Analysis: CHARITY MUSAMBA
ACCORDING to the United Nations Development Programme (UNDP), the concept of inclusive growth typically refers to equity with growth or to broadly shared prosperity resulting from economic growth. And it is common knowledge that poverty, inequality and growth are closely related and that in this triangular relationship, growth will only translate into meaningful development outcome when it benefits the majority in society, and perhaps more importantly, reaches these masses in an equitable manner.
Delivering Fiscal Consolidation for Sustainable and Inclusive Growth
This is the theme that will be guiding the implementation of the 2019 national budget. There are two points worthy of considering in analysing the implication of this focus with regard to poverty and inequality reduction in Zambia. First, the link between fiscal discipline, economic growth on one hand and poverty/inequality reduction, on the other, has remained consistently weak. This is because the extent to which economic growth reduces poverty is largely determined by the degree to which the poor participate in the generation and gains of this growth on one side and the extent to which such a strategy has, at its centre, core interventions focused on attaining rapid and sustained growth. The key question is: Has the 2019 national budget combined growth-promoting policies with policies that allow the poor to fully participate, contribute and benefit from growth outcomes to that growth?
Second, abrupt and reactive imposition of austerity measures on a population faced with high cost of living, high poverty levels and low incomes will continue to undermine the very reasons for undertaking these reforms. While reform will always be part and parcel of any development process, it is vital for ruling elites to effectively engage various social and economic interest groupings in the design, planning and execution of the necessary reforms.
A read through the “Economic Stabilisation and Growth Programme”, which has been adopted as the mattress for the national budgets, reveals a rebirth of the infamous “Structural Adjustment Programme” of the 1990s. Understandably, some reforms are inevitable but the whole process has remained opaque, exclusive to the technocrats and yet the measures are expected to be borne by the ordinary Zambians. For example, it is important to carefully and clearly explain the introduction of “cost-reflective prices” and other new forms of taxes to the masses. What are the benefits of these measures and how will these benefits be shared? Who will need to sacrifice and for what purpose? What are the major risks and challenges?
Primacy of debt servicing and defence over service to the people
While acknowledging the substantial increase made to areas such as health, housing and community amenities, it is important to state that some areas that have been given significant increases are remotely connected to the rhetoric of pursuing “inclusive growth”.
For instance, debt servicing, particularly external, and the defence sector, have seen the highest increases in allocations under this budget. Reminiscent of the note by JCTR on the same subject in the year 2000, the 2019 national budget is here to “service debt and defence” and not the “poor” of Zambia. For example, why did the Government decide to increase the allocation to the defence (from 4.9 percent in 2018 to 5.8 percent in 2019) at a time when it has challenges in meeting the basic economic and social needs of the majority people in Zambia?
It is these errors in planning and misallocations of public resources that have often contributed to “leaving the majority behind” and taking forward only a few citizens in the development process – hence the growing inequality and poverty situation in Zambia.
Exclusive Vs Inclusive Growth?
The growth rate of four percent that has been set is too minimal to make any significant impact on the current high levels of poverty and inequality levels.
It has been estimated that Zambia needs a consistent growth rate of 16 percent in order to reduce the current poverty and inequality situations. In addition, a recent World Bank Report revealed that poverty and inequality have persisted amidst two decades of positive economic growth (averaging at 7.7 percent) because of three key reasons.
These are extractive-based growth, uneven territorial development which is illustrated by large urban-rural divide and a stable but weak governance (World Bank 2018:5).
Therefore, there is need for Zambia to strongly respond to these long-standing challenges, through the annual budgets, in order for the country to make gradual progress in terms of changing the situation.
Most notable about this budget is that majority of the sectors that have a direct impact on poverty have either seen a significant decline in terms of allocation.
Examples in this regard include social protection, environmental protection, recreation, culture and religion.
In the case where increases have been made, these have been very minimal to the extent that it will be impossible to register any meaningful change on poverty and inequality. A good example in this regard is housing and community amenities.
The health sector is an exception in both regards. And it is important to remember that it will never be feasible for Zambia to safeguard its “fiscal consolidation” agenda and attain and sustain high economic growth rates under high poverty and inequality levels.
These challenges should not be seen as long-term aspirations. Instead, they should be fought against on annual basis and alongside the pursuit of economic growth, in order for the country to begin registering steady notable positive change.
A read through the budget gives the impression that economic areas where the poor are located such as the informal sector and the small and medium-scale enterprises, including small and medium farming, have not been given sufficient attention.
Given the centrality and urgency of expanding, diversifying and industrialising the economy of Zambia, the national budget should reflect concrete interventions of change, including exact performance targets, number of beneficiaries and indicators (evidence) of change.
One major challenge in this regard is the absence of a comprehensive mix of policies, long-term strategies and management mechanisms to guide this transformative agenda on an annual basis through the national budgeting processes.
As a result, diversification, industrialisation and transformation of the informal economy in Zambia will remain elusive.
Exclusive vs inclusive governance
Similar to the preceding national budgets, the 2019 budget has continued to perceive “governance” from a narrow perspective.
While appreciating Government’s keenness to address public finance management and broad administrative reforms in the justice sector as part of “Creating a conducive environment for a diversified economy, it is important to acknowledge that inclusive growth goes hand in hand with effective inclusive governance.
Therefore, the budget should have dug deeper in areas such as political accountability, transparency and public participation. Ordinary citizens are yearning for functional, just, professional, affordable and accessible justice and law enforcement systems, timely access to information on public affairs and gender equality and equity.
Guaranteed and adequate financial allocations to these areas would pave a sustainable path to an “inclusive” system of both democratic, economic and political governance in Zambia.
Implications for inclusive and sustained growth
While it is encouraging to see the Government in Zambia stick to call for “inclusive growth, fiscal consolidation and sustained growth”, in the 2019 national budget, the attainment of these imperatives will remain elusive unless:
a) Government undertakes serious efforts and commitment, including politically, to improve public finance management and curb the misuse of public resources
b) Government takes a decisive position on reducing on debt contraction and puts in place a stringent debt management mechanism that would be transparent, accountable and participatory
c) Government makes great effort to link economic growth outcomes to the reduction of poverty and inequality agenda.
d) Government brings to the centre of economic development the private sector, especially the local small and medium actors, including those in the agriculture sector.
e) Government ensures that public institutions are fair and accountable in the delivery of public goods and services, especially to the low income, vulnerable and rural communities.
The author is a lecturer at the University of Zambia.