Thursday, March 28, 2024

Zambia’s Public Finance Management laws are fragmented and outdated-IMF

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The International Monetary Fund as observed that Zambia’s legal framework for Public Finance Management is fragmented, and much of it is outdated.

The IMF says the laws fall short of capturing both recently introduced reforms and internationally accepted practices.

In its latest country report for Zambia, the IMF says the government has prioritized a revision of the existing legal framework for Public Finance Management and national development planning.

It says this revision will permit a range of important Public Finance Management reforms that are ongoing or planned to be incorporated within the legal framework.

‘These reforms include medium-term planning and budgeting, a performance oriented approach to budget management, the introduction of comprehensive commitment controls, adoption of international accounting and reporting standards (International Public Sector Accounting Standards (IPSAS) and Government Finance Statistics Manual (GFSM) 2001), implementation of a treasury single account (TSA), and recognition of electronic transaction processing arrangements,’ it said.

It said an updated legal framework would permit other important improvements in current practices to be incorporated.

“These amendments include extending the coverage of the law from the budgetary central government to general government and financial oversight of the wider public sector, harmonizing definitions and terminology, provisions on the management and monitoring of fiscal risks, and the approval for borrowing and guarantees issued by the government.”

It added, “Clarification of the roles of the MoF and the BoZ on cash and debt management, clear rules and procedural arrangements for supplementary budgets, excess expenditure, and the end-year carry-over of unspent appropriations and broadening the sanctions regime for breaches of financial regulations to the controlling offices of organizations as well as individuals.”

It added that a revision of the legal framework would facilitate the strengthening of existing institutions, in particular the powers of the National Assembly to scrutinize the government’s medium-term fiscal and budget strategy and to oversee the execution of the budget, and the independence of the Auditor General (AG).

The IMF also suggested that consideration could also be given to elevating the position of the Accountant General to Permanent Secretary level, in line with several other African countries.

The Fund also noted that revisions to the Public Finance Management legal framework will need to be harmonized with the new Constitution, a draft of which was finalized in 2014.

“In addition, the government has embarked on a decentralization reform which by 2017 will substantially increase the autonomy of and the amount of fiscal transfers to local governments,” it said.

It said the reform will require the establishment of legal provisions for enhancing intergovernmental fiscal relations, including central government’s oversight of local government fiscal operations as well as harmonization of the Local Government Act (LGA) with the Public Finance Act (PFA).

The IMF also noted that the government is currently proposing a two-track approach to revising the Public Finance Management legislation.

“The first track comprises a Planning and Budgeting Bill (PBB) that has already been drafted and should be submitted to the Cabinet and National Assembly in summer 2015. The PBB covers broadly the preparation of the national development plan (NDP) and the budget. The second track would comprise the preparation, in longer time, of the revised PFA and other specific PFM-related laws, including on debt management, state-owned enterprises (SOE), and local government finance.”

The IMF said it has reservations about the government’s two-track approach as there are risks that the two laws will not be comprehensive, and will lack consistency and comparability.

“A preferred approach would be to prepare a single integrated PFM law—a new Public Finance Management Act (PFMA)—taking elements from the PFA 2004 and the draft PBB, and consolidating and updating them.”

It said many other African countries (such as Kenya, Liberia, Mauritius, Rwanda, Seychelles, Swaziland, and Uganda) have followed a similar path in updating their legal framework for budgeting and public finance.

“If the government decides to continue with the two-track approach, it is very important that the process of drafting legal framework is managed by a single technical working group, and the work is closely coordinated with relevant experts in the MoF, the Ministry of Local Government and Housing (MoLG), the Cabinet Office, and other government ministries and agencies. Ideally, the two Bills should be presented to the Cabinet for approval concurrently, followed by their combined submission to the National Assembly.

The country report proposes a road-map for completing the process of drafting and adopting the revised legal framework.

“It will be particularly important to consult at an early stage with all stakeholders, especially the National Assembly. Early engagement with the legislature may convince them that it is necessary to extend the timetable for consultation and drafting in order to prepare a fully integrated legal framework as emphasized above.”

13 COMMENTS

  1. Even the evil himself has taken notice…in short what he is saying is STOP RUNNING THE COUNTRY LIKE RECKLESS DRUNK KAPONYAS. Downgrade will follow soon…all of Mwanawasa’s hard work wasted.

  2. This is great. We really need to improve on the Public Finance Management and stiffer suctions will help minimize misapplications and misappropriation of Public Resources. Kudos GRZ but we need this ASAP.

  3. me.wht do u mean kudos grz? i cant see n sense in wht u r sayn in shrt u see to b a kaponya who do not knw nthing abt de economy.hw do u borrow mon nd pay civil servants? wakeup men.

    • @CKD, WHATS WRONG WITH HAVING GOOD LAWS THE WILL PREVENT WASTAGE OF GRZ RESOURCES? You are totally lost as you do not seem to understand anything. Kudos YES! We need laws that will stop theft of public resources, we need laws that will stop GRZ workers from misapplying funds. We need laws that will stiffen the punishments for the wrong doers. Any such law to me its very welcome. This article has nothing to do with borrowing. So you thinking is some what amazing. I will not call you a Kaponya or what ever, but I advise you debate topic by topic. It does not mean that because you hate the party in power, everything they do is wrong. Give credit were its due. By the way, I am not a fun of the party in power. But I have critic mind that analyses issue by issue

    • This article is not about what law IMF thinks Zambia should have. Indeed, this article actually states that the new proposed law is a GRZ initiative & not an IMF initiative. IMF is simply stating its discomfort with the 2 track process adopted by GRZ in place of its 1 track process. My interest is to also note that GRZ is aligning public finance management policy to the requirements of the draft Constitution Bill. I’m so looking forward to this transformation in the country’s governance system. It will definitely bring a lot of discipline.

  4. ‘outdated financial laws’ and we had to wait for imf to push us.yet we have so many lawyers/legal institutions and none could have been responsive to all the flaws we’ve been subjected to for 50 years!

  5. Mmmmmmm….these PF kaponyas need special laws dedicated and drawn up for them, world laws and practices will not work on them. They sleep and wake thinking of how to steal. Look at their latest scam, Zambian roads are the most expensive to build using borrowed money because PF kaponyas in GRZ are getting rich. Normal practices and checks used in the rest of the world won’t work with PF , they will find loopholes to steal.

  6. Welcome back IMF! The last time we saw you was during the Structural Adjustment Program (SAP). Looks like we are up for a bigger one this time…

  7. I have been telling the cops at roadblocks that their traffic laws are fragmented and outdated too but they are waiting for Interpol to come and tell them that. What I am trying to say is that Zambia’s lawmakers seem to be content with only CREATING new laws even when most existing laws have been overtaken by events, technology and other societal shifts and practices. We need to get into the habit of maintenance. This is reflective of a nation that thinks that maintenance is development – hence resurfacing of roads and repair of old buildings is considered development! Pathetic!

  8. Zambia has gone to dogs.We don’t have a ministry of Finance and National planning like it was under Mwanawasa and Magande now we only have the ministry of Finance why because all the PF thieves know is to share and spend money and not planning.Everything they do is mitigation measure and short term planning (Hand to mouth).The major reason they will not follow IMF gidelines because they are thieves so they don’t care to put strong Financial controls,how are they going to steal.The solution is to remove them from power.Stealing is in their blood.

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