Presentation I made at the Public hearing on the Zambia National 2017 Budget Analysis at Mulungushi Conference Centre.

1. 2017 Budget
Kampamba Shula
Economics Association of Zambia
23rd November 2016

2. Enhance
Domestic
Resource
Mobilization
Scale up
Protection
Programs
Raise levels of
accountability
and
transparency
Minimize
Unplanned
Expenditures
Policy
Consistency
Zambia Plus Economic Recovery Program
Turnover & PAYE Tax
bands adjusted
No Export ban in
Agriculture
Government to
disengage from oil
procurement
Free sanitary pads to
be distributed to
Rural and Peri Urban
Areas
Social Health
Insurance bill
coming in 2017
Cost reflective
electricity tariffs in
2017
Government to
operationalize
Higher loan scheme
Slow down on
Capital project
financed through
costly borrowing
Dismantle arrears to
suppliers and
contractors
Realign Farmer input
support program
Mitigate effect of
economic recovery
programme on
vulnerable in society
Support Growth in
key sectors of
Economy
Key 2017 Budget Highlights

3. 2017 National Budget
28%
5%
4%
31%
1%1%
9%
1%
16%
4%
2017 Expenditure by Function
General Public Services
Defence
Public Order Safety
Economic Affairs
Environmental Affairs
Housing and Community
amenities
Health
Recreation, Culture and Religion
Education
Social Protection
8%
15%
5%
3%
15%
12%
1%
8%
6%
27%
Resource Envelope 2017
Company Income tax
PAYE
Withholding
Mineral Royalty
VAT
Custom and Excise
Other revenues
Non Tax revenues
Domestic revenues
Grants and Financing
Government proposes to spend K64.5 billion in 2017
The resource envelope projects Grants and Financing at 27%, which is a rather large percentage. The grants and financing will be greatly affected by how much Government is able to
solicit confidence in the economy’s fiscal trajectory and debt sustainability. A deal with the IMF in the first quarter of 2017 could help accomplish this.

4. Budget Review
The 2017 budget projected at K64 billion is 26% higher than the projected amount in the medium term expenditure framework. Recent expenditure patterns have rendered the
medium term expenditure framework impotent in guiding spending policy. As can be observed from the graph above the proposed budgets in the last two years have been
substantially higher than the projected medium term expenditure framework which means the internal budgeting process, actual budgets or even projected budgets for that
matter are significantly at disparity with the medium term expenditure framework
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2012 2013 2014 2015 2016 2017
Billions
Proposed Budget Medium term expenditure framework
Source: Ministry of Finance

5. Expenditure Review
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015
Billions
Actual Tax Revenue Actual Expenditure
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015
Billions
Projected Expenditure Actual Expenditure
The gap between actual expenditure and actual revenue in the last five years has widened.
This shows that expenditures have increased at a rate that was not correlated to actual Tax
revenue. This trend highlights a great problem in the budget constraint.
Actual expenditure has exceeded projected expenditure more times than it has
underperformed in the last five years. This further shows a recurrent problem in sticking
to planned for expenditure which if unchecked will undermine the budgeting process.
Source: Ministry of Finance Source: Ministry of Finance

6. Debt Review
Since 2012 Zambia’s debt position has been deteriorating with both domestic and external
debt climbing to almost unsustainable levels according to IMF standard international
sustainable debt ceilings.
Actual Fiscal deficits have also outstripped projected Fiscal deficits in the last three years
with the widest difference noted in 2015.
0
1
2
3
4
5
6
2010 2011 2012 2013 2014 2015
Billions
Domestic Debt External Debt Government Borrowing
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014 2015
Billions
Projected Fiscal Deficit Actual Fiscal Deficit
Source: Ministry of Finance Source: Ministry of Finance
“Medium Term Debt Management Strategy coming in 2017.”
Honorable Minister of Finance Felix Mutati, 2017 Budget

7. Attain year end inflation no more than 9%
Attain domestic Revenue Mobilisation of atleast 18% of GDP
Limit overall fiscal deficit to no more than 7% of GDP on cash basis
Maintain domestic borrowing to no more than 2% of GDP
Build Foreign exchange Reserves to atleast 3 months import cover
Support creation of 100,000 decent jobs
Agriculture Industrialisation Tourism Mining
Macroeconomic Objectives
Seventh National Development Plan

