NEXT YEAR’S CDF TO REDUCE – GOVERNMENT RUNNING LOW ON CASH, SAYS MUSOKOTWANE
NEXT YEAR’S CDF TO REDUCE – GOVERNMENT RUNNING LOW ON CASH, SAYS MUSOKOTWANE
Finance minister Dr Situmbeko Musokotwane has revealed that the Constituency Development Fund (CDF) allocation for next year will be lower than initially anticipated as Treasury plans to contain the over-expenditure witnessed this year.
Dr Musokotwane says the Ministry of Finance will significantly reduce allocation to the Food Reserve Agency (FRA) next year owing to the purchase of more maize than targeted this year, coupled with expected reduction in production due to anticipated drought.
Speaking on Friday when the government and the International Monetary Fund (IMF) reached a staff-level agreement on a new three-year US $1.5 billion Extended Credit Facility worth, Dr Musokotwane said although subsidizing pump price after the unexpected break out of the US-Israel war with Iran had helped shield Zambian consumers from high oil prices, it had put pressure on the national purse.
He said there is an urgent need to realign the government expenditure versus the income as the country is running so low on revenue which if not corrected could hurt funding to highly priority areas such as free education.
This month, motorists were hit by a 24 percent increase in prices at the pump after the government reinstated excise duty on finished petroleum products which was suspended last March. The government is expected to reinstate VAT on imported fuel by this December.
“To cushion the effect of the fuel prices on the citizens, when the prices in the world are already high, the measures taken was to suspend VAT and excise tax. However, there’s a limit to which you can cushion people,” Dr Musokotwane said.
“When this measure was taken, it was thought that maybe the effect of the war may run for a month or two to three months, but the war is rumbling on. So, to what extent can we keep up on suspending the taxes that you have on these commodities. If you don’t collect these taxes, something on the expenditure side will suffer. The CDF will be lower than what we had budgeted for, and I will communicate this to the councils so they know. Because if we don’t communicate, they’ll over-procure and cause arrears.”
Dr Musokotwane said apart from disruptions to CDF, funding to construction road projects could also be affected by the low liquidity position of the government.
“There many areas where there’s been disruptions – we don’t want to get to a stage where even free education gets affected because we are failing to collect these taxes. So, the first thing we have done is to reinstate the excise tax as we study the rest of what is happening and then we see what happens by the time we come to December,” he said.
Dr Musokotwane said this year, the government borrowed beyond plan and the focus for next year is to correct that situation.
He explained that the government will significantly reduce the amount of money to FRA after it expanded its maize purchasing capacity from 500, 000 metric tonne to one million metric tonnes the current maize marketing season.
“What has happened this year, it is like we have spent money not just for 2026 but also to cover for food security in 2027, which means that because we’ll enter 2027 with enough stocks of maize to last the whole of 2027 and to go all the way until the next harvest in 2028,” said Dr Musokotwane.
He also said the government is also anticipating that due to the anticipated poor harvest next year due to the expected impact of the El Niño weather pattern, there will not be so much pressure on FRA to participate actively in the market.
“From the Treasury side, there will be low money to give to FRA to go into the market because there is enough maize and there are large stocks of maize [which] when sold can still enable them to go into the market. So, this is the way we have dealt with this this year and how we anticipate to deal with it next year.