February 5, 2005

Debt write-off brings no benefits, complain workers

Zambia's debt write-off has not yet translated into benefits for ordinary workers, according to the head of the country's labour movement. "This is what I would call the greatest betrayal for the Zambian workers, who were expecting a significant reduction in Pay As You Earn (PAYE) [income-tax] and other taxes," said Zambia Congress of Trade Unions (ZCTU) president Leonard Hikaumba (who only recently gave a major lecture in Vienna, Austria), criticising the recently released national budget.

The International Monetary Fund (IMF) has agreed to write off the debts of 19 of the world's poorest countries, including Zambia's of more than US $390 million. Although Finance and National Planning Minister Ngandu Magande raised the threshold of those exempt from paying income tax from around US $80 to almost $100 in his $3.1 billion budget, Hikaumba said this was insignificant when compared to an average Zambian's expenditure on basic needs.

According to a recent Basic Needs Basket Survey conducted by the Jesuit Centre for Theological Reflection (JCTR), which monitors household expenditure on basic food and non-food items, the cost of food alone for a family of six in the capital, Lusaka, amounted to about $153 per month.

The IMF before commended the Zambian economy for its robust growth, but noted that poverty, "though declining, is still widespread". It urged Zambia to use the opportunity provided by debt relief to build upon the recent improvement in economic performance.

The agriculture sector has been adversely affected by the strengthening kwacha as a result of the debt write-off. Last year the Tobacco Association of Zambia and Dunavant Zambia Limited, the country's largest cotton grower and buyer, warned that they would have to let a million workers go because of the strong kwacha and asked for incentives in this year's budget. In response to the farmers' concerns, Magande, who has increased government spending by 6.9 percent this year compared to 2005, beseeched agriculture "to use this opportunity to purchase capital machinery while the kwacha remains strong". Magande said the government ought to be showered with kudos for bringing down annual inflation to 12.2 percent from 18.2 percent last year, against a target of 15 percent. The minister said Zambia's economy might grow by six percent this year, while inflation was projected to decrease to 10 percent, with the main economic boost anticipated to come from the mining and agricultural sectors. Zambian export earnings grew by 18 percent in 2005 as copper prices surged to more than $4,000 per mt and non-traditional exports, such as tobacco, cotton, flowers and vegetables rose by 20 percent. (IRIN)

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