8. Global Economy
3.2 3.1
4
4.2
3.4
1.4
3.5
3
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2015 2016
Global Growth Emerging Market Sub-Saharan Zambia
“Zambia projected to grow at 3% in 2016 and 3.4% in 2017”
Honorable Minister of Finance Felix Mutati, 2017 Budget
As you can observe actual GDP fell below potential GDP in 2008-2009
due to the effects of the financial global crisis on Zambia’s actual GDP
growth. Zambia’s actual GDP again fell below potential GDP growth in
2013 and has been below potential GDP growth to this date. This is
due to low commodity prices, unfavorable weather conditions and
most importantly a power deficit which reduced productivity in many
sectors in the economy.
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP Residuals (Potential vs Actual Output)
Source: World Bank & EAZ calculations

9. 0
5
10
15
20
25
30
Non Food Food Total
Inflation
Inflation has remained high in double digits and is projected to drop to single digits by year end next year. The projection that inflation will drop to single digits by the year end of
2016 is very unlikely as fuel prices were not factored in the base effect drop of inflation in October 2016.
Source: Central Statistics Office

10. Trade Balance
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2015 (Jan-Sep) 2016 (Jan-Sep)
Export Earnings (US$ Billions)
Copper Export
Earnings
Non-Traditional
Export Earnings
-$2,000
-$1,500
-$1,000
-$500
$0
$500
$1,000
$1,500
$2,000
$2,500
Millions
Trade balance
0
2
4
6
8
10
12
Billions
Exports (US$) Imports (US$)
As the trade balance graph shows over the past 2 years Zambia has recorded trade deficits and more importantly Zambia’s gap between imports and exports began to narrow as far
back as 2011.This shows our terms of trade have deteriorated greatly
Source: Central Statistics Office Source: Central Statistics Office Source: Central Statistics Office

11. Mining
500,000
510,000
520,000
530,000
540,000
550,000
560,000
570,000
580,000
2015 (Jan-Sept) 2016 (Jan-Sept)
Copper Production (Metric tons)
0
0.5
1
1.5
2
2.5
3
3.5
4
2011 2012 2013 2014 2015
Billions
Mineral Royalty
As the graph above shows Government revenue collection in terms of
royalties increased in the last five years with a major spike in 2014 due
to a revision on the royalty rate.
Increased Copper production for year 2016 compared to same period in 2015. Mobile
Phone users increased showing opportunities for business in mobile based platforms
GOVERNMENT WILL KEEP THE TAX STRUCTURE UNCHANGED IN THE MINING
INDUSTRY
Source: Ministry of Finance Source: Ministry of Finance

12. 10.6 10.8 11 11.2 11.4 11.6
2015
2016
MOBILE SERVICE USERS
(MILLION)
Mobile service users increased from 10.9million to 11.5 million. This
underscores the great potential the country has in mobile based
platforms.
Laptop Tablet
Phone
Technology
Source: Ministry of Finance

13. Energy
Kafue George,
4,413,730
Kariba North,
2,163,326
KNBE, 455,247
Victoria Falls,
632,470
ITPC, 394,262
Mini-Hydros,
107,917 Diesels, 15,945
Energy (MW) Jan-Sept 2016
Kafue George Kariba North KNBE Victoria Falls
ITPC Mini-Hydros Diesels
65,881
183,659
48,020
375,549
71,454
5,526
77,925
23,052
395,944
2,729,904
4,414,352
OTHERS
AGRICULTURE
QUARRIES
MANUFACTURING
ENERGY AND WATER
CONSTUCTION
TRADE
TRANSPORT
FINANCE AND PROPERTY
SERVICES
MINING
- 500,000 1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000
SECTOR CONSUMPTION (MWh), JAN-SEPT 2016
SECTOR CONSUMPTION
The bulk of electricity consumption still goes to the Mining sector followed by
services, Finances and property and then manufacturing
The bulk of power generation comes from then Kafue Gorge followed
by Kariba North
GOVERNMENT WILL MOVE TO COST REFLECTIVE TARIFFS BY END OF 2017 TO
ATTRACT PRIVATE SECTOR INVESTMENT WHILE MAINTAINING THE LIFE LINE TARIFF
TO PROTECT POORER HOUSEHOLDS.
Source: Zesco Source: Zesco

