What problems would the minister of finance encounter in the process of budget formulation and implementation in Zambia?

Answer 1

The following was a brief response to a press query by Brian Hatyoka of Times of Zambia on the new budget and its implications. The story was covered in Times (Friday 3rd July) though compressed into one paragraph and referred to the positive implication only. There is, however, a likely downside in the initial stages of implementing the new budget cycle:

1. The new act will certainly improve in the project implementation process. It will also enhance accountability as tender procedures will not be hurried. It will also support the financial allocation mechanism as unspent allocations for that fiscal year will not be ceded to Ministry of finance. It will mean that once all money is applied into projects, the private sector, which implements most of these projects as contracted agents, will equally meet performance targets. In the long run, the circulation of cash in the economy will generally improve the circular flow of income.

2. The challenges remain however, and government is advised to pay attention to these:

(i)It is important to know that the budget cycle is not necessarily about having it run from January. The budget cycle should always run its full course. In this case, the danger remains that the budget implementation process will be curtailed midstream to allow for the commencement of another budget formulation process. It is possible that the budget making process will improve drastically on the period of implementation but prove a strong challenge on the formulation. The challenge will shift from implementation agencies to the treasury to effectively manage the process of implementing while at the same time formulating the budget for the following year. In other words, there will be obvious lapses. It is important to know that the budget making process ordinarily takes longer in developing economies because of the various factors under consideration such those which are exogenous like donor support, performance of the key industries like copper. The formulation of the budget policy and resource projections generally takes two to three months. This includes macro-economic reviews. How do you effectively review these factors midstream (when the other budget is still running)? Then we have the other process of identifying the main activities and processes for the new financial years. This includes resource projections and the budget framework. Do we have capacity to make effective and all encompassing projections when we do not exactly know how the running projects will end? In my view, it is very challenging to make expenditure and revenue projections as well as setting up sectoral priorities and sector ceilings when some projections are still running. This process alone takes several months. There is the additional challenge for issuing the budget draft to cabinet, inter-ministerial technical committee reviews and final cabinet approvals before parliamentary committees debate the budget. This process alone is very challenging. Zambia is not a federal state, so, we also have the challenge of incorporating projections from other regional players as well as local governments. In other words, the treasury will have a lot of econometrics to do as this will mean making a lot of assumptions in the budget making process. This is all because while parliament is approving the budget for the following year, the existing budget would still be in the current fiscal year. There is therefore need for additional capacity at the treasury. In other words, pressure will move away from the implementing agencies to the treasury. What is critical for me is the need to seriously streamline the tender awarding system because this had very little to do with the budget cycle but bureaucracy and inefficiencies. This was the reason one Minister found herself approving projects within her ministry. It has had to do with inefficiencies.

Answer 2

The minister of finance in Zambia may encounter several problems in the process of budget formulation and implementation. These may include insufficient revenue generation leading to budget deficits, challenges in accurately forecasting revenue and expenditures, difficulty in prioritizing and allocating funds among competing sectors, limited capacity and resources for effective budget execution, and the need to address corruption and inefficiencies in public financial management. Additionally, external factors such as economic shocks and changes in global commodity prices can also pose challenges in budget formulation and implementation.