[{"bbox": [96, 122, 1136, 390], "category": "Text", "text": "To address some of these constraints, a number of reforms have been implemented to strengthen the legal framework, support systems and PFM institutions to further enhance planning, budgeting and expenditure control. The reform of the legal framework includes the enactment of the National Planning and Budgeting Act (NPBA) and the revision of the Public Finance Act, the Public Procurement Act, as well as the Loans and Guarantees (Authorization) Act. The NPBA, enacted on 26/10/2020, prescribes a multi-year planning and budgeting framework including a National Development Plan, a Medium-Term Expenditure Framework (MTEF), and performance or output-based budgeting (OBB). The Public Financial Management Act No. 1 of 2018 was enacted in April 2018. The government is actively working on the design of a new PFM Reform Strategy, expected for the end of 2022. These reform efforts present a new opportunity for continued engagement and partnership in enhancing effectiveness, transparency and accountability in the government's PFM system."}, {"bbox": [96, 399, 1136, 560], "category": "Text", "text": "In December 2020, in reaction to the economic and fiscal crisis the country was facing, government launched the Economic Recovery Programme 2021-2023 (ERP), as a successor to \"Zambia plus\" under the 7NDP, largely under-implemented and falling short of its targets. The objectives of the ERP are to restore macroeconomic stability, achieve fiscal and debt, sustainability, restore growth, dismantle domestic arrears and safeguard social sector spending. The programme commits to make progress in some key PFM areas, including domestic arrears, debt management and domestic revenue mobilization."}, {"bbox": [96, 571, 1136, 730], "category": "Text", "text": "In April 2022, the cabinet approved the draft 8NDP 2022-2026. The 8NDP will address some of the key constraints identified by the government, including macroeconomic and fiscal vulnerabilities, low economic diversification, job creation and low skilled labour, poor quality access to and delivery of social services, insufficient progress on decentralisation, while pursuing the goals of Vision 2030. Yet, there is a notable disconnect between the transformational ambitions and the fiscal consolidation needed to address Zambia's challenging economic and financial realities."}, {"bbox": [85, 758, 342, 790], "category": "Section-header", "text": "## 2.2 Problem Analysis"}, {"bbox": [96, 804, 1136, 939], "category": "Text", "text": "The action seeks to address performance constraints of PFM as impediment to public service delivery. The most important priorities that have been identified for the present action are detailed below. To address key systemic and capacity constraints in PFM, the MoFNP has undertaken the design of a PFM Reform strategy, expected for the end of 2022. The strategy is foreseen to feature the items listed below. The most important priorities that have been identified for the present action are the following:"}, {"bbox": [96, 949, 1136, 1190], "category": "Text", "text": "**Budget credibility:** Every year since 2013, the credibility of the national budget has been eroded by budget overruns leading to widening fiscal deficits, growth in the national debt stock and an increase in expenditure arrears. Significant deviations from the appropriated budget at the aggregate level and within the budget have been recorded. The outturn, as a percentage of the original budget, was respectively 110%, 111% and 114%, for 2018, 2019 and 2020. In view of higher expenditure relative to revenues, the fiscal deficits, on a cash basis, have been higher than planned at 7.6%, 9.1% and 14.5% of GDP for 2018, 2019 and 2020 respectively¹⁴. These systematic fiscal slippages have led to total public debt of USD 30.9 billion¹⁵ without interest arrears as at December 2021 and an accumulation of domestic arrears of ZMW 76.6 billion¹⁶ as at end-September 2021. Unsustainable debt financing led to a default in late 2020."}, {"bbox": [96, 1200, 1136, 1548], "category": "Text", "text": "The reasons for this lack of fiscal sustainability are manifold. The MTEF needs improvement in order to provide a credible medium-term fiscal ceiling for political decisions relating to resource allocations. There is a persistent disconnect between the NDPs and the budget, and between the approved budget, commitments in contracts, and the actual release of the funds. More robust and reliable macro-economic forecasts are needed, so not to rely on too optimistic GDP estimates, and subsequent available fiscal space. Challenges can also be attributed to failure to comprehensively budget for all expenditures implied by the NDP and the strategic plans of the Ministries, Provinces and Government Spending Agencies (MPSAs). The decoupling of political decision-making and budget cycle contributes to frequent changing of expenditure priorities outside of the planning and budgeting process. The change in government in August 2021 has generated high expectations, both in an economic and political terms. However, persistent challenges at technical level induce a disconnect between announced measures and their implementation. Nevertheless, the change in government presents a window of opportunity to substantially reform PFM in Zambia. The government under President Hakainde Hichilema has committed to improve public sector accountability and it has intensified the fight against corruption. This has led to the investigations and, in some"}, {"bbox": [87, 1579, 440, 1602], "category": "Footnote", "text": "14 Bank of Zambia – 2020 Annual Report"}, {"bbox": [87, 1601, 746, 1626], "category": "Footnote", "text": "15 Debt Statistical Bulletin – End 2021, Ministry of Finance and National Planning"}, {"bbox": [87, 1624, 548, 1646], "category": "Footnote", "text": "16 2022-2024 Medium Term Budget Plan (White Paper)"}, {"bbox": [1038, 1680, 1143, 1706], "category": "Page-footer", "text": "Page 7 of 31"}]