14. Energy
2016 2017 2018 2019 2020 2021 2022
Supply (GWh) 12,773 14,894 21,018 21,018 22,118 22,118 34,476
Demand (GWh) 16,764 18,314 19,117 19,944 20,721 21,185 22,021
Energy satiation to
normalize after 2
good rainy seasons
New Energy from
KGL, BGHES and LRB
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Energy(GWh)
Energy Load Forecast, 2016-2022
Supply
Capacity
Power
Demand
According to Zesco Energy satiation is projected to normalize after two good rain seasons. This
effectively means load shedding will end.
Source: Zesco

15. Energy
0
0.5
1
1.5
2
2.5
3
2010 2011 2012 2013 2014 2015
Billions
Projected Fuel subsidy Actual Fuel subsidy
In the petroleum sub sector, the Government will disengage from the procurement of finished
petroleum products with effect from1st March, 2017 this will be undertaken by the private
sector.
Source: Ministry of Finance

16. Agriculture
0
500
1000
1500
2000
2500
3000
2015 2016 2017
Agriculture Policy (K'million)
FISP
FRA
0
0.5
1
1.5
2
2.5
2010 2011 2012 2013 2014 2015
Billions
Projected FISP Actual FISP
Government will promote diversification to cash crops through full migration to the E-Voucher
system. This will be done in order to reduce the associated wastage and overheads with the
current FISP. Government has allocated a total of K2.8bn in the 2017 budget for FISP and K942m
for FRA. This is the largest FISP amount in 3 years.
Government will refrain from using export bans to regulate agricultural markets.
Actual FISP expenditure has outstripped Projected expenditure for the last five years.
This shows a serious challenge in sticking to budgeted amounts for FISP..
Source: Ministry of Finance Source: Ministry of Finance

17. Transport
5626.51
6629.93
8644.5
2015 2016 2017
Road Infrastructure (K'million)
Government is seeking to partner with the private sector on the
North-West and Livingstone Sesheke railway line.
Honorable Minister of Finance Felix Mutati, 2017 Budget
Government budget allocation to the transport sector with reference to road
infrastructure has been increasing in the last 3 years
Government will attract equity partners to revamp operations
of Zambia Railways Limited and TAZARA. Inter-mine rail links
operated by Zambian Railways will be rehabilitated to reduce
strain on the roads.
Source: Ministry of Finance National Budgets

18. PPP Ndola-Lusaka Road
Government will embark on
Public private partnership
PPP
Kasomeno-Mwenda Road.
Government will embark on
Public private partnership
PPP Ndola-Kasumbalesa Road
Government will embark on
Public private partnership
Bridge
Kazungula Bridge
when completed will
substantially enhance trade
within the southern corridor.
Trade with Angola will be
enhanced on strengthening
the Kafue Hook Bridge on
the Lusaka-Mongu road.
Transport
Government is seeking to partner with the private sector on the North-West and Livingstone Sesheke railway line.
Honorable Minister of Finance Felix Mutati, 2017 Budget

19. Water and Sanitation
540.99
283.64
391.7
2015 2016 2017
Water Supply & Sanitation (K'million)
Budget allocation in the last three years to water and sanitation declined in 2016
compared to 2015 and picked up in the 2017 budget. It is still a relatively smaller
amount than the budget allocation in 2015.
Education
9433.33
9143.21
10641.93
2015 2016 2017
Education (K'million)
Budget allocation to the education sector dropped from 2015 to 2016 but
increased dramatically in the 2017 budget.
Source: Ministry of Finance National Budgets Source: Ministry of Finance National Budgets

20. Health
4464.09 4431.85
5762.03
2015 2016 2017
Health (K'million)
Allocation to the health sector dropped in 2016, but has picked up
significantly in the 2017 budget. Government will continue prioritizing
procurement and distribution of resources necessary for health services to
be fully functional.
Government will in 2017 Commence the distribution of free
sanitary towels to girls in rural and peri-urban areas.
Government will in 2017 table the Social Health insurance Bill to facilitate the implementation of a compulsory social health insurance scheme.
Honorable Minister of Finance Felix Mutati, 2017 Budget
Social Protection
1257.8 1273.76
2693.21
2015 2016 2017
Social Protection (K'million)
Allocation to the health sector dropped in 2016, but has picked up
significantly in the 2017 budget. Government will continue prioritizing
procurement and distribution of resources necessary for health services to
be fully functional.
Government will
upscale social cash
transfer both in
terms of coverage
and monthly
amounts to each
beneficiary
household in all
the 105 districts
with monthly
amounts rising by
28%.
Source: Ministry of Finance National Budgets Source: Ministry of Finance National Budgets

