Government Sets up Key Cornerstone for Fiscal Discipline

By Caesar Cheelo

The third pillar of the Zambia Plus economic recovery programme, which the Finance Minister launched in October 2016, focuses on improving economic and fiscal governance by raising the levels of accountability and transparency in the allocation and use of public finances.

In line with this, the 2017 National Budget envisions fully rolling out the Integrated Financial Management Information System (IFMIS) by end 2017. This is towards ensuring that all ministries, provinces or spending agencies are prohibited from spending outside the system, thus curbing the accumulation of arrears, and stemming financial misappropriation, irregularities, fraud and corruption. Therefore, once fully implemented, the IFMIS will be one of the key cornerstones for reestablishing fiscal integrity and credibility. It will partially determine whether the government succeeds or fails in its renewed quest for fiscal discipline and good governance.
In the recent past, the weaknesses in public financial management have cost the country dearly. Here are a few examples: firstly, one of Zambia’s most pressing fiscal discipline challenges has been the government’s propensity for unplanned spending. This has created huge fiscal deficits. For instance, in 2015 the deficit was K17.3 billion (or US$1.7 billion). The deficit was not only accumulated from big budget items like fuel or electricity subsidies; a significant portion was from the unplanned, unauthorized spending of line ministries, provinces and other spending agencies. Public sector unplanned spending on overseas allowances (travel abroad), suppliers of goods and services, and public affairs and summit meetings (more travel abroad) jointly exhausted K565 million (US$57.1 million). This was 133% larger than the total approved budget for these three expenditure items. The cumulative overspend on the three items accounted for 3.3% of the 2015 fiscal deficit compared to off-budget spending on the ZESCO electricity subsidy, which was 2.1% of the deficit (or K364 million).
Secondly, the Auditor General’s report for 2015 reveals that the top-three financial irregularities in the public sector in that year were: unvouched (or unsupported) expenditures worth K349.3 million (or 39.6% of total irregularities; undelivered materials worth K251.5 million (28.5%); and irregular payments of K115.4 million (13.1%). In total, these irregularities (a polite way of saying financial misappropriation, fraud and corruption) by authorizing officers in the civil service amounted to K716.2 million, which was twice the size of the ZESCO electricity subsidy in 2015.

Thus, IFMIS is seen as a salient system for reestablishing fiscal discipline and sound financial governance precisely because it is meant to address the issues highlighted above.
A word of caution, however; it is quite possible that the levels of fiscal indiscipline and irregular financial practice in the civil service have already become endemic. The Minister of Finance recently revealed that government officials have sometimes used electricity power outages as an excuse to go off the IFMIS and manually process unplanned unauthorized expenditures or to accumulate payment arrears. It is therefore not farfetched that IFMIS could continue to be circumvented through these perverse civil service worker innovations. Should this continue to happen, one of the country’s key cornerstones for fiscal discipline could come unhinged and become ineffective.
In order to reduce the risk of an ineffective IFMIS, it will be imperative for the government to follow through with its 2007 budget intentions to introduce tougher punitive measures. In addition, the government may want to institute faster-track options of applying the punitive measures. For example, summary dismissals and immediate reference of cases to law enforcement arms could be pursued without having to wait for one year for the Auditor General’s Report and another year for the final verdict of the Parliamentary Accounts Committee of the National Assembly.

The author is a researcher at ZIPAR. For details contact:
The Executive Director, ZIPAR, corner of John Mbita and Nationalist roads, CSO Annex building, P.O. Box 50782, Lusaka. Telephone: +260 211 252559. Email: This email address is being protected from spambots. You need JavaScript enabled to view it..

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