By Marvin Banda, economist:
In the budget statement that Minister of Finance Simplex Chithyola Banda presented to Parliament last Friday, he stated under point 75, that total revenue and grants for the 2024- 25 fiscal year are estimated at K4.55 trillion, representing 24.3 percent of gross domestic product (GDP). Domestic revenues are estimated at K3.38 trillion, representing 18.1 percent of GDP.
In the 2023-24 Financial Year (FY), total revenue, including grants, are estimated to close at K2.99 trillion, representing 19.7 percent of GDP, a nominal increase of 52.17 percent annually.
Of these domestic revenues, tax revenues in 2024-25 are estimated at K3.26 trillion and other revenues have been projected at K126.54 billion whereas the previous FY pegs domestic revenue at an expected K2.41 trillion, of which tax revenue is estimated at K2.20 trillion and K209.34 billion is other revenue.
The 2024-25 FY sees domestic revenues constituting 74.28 percent of total revenues, of which tax revenues constitute 71.64 percent of total revenues and a staggering 96.45 percent owing to the expected bias on enhancing the tax base and potential revenue while neglecting the performance of non-tax revenues.
During the 2023-24 FY domestic revenues were seen to be 80.6 percent of total revenues where tax revenues were 91.29 percent of domestic revenues and 73.57 percent of total revenue. This means that the government will increase its reliance on tax revenues as seen in the increasing annual proportion by 5.16 percentage.
Point 76 pegs grants at an estimated K1.17 trillion, of which K1.10 trillion will come from international organisations and K72.69 billion from foreign governments.
Expenditure
Government expenditure as a percentage of GDP recorded in 2020 was 22.73 percent, in 2021 was 23.65 percent, while in 2022 it came to 26.67 percent. The 2023-24 financial year is estimated to have total expenditures of K4.35 trillion representing 28.6 percent of GDP.
Point 77 states that the total expenditure for the 2024-25 fiscal year is at K5.98 trillion, representing 31.9 percent of GDP. Of the total expenditure, recurrent expenses are estimated at K4.21 trillion, representing 22.5 percent of GDP and 70.4 percent of total expenditure.
Point 78 states that development expenditure for the 2024-25 FY is estimated at K1.77 trillion, of which K1.39 trillion is for foreign financed projects and K383.6 billion is for domestic financed projects. The share of development expenditure to the total budget stands at 30 percent from the 24 percent in the 2023-24 FY.
The budget states that total expenditure for the 2023-24 fiscal year is projected at K4.35 trillion, representing 28.6 percent of GDP. This indicates that the annual increase in total expenditure is estimated to be 37.47 percent. The 2023- 24 expenditure comprises K3.31 trillion in recurrent expenditure and K1.04 trillion in development expenditure. Development expenditure comprises K361.02 billion from domestic resources and K682.41 billion from foreign resources. This translates to annual nominal changes of 27.19 percent and 70.19 percent, respectively.
Even if this is irrelevant, allocation of 30 percent towards development does not immediately and necessarily translate to expenditure adherence.
Fiscal deficits and debt
Public debt interest is projected at K1.46 trillion which is 7.8 percent and 43 percent of GDP and domestic revenues, respectively. Interest for foreign debt is estimated at K79.75 billion while interest for domestic debt is estimated at K1.38 trillion. This means that the interest on domestic debt alone is projected to be greater than the entire domestic revenues resource base of FY 2021-22 which was recorded as K1.07 trillion, of which 95.5 percent were tax revenues.
The overall deficit for FY 2023-24 is estimated at K1.36 trillion, representing 8.9 percent of the country’s GDP. The deficit is projected to be financed through domestic borrowing, amounting to K1.23 trillion, while the rest of the resources will come from foreign borrowing. This means that debt contraction is expected to increase during FY 2024-25 to cater for government expenditure as noted.