Former Finance Minister Situmbeko Musokotwane on budget deficit (excerpt from Lusaka Times)

Former Minister of Finance Situmbeko Musokotwane. Photo source: The Post Newspaper

‘Few economists, if ever, can be happy with a deficit 8.5% of GDP. I consider this [2013 projected] deficit excessive for the following reasons:

1. It is way above the average deficits Zambia has run in the past decade or so – about 3.5% of GDP. The last time we ran a budget deficit of 8.5% was in the unstable 1980s and 1990s.

2. It is excessive when seen against the practice of other countries. If deficits of this size were good or prudent, we would expect most countries in the world to run deficits of similar sizes. The evidence shows us the opposite. Of the 210 countries and fiscal authorities covered by the CIA survey, the simple average deficit size was 2.5% of GDP. On the other hand, the average size of deficits corrected for the size of the economy was 3.8% of GDP, still way below ours at 8.5%.

3. The 2013 deficit is excessive because its size was never what the Finance Minister Chikwanda had originally intended. The intended size, as per the 2013 budget speech, was 4.3% . We got to where we are because of unplanned circumstances. It has been caused by political pressure.

Politicians are the main source of pressure over expenditure, or for allowing unsustainable expenditure to occur without adequate brakes. In succumbing to pressure for unsustainable expenditure, macroeconomic stability becomes an orphan. Not enough voices, especially from the government, are forthcoming to warn of the dangers of runaway budget deficits.’

Former Zambian Finance Minister Situmbeko Musokotwane commenting on the recent national budget in this Lusaka Times piece.

Now for the way forward? A humble and respectful government would be a great place to start.

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