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Signing ceremony of the Programme to Support Effectiveness and Transparency in Management of Public Resources - 11 April 2018, Lusaka
Opening remarks by H.E. Alessandro Mariani, Ambassador of the European Union to Zambia & COMESA
Secretary to the Treasury, Mr Fredson Yamba
Deputy National Authorising Officer of the European Development Fund,
Colleagues Ambassadors of EU Member States
Representative of the National Assembly of Zambia
Representative of the ACC
Representative of the OAG
Representative of the ZRA
Members of the Press
Distinguished Ladies and Gentlemen,
It is indeed a great pleasure and an honour to participate today in the launch of a new European Union Programme, in Support to the Effectiveness and Transparency in the Management of Public Resources (EFFECT). Funded under the 11th European Development Fund (2014-2020), the financing agreement we are signing today commits a new grant of 17 million Euro, which is slightly more than 200 million kwacha.
First of all, I would like to warmly thank all the partners that have contributed to the design of this Programme, and notably the Ministry of Finance and the National Authorising Office of the European Development Fund, the Parliament, the Auditor General Office and Anti-Corruption Commission, the Zambia Revenue Authority, colleagues from the EU Member States and other Cooperating Partners. It is thanks to all your contributions that we are here today ready to sign this financing agreement.
As you all know the European Union attaches great importance to promoting effective, efficient and transparent use of public resources and strengthening tax systems in its partnership with Africa. The programme we are launching today reflects the EU approach “Collect more – spend better”, intended to reinforce governance, raise the revenue collection, and improve the quality of spending. Our approach also reflects the need to strengthen fiscal transparency and accountability through effective oversight of the country’s budget in all its phases from its preparation to its day to day implementation.
This Programme will address some of the key challenges Zambia is facing in the field of public finance management, which in turn are critical elements for sustained inclusive growth as set out in the economic recovery programme and the Seventh National Development Plan and its aspiration to “accelerate development efforts towards the Vision 2030, without leaving anyone behind”.
Despite some encouraging reforms in recent years, the country still faces major challenges in the field of public finance management.
Fiscal imbalances remain high as the revenue mobilisation is insufficient to cover for the expenditure where salaries, payment of interests and subsidies all together represents a very large part of the revenues thus leaving not much for discretionary expenditure in various sectors, including the social sectors . The fiscal deficits have driven up interest rates, crowded out lending to the private sector, and represent a risk to macro-economic stability.
The budget preparation does not assure the optimum allocation of resources.
The budget implementation has been affected by unplanned expenditures with important deviations between the approved budget and the actual expenditure. This undermines budget credibility and the good work of the Ministry of Finance. Moreover challenges have been encountered in ensuring good value for money in the use of public resources. A large use of single source contracts seems to be at the origin of these challenges.
The Public debt has been rising at an unsustainable pace leading the IMF in October last year to declare Zambia a country "at high risk of debt distress". This requires very careful management as a high level of debt usually increases the vulnerability of an economy and increases the statutory payments of any given country (there is a need to pay for the interests and to repay the loans).
In view of the above challenges there is a need to boost domestic revenue, on the one hand, and restrain spending, on the other hand, focusing on well targeted and pro-poor expenditure while delaying and cancelling projects in the pipeline on the basis of a clear prioritization strategy. In this context the European Union welcomed the intention of the Government to come forward with a clear prioritisation of projects (to be implemented; to be delayed; to be cancelled) and the commitment to present a new Loans and Guarantees Act aimed at submitting to the approval of Parliament new loans and guarantees.
EFFECT - The Programme
Secretary to the Treasury, ladies and gentlemen,
The Support to Effectiveness and Transparency in Management of Public Resources programme (EFFECT), with a budget of 17M EUR (more than 200M Kwacha), combines the continuation of successful activities implemented under an ongoing EDF project (such as the support to the National Assembly), with new and complementary actions.
We will be supporting the Zambian Revenue Authority in its efforts to modernise revenue collection processes so to ensure that the tax system is simpler, the tax base is expanded and the compliance is increased.
We are going to contribute to improvement in the planning, budgeting and management of public resources capacities of the Ministry of Finance and some targeted line ministries. This will include the reinforcement of budgeting skills, the support to the Public Investment function and the management of arrears, the improvement of procurement management and a better monitoring of budget execution among others.
We are going to jointly work to improve the capacities of the main oversight institutions – the National Assembly, the Office of the Auditor General and the Anti-Corruption Commission.
Secretary to the Treasury, ladies and gentlemen,
This is an important day as we are signing an ambitious and innovative programme. Not only we will able to address a wide range of key challenges but we will do so by putting at the disposal of Zambia the best expertise possible, including from highly reputed institutions from EU Member States, such as Supreme Audit and Anti-Corruption institutions, that will mobilise their staff to support their peer institutions in Zambia.
The country will also benefit from the experience and expertise from EU Member States, and in particular from the German cooperation that will be in charge of implementing the components of the programme in support of planning and budgeting and revenue mobilisation.
Secretary to the Treasury, Ladies and gentlemen,
This programme provides a unique opportunity (offered by EU tax payers) for key public institutions to make significant steps forward in their reform programmes. I trust that all partners involved will endeavour to make the most out of this opportunity, by maintaining a clear, day-to-day commitment and focus on achieving and communicating results.
With political support, the most important ingredient, I am fully confident that the programme that we are signing today can greatly contribute to the strengthening of public finance management which is in the supreme interest of the people of Zambia.
Thank you for your attention, Zikomo kwambiri