THE ZAMBIA BUDGET TRACKING PROJECT

PUBLIC EXPENDTURE REVIEWS IN ZAMBIA: A REVIEW OF

LITERATURE

The Study Purpose

Provides summary of findings of studies on Zambia’s public expenditure management since 2000

Through findings of these studies, to check extent to which budget is an effective tool for poverty reduction

Main purpose is to amplify issues around which public could engage the GRZ on how best to raise the quality of service delivery

Literature on PEM in Zambia

A lot of literature on public expenditure management

But few studies directly tackle the link between PEM and poverty. But issue strongly highlighted in many studies even not the key focus

A wide range of focus – From looking at the entire PEM system to analysis of how the budget supports objectives of particular sectors

WB has conducted a number of PERs since 2001 Zambia a leader in Public Expenditure Tracking

Surveys/Quality of Service Delivery Surveys

Study Organisation

1. The budget process: how amiable is the process to the voice of the poor?

2. The poverty-reducing merits: To what extent is spending pro-poor?

3. Sector case studies in education, health, agriculture and social protection.

4. Recommendations to make the discretionary budget truly pro-poor.

The Budget Process: Institutional and Legal

Role of parliament is not adequate

Has responsibility to scrutinize the budget so that it reflects the needs of the people

But studies show that Parliament does not fulfill this role because:

1. Not sufficient time to scrutinize the budget2. The Executives’ tendency to submit

supplementary expenditure after the fact3. It is playing a minimum role in the MTEF4. Inability of its recommendations to translate

into enforceable sanctions on the Executive and individuals

The civil society and the general public have not injected themselves strong in the budget process

CS has various forums to analyse and discuss the budget

But it is not clear to what extent this in the end has a bearing on the budget

Neither do line ministries play an effective role They complain that the budget negotiation

process has been deteriorating because of delays in publishing the Green Paper

The late setting of ceiling by MFNP means that line ministries cannot meaningfully engage their sub-national structures

Process for priority setting in line ministries through the budget has broken down because of the low integrity of the budget

There are also inconsistencies and ambiguities in the legal framework

For the budget process and its outcomes to be effectively pro-poor, it must first of all be supported by a sound legal framework

But…1. Weaknesses in the legal framework that provisions

on the budget subject to various interpretations2. The Public Finance (Control and Management) Act

was found to be weak3. The Financial Regulations Act does not properly

allocate responsibility4. All this compounded by very weak legislation in the

procurement system

The Budget Process:

Technical Weaknesses

The Zambian budget is not comprehensive in its coverage

1. It excludes revenues and expenditures of the wider public sector including local authorities and semi-autonomous bodies

2. Information on domestic and external debt stock of the wider public institutions and GRZ guarantees for loans contracted by public and private institutions is not comprehensive

3. Non-tax revenue is not remitted to the treasury by some departments

4. Donor funds to projects not comprehensively captured

5. Omissions mean that the quasi budget deficit is much bigger than the deficit reported in the budget

Lacks predictability

Can only be an effective tool for poverty reduction and for steering development, the extent to which it is predictable

The quality of revenue projection is not the problem

Problem is on the expenditure side due to budget’s lack of comprehensiveness

Hence too many contingencies and supplementary allocations

Poverty monitoring of the budget is complicated

Results from classification of allocations by administrative units rather than programmes

Difficult to know the relationship between the budget and the FNDP

Makes difficult the analysis of budget with respect to developmental and poverty impacts

The Poverty-Reducing Merits of the Zambian

Budget

A three-pronged criteria for determining whether a budget is pro-poor

Spending on activities with growth impact in activities where the poor are

Spending on activities with direct impact on the poor

Spending that corresponds with the expressed needs of the poor themselves

Spending for growth

Not just growth but the sources of growth matters

Concern that agric where nearly 70% of population derive living is not contributing as much to growth

Improvements noted in the allocations to agric But this is mostly to input support, starving in the

process other services Analysis of distribution of allocations show that

there is room to improve spending on agric to contribute to growth and to poverty reduction

Spending on activities that directly benefit the poor

The Human Development paradigm helps to identify what these are

In general, trends suggest that the budget is becoming more pro-poor

Combined share of education and health in total expenditure increased from 22.1% in 2000 to 25.7% in 2007

Social protection also increased from 0.74% in 2000 to 2.96% in 2007

Improvements in spending on agriculture from 2% in 2000 to 7.6% in 2007

But poverty impact of spending is blunted by intra-sector misallocation

Within sectors, sub-sectors unlikely to have big poverty impact sometimes receive more resources:

1. In education, tilted towards higher rather than basic education

2. In education again, tilted towards urban against rural areas

3. In agriculture, the budget is overwhelmed by input subsidies that reach only about 15% of the farmers, who are the better off

Spending that corresponds with the expressed needs of the poor

Would be supported by the existence of systems to consult the poor in national planning and budgets to be strongly linked to plans

Complicated by an over-centralized governance system.

Decentralization more able to have structures that allow for regular consultation, look at the various dimensions of poverty and mobilizing a more integrated response

Planning for the FNDP attempted to consult grassroots but had challenges to integrate issues articulated by people on the ground

The budgets that have followed have had this handicap

To Summarise: Failing the Pro-Poor Test, Some Examples Over 60% of expenditure in agriculture goes

to support only one commodity, maize Input support has only reached 15% of

farmers, 60% of whom have cell phones! Donor support in education helps increase

enrolment but not the recruitment and retention of teachers. The quality of education is undermined in the process

Leakage is a big problem: The 2002 PETS in education found that only 25% of discretionary funds actually got to schools!

Recommendations

Radical reforms required in the governance, legal and institutional systems.

Reforms will not be accepted and implemented easily because the factors that undermine the pro-poor qualities of Zambia’s budget are deeply entrenched.

Civil society should thus mount a massive campaign to both educate the Zambian public and to bring pressure on Government to begin implementing these reforms.

Three areas for reforms particularly important.

1. Reform the planning process and make it more sensitive to poverty reduction

Decentralise the governance system to create an institutional framework that accommodates grassroots’ consultations

A planning model that is effective in identifying key development issues and the leverage points where investments yield greatest pro-poor impacts at minimal cost

2. Reform the budget process to make it more inclusive There should be more participation by various

stakeholders in both the MTEF and the budget at various stages

The public should be sensitised to take interest – CS to play this role

Parliament should be given enough time [already implemented] and resources, including specialist analysis, to scrutinize and debate the budget

3. Strengthen line ministries in their engaging MFNP Strengthen their capacity to provide a strong

case for returns to investments in their sector Strengthen their ability to demonstrate value

for money by adopting tools that improve transparency of spending

Where reviews reveal low efficiency and effectiveness, bold steps should be taken to reform spending patterns and changing service delivery modalities