2 The Zambian Government's public
expenditure: opportunities for spending more efficiently
7. The Government of Zambia's vision is to become
a "prosperous middle-income nation by 2030". How it
plans to achieve this is set out in the Sixth National Development
Plan (SNDP) 2011-2015, which was published by the previous Government
at the beginning of 2011.[8]
The SNDP has remained in place since the new Patriotic Front (PF)
Government was elected in September 2011[9]
following 20 years of MMD. The new Government declared that its
development agenda was anchored on the SNDP.[10]
8. According to the SNDP, its theme is 'sustained
economic growth and poverty reduction', which is to be achieved
through 'accelerated infrastructure and human development (including
health and education), enhanced economic growth and diversification,
and promotion of rural development'.[11]
The Plan will promote increased rural investment in infrastructure
such as roads, rail, Information and Communication Technology,
energy, water and sanitation, education and health. Over the period
of the SNDP, the largest area of spending will be infrastructure,
mostly roads, followed by human development, mostly education
and health.[12]
9. Zambia's GDP in 2010 was 16.2 billion US dollars.[13]
The Government estimates that its expenditure will broadly remain
at an average of 23.8 % of GDP during the Plan period.[14]
It plans to increase domestic revenues as a share of GDP to an
average of 18.6 percent (from about 17.7 % in the Fifth national
Plan).[15]
10. In the past Zambia was highly dependent on Official
Development Assistance (ODA). According to DFID dependence on
traditional development aid has fallen from 37% in 2002 to 7%.[16]
Thus the bulk of the public expenditure needed to meet the SNDP
vision will come from the Government of Zambia's own revenues,
easily exceeding aid from donors which was about 1.3 billion dollars
in 2009.[17] The UK spent
c.£54.7 million on programmes in 2010-11 (c. 85 million dollars
at the average exchange rate over this period); this sum is expected
to increase to £63 million in 2014-15 according to the DFID
Operational Plan updated in May 2012.[18]
11. During our visit we heard that Zambian revenues
could be used much more effectively on public services if a number
of significant inefficiencies in public expenditure inherited
from the previous Government were removed. These include:
- the public sector wage bill, which according
to DFID is high at 8% of GDP, restricting spending on investment
and public services, but pressure to increase public sector salaries
is strong.
- inefficiencies associated with the
Government's control of Zambia's national fuel supply; this means
that fuel prices are much higher than in neighbouring countries.
However, rather than liberalising the sector to avoid price rises
the Government instead cut fuel tax and in 2010
ended up subsidising fuel (mainly consumed by wealthier Zambians)
at a cost of $80million.
- Government interventions in the market for
maize, particularly in setting prices and subsidising inputs.[19]
12. The maize subsidy is one of the biggest issues
which the Zambia Government has to confront.[20]
In 2010 the Government's floor price for maize was set $100 per
tonne above the regional market price. Following the record
maize harvest in 2010 the Government was forced to buy 840,000
metric tonnes at a cost of $280million. While some is being exported,
there will be a net loss to the Zambian treasury of around
$140million (about 1% of GDP). This problem continued in 2011
following another record maize harvest and no change in prices.[21]
According to the DFID Head of Office in Zambia, the subsidy amounts
to 8% of the Government's budget.[22]
Moreover, the 'maize subsidy' helps the better-off, not the poorer
farmer.
13. The new Government has indicated that it is open
to reform. We asked the DFID Minister what influence DFID could
bring to bear. He replied that the Head of DFID in Zambia was
having:
a series of very useful and important conversations,
but one of the ways of arguing this is that it would actually
deliver universal access to secondary education, by providing
free schooling for 300,000 children, constructing 50 new high
schools, and employing 10,000 more teachers; these are alternatives
you then have in place. The question is what to do about it, and
it is difficult, because it is ultimately a political decision
within Zambia.[23]
14. There are significant inefficiencies in Zambia's
public expenditure. The biggest of these is the 'maize subsidy',
which costs 8% of the Government budget; this is a sum which considerably
exceeds DFID's bilateral aid programme. The abolition of the 'maize
subsidy' would free up funds to provide much needed services,
for example free secondary education. We believe that the Government
of Zambia wants to do something about it, but faces serious political
constraints. We urge that the UK continue to provide the greatest
encouragement and support to the Government of Zambia to remove
the maize subsidy and switch resources to public services such
as secondary education.
8 Republic of Zambia, Sixth National Development Plan
(SNDP), January 2011 Back
9
Although it does not have a majority in the House Back
10
http://www.zambia.co.zm/article24586&sa Back
11
SNDP Executive Summary, p 1 Back
12
SNDP Summary, p 11 Back
13
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/ZAMBIAEXTN/ Back
14
SNDP Summary , p 10 ; though the IMF forecasts expenditures over
2011-15 to average 25.6% GDP Back
15
SNDP Summary , p 10 Back
16
Ev 25 Back
17
www.oecd.org/dac/aideffectiveness/49386110.pdf Back
18
DFID Zambia Operational Plan 2011-15, updated May 2012 Back
19
And see Ev w7 (Jonathan Coulter) Back
20
Ibid; and see QQ 54-55 Back
21
Information provided by DFID Zambia Back
22
Q 56 Back
23
Q 56 Back
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