Stop contaminating the minds of the young people with negative thoughts.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Instead, let us challenge, encourage and inspire them so that they can achieve feats even under difficult conditions.  This is what will move our great nation forward.

Hon. Government Members: Hear, hear!

Dr Musokotwane: Mr Speaker, the measures that the Government has taken in this Budget are tangible proof of our Government’s unwavering commitment to stop talking but to deliver.

I commend, therefore, this Budget to this honourable House.

Mr Speaker, I beg to move.

Hon. Members: Hear, hear!

Invited Guests in the galleries applauded.

Mr Speaker: Order! No applauding is allowed.

Laughter

Mr R. C. Banda (Milanzi): Mr Speaker, I thank you for giving me this honour and privilege to propose that the debate on the Budget Speech  delivered by the hon. Minister of Finance and National Planning, today, Friday, 9th October, 2009 be adjourned to Tuesday, 13th October, 2009.

Mr Speaker, in the first place, allow me to congratulate the hon. Minister of Finance and National Planning …

Hon. Government Members: Hear, hear!

Mr R. C. Banda: …for his excellent and elaborate speech as he presented the 2010 Budget.

Sir, in his speech, the hon. Minister has, indeed, provided a clear direction for the economic development of this country. The speech has covered a wide range of developmental and economical issues, all of which are extremely important.

Mr Speaker, in order to give ample time to hon. Members of this august House to study the Budget and debate more meaningfully, I would like to propose that the debate on the Motion by the hon. Minister of Finance and National Planning be deferred to Tuesday, 13th October, 2009.

Mr Speaker, I thank you.

Hon. Members: Hear, hear!

Mrs Banda (Chililabombwe): Mr Speaker, I thank you for according me the opportunity to second the proposal moved by the hon. Member of Parliament for Milanzi Constituency. Indeed, hon. Members will agree with me that the issues presented in the Budget by the hon. Minister of Finance and National Planning impact on the life of each and every Zambian.

Hon. Opposition Members: Hear, hear!

Mrs Banda: Hence, the Budget Speech should be scrutinised crtically.

Hon. Opposition Members: Hear, hear!

Mrs Banda: Mr Speaker, I would like to urge my fellow parliamentarians to come well prepared on Tuesday, next week…

Hon. Opposition Members: Hear, hear!

Mrs Banda: … so that we can engage in constructive and meaningful debate on the issues that have been raised in the 2010 Budget Speech.

Hon. Opposition Members: Hear, hear!

Mrs Banda: Sir, I agree that more time is required to carefully analyse and study the Budget which has just been presented in readiness for the debates next week. I therefore, stand to support the proposal to adjourn the debate on the Motion to Tuesday, 13th October, 2009.

I thank you, Mr Speaker.

Hon. Members: Hear, hear!

Mr Lubinda: Quality!

Mr Munaile: Ee Boom iyi!

Question put and agreed to.

ADJOURNMENT

The Vice-President and Minister of Justice (Mr Kunda, SC): Mr Speaker, I beg to move that the House do now adjourn.

Question put and agreed to.
_______

The House adjourned at 1628 hours until Tuesday, 13th October, 2009.