[{"bbox": [96, 123, 1135, 602], "category": "Text", "text": "years, as long-awaited structural reforms and their implementation have not yet taken place. The COVID-19\npandemic, combined with the previous` administration`s handling of PFM triggered the first recession in 20 years.\nThe economy contracted by 3% in 2020⁹ in a context of high inflation. Inflation has been above the government's\ntarget band of 6-8% since May 2019¹⁰. Year-on-year inflation reached 24.6% in June and July 2021. The Zambian\nKwacha (ZMW) has been under severe pressure, depreciating by 50% against the US Dollar in 2020. In recent\nyears, fiscal policy has been expansionary. Fiscal deficits have been on the rise, resulting in a reduction of fiscal\nspace: over 2007-2012, fiscal deficits averaged 1.7% of GDP p.a., but this average rose sharply to 9.0% of GDP\np.a. in the subsequent period of 2013-2019¹¹. In 2020, the fiscal deficit worsened, registering at 14.5% of GDP.\nWhile the major factors behind the fiscal overruns, in recent years, have been interest payments on external non-\nconcessional debt and large-scale, often overpriced capital expenditure projects, the COVID-19 pandemic has\ncertainly exacerbated the situation in 2020, with revenue declines and expenditure pressures. Zambia is once again\nexperiencing a debt crisis, having borrowed extensively during the last decade. A sharp rise in public debt has\nresulted in debt service costs, crowding out other spending lines, affecting foreign exchange reserves and a growing\nfiscal deficit. The long-term economic and fiscal consequences, including access to finance, shrinking fiscal space\nand further currency depreciation, negatively impacts Zambia's competitiveness and economic recovery. Further,\nclimate change is unequivocally impacting the economic and fiscal situation of Zambia, as a key structural risk\naffecting sectors such as agriculture and energy. This highlights the need to incorporate climate-smart solutions in\nZambia's long-term growth strategy."}, {"bbox": [96, 612, 1135, 932], "category": "Text", "text": "In 2022, Zambia shows some signs of stabilisation and recovery. The GDP is projected to have grown by +4.3% in 2021¹². Year-on-year inflation has been progressively decreasing to 10.2% by May 2022¹³. In 2021, the ZMW climbed to around ZMW 22.6/USD mid-July, before easing back to below ZMW 18/USD in three successive episodes, following official announcements which provided some measure of reassurances on the short-term political and economic stability of the country, provoking a temporary shift in market sentiment. In late July 2021, the Minister of Finance announced that the IMF would allocate USD1.3 billion SDR to Zambia. This contributed to boost the country's forex reserves. In late August, the Presidential election resulted in a peaceful political transition, with a transfer of power to the opposition. In early December, the IMF and the government jointly announced the successful conclusion of a staff level agreement (SLA). The government is in the process of obtaining financial reassurances from the Official Creditors Committee, a prerequisite for an IMF support programme under the Extended Credit Facility. The precise timeframe is unknown as assurances from all official creditors, including China, are required."}, {"bbox": [96, 944, 451, 968], "category": "Section-header", "text": "Current situation in the PFM sector"}, {"bbox": [96, 982, 1135, 1274], "category": "Text", "text": "Since the early 2000s, Zambia has embarked on a series of successive PFM reforms to improve transparency, accountability and efficiency in the management of public resources. The PFM reforms are anchored at the Ministry of Finance and national Planning (MoFNP), but spread through line ministries, accountability agencies (e.g. the Office of the Auditor General), and the National Assembly. Development partners have been actively engaged in support of the government's PFM reform agenda since 2000. PFM has been under intense scrutiny. With cooperating partners' support, a number of fiscal diagnostics have been implemented in the past few years, including the Public Expenditure & Financial Accountability Assessment (PEFA); the Tax Administration Diagnostic Assessment Tool (TADAT), the Public Investment Management Assessment (PIMA), the Supreme Auditing Institutions Performance Management Framework (SAI PMF), the Report on Observance of Standards and Codes, Accounting and Auditing (ROSC AA), the Methodology for Assessing Procurement Systems (MAPS), and a Debt Management Performance Assessment (DeMPA)."}, {"bbox": [96, 1286, 1135, 1473], "category": "Text", "text": "The fourth PEFA assessment (earlier assessments were done in 2005, 2008, 2012) reported relatively strong performance for almost all the performance indicators (PIs) for policy-based fiscal strategy and budgeting, and external scrutiny and audit. However, there has been relatively poor performance for almost all PIs for management of assets and liabilities, and predictability and control in budget execution. Budget reliability, transparency of public finances, and accounting & reporting have mixed results. Important deviations between approved budgets and actual expenditures were still reported and the aggregate actual expenditure was often significantly higher than the approved budget. Budget releases were often delayed and payment arrears have been accumulating."}, {"bbox": [86, 1536, 758, 1558], "category": "Footnote", "text": "⁹ Global Economic Prospects - January 2022, A Word Bank Group Flagship Report"}, {"bbox": [86, 1558, 868, 1581], "category": "Footnote", "text": "¹⁰ The Monthly Bulletin, vol. 209 to vol. 230, August 2019 to May 2022, Zambia Statistics Agency"}, {"bbox": [86, 1580, 818, 1603], "category": "Footnote", "text": "¹¹ Bank of Zambia Annual Reports – 2007 to 2020, https://www.boz zm/annual-reports.htm"}, {"bbox": [86, 1602, 765, 1624], "category": "Footnote", "text": "¹² World Economic Outlook: War Sets Back the Global Recovery – April 2022, IMF."}, {"bbox": [86, 1624, 602, 1645], "category": "Footnote", "text": "¹³ The Monthly Bulletin – May 2022, Zambia Statistics Agency"}, {"bbox": [1038, 1681, 1142, 1705], "category": "Page-footer", "text": "Page 6 of 31"}]