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1. An Analysis of the Legal Framework for Public Debt Management in Zambia

Author:
Florence Banda-Muleya, Mbewe Kalikeka, Zambwe Shingwele, Philip Ngongo, and Shebo Nalishebo
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
Zambia’s current legal framework for public debt management is inadequate. The high level of external debt standing at US$11.2 billion and domestic debt at K80.2 billion due to fast pace of debt contraction; the resulting heightened risk of debt distress; and the weak implementation of the 2017-2019 Medium Term Debt Strategy (MTDS), raise questions on the adequacy of the laws that govern public debt management. Now more than ever, with Zambia quickly headed to its first bullet repayment on its Eurobond debt, the country needs to enhance its legal framework on Public Debt Management (PDM).
Topic:
Debt, Government, Economy, and Public Debt
Political Geography:
Africa and Zambia

2. The Sales Tax Proposal: Are We Beating a Dead Horse? Preliminary results from a rapid assessment

Author:
Shebo Nalishebo and Florence Banda-Muleya
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The fiscal authorities have argued that the horse – in this case, (value-added tax) VAT – is dead. In contrast, this rapid assessment argues that the VAT may have been pronounced dead too quickly, perhaps for expediency’s sake. Examples from many countries abound and show that with the right fiscal discipline to ring-fence VAT refunds and improve compliance, VAT works just fine, offering value-added incentives and avoiding cascading effects. In finding a solution for this supposedly dead horse, important questions that we need to ask are “Is the horse really dead? If it is, what killed the horse?” Without this introspection, the other horse in form of Sales Tax, which in fact died and was buried 25 years ago, might be resurrected. Without learning from previous experiences and experiences elsewhere, we are bound to make the same mistakes in trying to resuscitate a truly dead horse.
Topic:
Government, Tax Systems, Economic Policy, and VAT
Political Geography:
Africa and Zambia

3. Are Interest Payments on Debt Derailing Fiscal Consolidation?

Author:
Shebo Nalishebo and Florence Banda-Muleya
Publication Date:
06-2018
Content Type:
Policy Brief
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
This policy brief provides a review of the performance of the first quarter of the 2018 National Budget. The paper provides context by looking at both the revenue and expenditure trends during the last three years when Government instituted some fiscal adjustment measures to bring the country back to a path of fiscal fitness. In analysing the 2018 Budget, the first quarter preliminary outturns are compared to the approved Budget for 2018, the projected performance for the first quarter as well as the first quarter of 2017. We assess fiscal fitness over the last three years and determine that fiscal consolidation had begun. While fiscal performance was generally high, budget credibility and sustainability were low. In the first quarter of 2018, revenues were higher than planned and most expenditures were within the projected amounts. Nonetheless, interest payments were much higher than expected and are likely to be a major source of spending overruns in 2018.
Topic:
Debt, Government, Budget, Public Debt, and Revenue Management
Political Geography:
Africa and Zambia

4. Scaling the Eurobond Debt Wall

Author:
Shebo Nalishebo and Florence Banda-Muleya
Publication Date:
11-2017
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The writing is on the wall - Zambia is at a high risk of debt distress: The country risks defaulting on repaying the principal amounts of the three Eurobonds due during 2022-2027. A default could lead to exclusion from the international capital markets, a dented reputation which would culminate into a decline in Foreign Direct Investments and reduced credit to the private sector and credit rating downgrades. This would ultimately result in an economic contraction which would affect future payments and further compounding the default. Government has to pay back US$750 million in 2022, US$1 billion in 2024 and US$1.25 billion over 2025-2027. Between 2018 and 2022, Government will spend about US$237.4 million per annum in interest payments towards the three Eurobonds – this annual amount is about the same as the entire social protection budget in 2017. Policy measures have been put in place to manage the debt, but they seem inadequate: The measures include a debt management strategy that will guide borrowing decisions in the medium term. The Government has also signalled its intensions to set up a sinking fund and/or refinance the debt – essentially replacing the old loans with a new loan offering different, perhaps more favourable, terms. To set up the sinking fund, Government intends to set aside K100 million in 2018, K800 million in 2019 and K3.97 billion in 2020. But setting up the fund requires an excess of K6 billion per annum between 2018 and 2022. No clear indication has been given with regard to when refinancing will be considered. So the plans put in place may not be adequate to pay back the Eurobonds. Government should not wait until it is too late: In order to meet the principal and interest payments on the three Eurobonds, Government needs to start the strategies for paying back the Eurobonds sooner rather than later. Government has already lost time as a pay-back plan should have been instituted for the Eurobonds as soon as they were issued. But without any budget surpluses, and with foreign financing having somewhat dried up, Zambia has to look to more domestic resource mobilisation to raise the funds needed to pay back the Eurobonds.
Topic:
Government, Economy, Public Debt, and Eurobonds
Political Geography:
Africa and Zambia

5. Uncovering the Unknown: An Analysis of Tax Evasion in Zambia 2014

Author:
Shebo Nalishebo and Albert Halwampa
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The Government of the Republic of Zambia, like many other governments in the world, significantly relies on tax revenue to finance both its key infrastructure development and social services. Zambia’s tax revenue declined from 30% of GDP in the 1970s to only an average of 13% of GDP in the 1990s mainly due to the decline in mining revenue and weak tax administration. To address this decline, significant tax reforms were undertaken that included the creation of the Zambia Revenue Authority (ZRA). Despite these reforms, tax revenue collection has to a large extent been unsatisfactory, recording average tax revenue-to-GDP of 17% in the last five years. This study investigates the extent and causes of tax evasion in Zambia including the review of the current legal and administrative measures used by the ZRA in addressing this problem. To investigate tax evasion in Zambia, several methodologies or approaches are used. These include carrying out a qualitative survey on a small sample of large taxpayers to find out their perceptions on the causes of tax evasion in Zambia. In investigating the extent of tax evasion, the tax gap with respect to Pay-As-You-Earn (PAYE) personal income tax of the self-employed and paid employees is estimated using data from the nationally representative 2010 Living Conditions and Monitoring Survey (LCMS). Further, a comparative assessment of Zambia‘s tax revenue performance relative to countries in the Southern Africa Customs Union (SACU) and Sub-Saharan Africa (SSA) is undertaken. The study also reviews the current legal and administrative measures used to address tax evasion.
Topic:
Government, Tax Systems, and Tax Evasion
Political Geography:
Africa and Zambia