THE ZAMBIA BUDGET TRACKING PROJECT

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THE ZAMBIA BUDGET TRACKING PROJECT

• PUBLIC EXPENDTURE REVIEWS IN ZAMBIA A REVIEW OF
  LITERATURE

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The Study Purpose

• Provides summary of findings of studies on
  Zambias 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

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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

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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.

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The Budget Process Institutional and Legal
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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
• Not sufficient time to scrutinize the budget
• The Executives tendency to submit supplementary
  expenditure after the fact
• It is playing a minimum role in the MTEF
• Inability of its recommendations to translate
  into enforceable sanctions on the Executive and
  individuals

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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

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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

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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
• Weaknesses in the legal framework that provisions
  on the budget subject to various interpretations
• The Public Finance (Control and Management) Act
  was found to be weak
• The Financial Regulations Act does not properly
  allocate responsibility
• All this compounded by very weak legislation in
  the procurement system

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• The Budget Process
• Technical Weaknesses

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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

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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
  budgets lack of comprehensiveness
• Hence too many contingencies and supplementary
  allocations

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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

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• The Poverty-Reducing Merits of the Zambian
  Budget

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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

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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

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Spending on activities that directly benefit the
poor

• The Human Development paradigm helps to identify
  what these are

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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

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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
• In education, tilted towards higher rather than
  basic education
• In education again, tilted towards urban against
  rural areas
• In agriculture, the budget is overwhelmed by
  input subsidies that reach only about 15 of the
  farmers, who are the better off

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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

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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!

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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 Zambias 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.

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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

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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

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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