21. Monetary Policy
0
5
10
15
20
25
30
35 Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
BOZ Policy Rate Average Lending Rate
Weighted Interbank Rate
0.0000
2.0000
4.0000
6.0000
8.0000
10.0000
12.0000
14.0000
16.0000
18.0000
20.0000
Jan-10
Sep-10
May-11
Jan-12
Sep-12
May-13
Jan-14
Sep-14
May-15
Jan-16
Sep-16
K/US$ K/Euro K/BPS K/ZAR
0
5
10
15
20
25
30
35
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Bonds
24 months 3 year 5 year
7 year 10 year 15 year
Sovereign bonds for Zambia have had their yield rise substantially since late 2014. Fiscal consolidation will be needed on the part of Government to bring yields down. The Zambian Kwacha
depreciated significantly in 2015 but has relatively appreciated in 2016.Bank of Zambia will adopt a target range of inflation of 6-8% thereby supporting a forward looking monetary policy.
Exchange rates will continue to be market driven.
Source: Bank of Zambia Source: Bank of Zambia Source: Bank of Zambia

22. Fiscal Targets
Dismantle arrears to Suppliers and Contractors and prevent the accumulation of new arrears through effective control
systems
Restore budget credibility and enhance transparency and accountability
Restrict new public sector recruitments to only frontline workers in Health and Education.
Implement phased removal of electricity subsidies
Restrict new capital projects and major equipment procurements until all ongoing projects are completed.
Target public spending to support the Economy Recovery programme as well as increased social protection
Realign FISP and restrict FRA to the procurement and management of strategic reserves.

23. Debt Management Policy
Slowdown on Capital infrastructure projects
which are debt financed through costly
borrowing.
Develop and publish a Medium term Debt
management strategy in 2017
Use Government Securities as the main
instrument for domestic financing as they
offer competitive prices
Utilize PPPs and Joint Ventures to finance
Government projects
Establish trade centres at the boarders of major
nontraditional export markets beginning with
Kasumbalesa, Kipushi and Chirundu.
Implement a single window platform for various boarder
agencies to enhance trade facilitation
Operationalize the Bilateral Trade agreements with the
Democratic Republic of Congo and Angola
Provide for advance ruling on rules for origin for goods
originating from countries with which Zambia has signed
trade agreements including SADC, COMESA, India and
China
Trade Policy

24. Monthly Turnover
Category
Proposed Regime
K1-K4,200 K100 per month + 3% of monthly turnover above
K3,000
K4,200.1-K8,300 K225 per month + 3% of monthly turnover above
K3,001
K8,300.1-K12,500 K400 per month + 3% of monthly turnover above
K3,002
K12,500.1-K16,500 K575 per month + 3% of monthly turnover above
K3,003
K16,500.1-k20,800 K800 per month + 3% of monthly turnover above
K3,004
Above K20,800 K1,025 per month + 3% of monthly turnover
above K3,005
Engine Capacity Current Rate Proposed rate
Less than 1500cc including motor cycles 50 70
1501cc to 2000cc 100 140
2001cc to 3000cc 150 200
3001cc and above 200 275
Capital
allowance for
plant,
equipment and
machinery used
in farming and
agro processing
increased from
50% to 100%
Honorable Minister
of Finance, 2017
Budget address
Require every person changing ownership of a
vehicle to obtain a tax clearance certificate from
ZRA
Honorable Minister of Finance, 2017 Budget address
Increase advance income tax rate paid at importation of goods from 6
to 15%.Advance income tax is not a final tax and is refundable at the
end of the year pending tax compliance proof
TAX CARD

25. Editorial Team
HERRYMAN MOONO
NATIONAL SECRETARY
KAPELE STEPHEN NDUMBA
ACTING EXECUTIVE DIRECTOR
MULONGWE MUSONDA
RESEARCHASSOCIATE
KAMPAMBA SHULA
RESEARCH ASSOCIATE

26. Contacts
For the Full Report on “The 2017 Budget Highlights & Analysis”
Contact:
Kampamba Shula – Programs Officer
kampambashula@gmail.com
26 Parairenyatwa Road,
Rhodes Park, Lusaka
Telephone: +260 211 842 088;
P.O. Box 38006
Twitter: @EAZambia
Facebook: Economics Association of Zambia