Zambia considers the 2030 Agenda for Sustainable Development as a national agenda. The government’s efforts to address development challenges resonate with the goals agreed in this global Agenda (Zambia VNR, 2020). This brief reports on budget credibility trends in Zambia and how they relate to Zambia’s efforts to achieve the Sustainable Development Goals (SDGs). Budget credibility is the ability of governments to meet their expenditure and revenue targets accurately and consistently (IBP, 2018). Where governments consistently miss these annual targets, these issues can indicate underlying challenges within the public financial management (PFM) system in ensuring that funding flows toward achieving the government’s stated priorities. If unaddressed, such challenges have the potential to undermine the country’s goals on effective service delivery and poverty alleviation.
Budget credibility challenges in Zambia are widely discussed amongst civil society organizations as well as media practitioners. Deviations from the approved budget pose a governance challenge and are a threat to national development. This concern has been more pronounced in the wake of continued reduction of budget allocations (as a percentage of the total budget) for social sectors. The government has not significantly increased budget allocations to strategic social sectors such as health, education, water and sanitation despite endorsing international commitments and recommended thresholds to improve public services.
We reviewed budget credibility patterns from 2018 to 2020 in seven key sectors3 that relate to 10 SDG goals, using available budget data by ministries, tracked spending on gender equality, and reviewed allocations on social protection programs. While social sector spending figures have nominally increased, they remain below optimal thresholds. In 2022, the government allocated 45 percent of the national budget towards debt servicing, diverting needed funds away from social sectors. This analysis aims to demonstrate how Zambia’s current performance on budget credibility can potentially impact wider efforts to achieve SDGs. We conclude with some recommendations for improving budget credibility for SDGs and overall development goals.
This research found that at the aggregate level and in some sectors, spending was largely underspent over three years (2018-2020, see annex 1), which raises issues of budget credibility. Budget deviations were highest in the agriculture sector at over 236 percent (overspend) and lowest in education at 15 percent (underspend). Water and sanitation, though among the least funded (as a percentage of the budget), was one of the sectors with high budget variations (70 percent underspend). Climate action was the only goal on track, even with one of the least budget allocations among the sectors under study. This may be linked to higher political will to spending in this sector, following two recent keys actions: Zambia’s signing of the Paris Agreement on Climate Change in in September 2016 and the launch of the National Climate Change Policy in March in 2017.
The continued discrepancy between the approved budget and actual budget, and the consistent underspending of the budget, takes place in the context where debt servicing concerns dominate government discussions of public finance. High debt servicing costs have limited the government’s expenditure towards key economic and social sectors. The discrepancy between the Constitution and existing laws such as the Loans and Guarantees Act (LGAA) on authorizing loan approvals before contractions have further exacerbated the debt crisis. These dynamics may lead to government putting less pressure on line ministries to execute their entire approved budgets, given the limits on the overall availability of public funding.
The onset of COVID-19 had mixed results in terms of expenditure. For example, the increased allocations to sectors such as health and water and sanitation did not translate into better spending. Deviations for health increased from underspending of 23 percent in 2019 to underspending of 27 percent in 2020. In water and sanitation, the deviation reduced to underspending of 62 percent from a high of underspending of 89 percent in 2019. The 2020 deviation was, however, still higher than the 2018 deviation of underspending by 58 percent. Social protection also saw deviations maintain a downward trajectory from underspending by 51 percent in 2018 to underspending by 8 percent. Agriculture on the other hand saw spending increase to 563 percent from 181 percent overspending in 2019.
The research recommends the following:
- Lack of publicly accessible budget information is a serious impediment to achieving budget credibility in Zambia. To enhance transparency, the government should publicly publish blue books which contain the actual approved budgets as well as actual expenditure including justifications for any deviations. This can increase awareness amongst actors with a direct stake in timely SDGs achievement.
- There is need for consistent and more regular reporting on progress made on the SDGs. Government should publish the VNR in a timely manner and report on SDG 16.6.1 on budget credibility.
- To improve budget credibility, it is critical to assess spending beyond budget provision. Better tracking and reporting on SGD trends and budget allocation and expenditure can help activate a positive policy feedback loop.
- Gaps between existing laws and the Constitution should be addressed to ensure transparency and avoid future debt troubles. Government should put in place legal frameworks to manage the debt crisis.
- Government should honor international protocols and agreements on key sectors related to SDG targets, and the SDG index trends and performance.
This publication is a part of Connecting Budget Credibility to the Sustainable Development Goals