Budgeting Process in Zambia PDF

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This looks at the bugetory process and various steps involved in Zambia...

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INTRODUCTION The budgetary process has over the years become a very important aspect of macroeconomic management, resource allocation and governance in the country. This is evidenced by the high state of public discourse, which prevails in the country just before and after the Minister of Finance and National Planning (MOFNP) has presented his annual budget to Parliament. The Budget is an institutional tool that looks into public expenditure and ways and means of raising the necessary revenue. In other words, the Budget is a document containing various government activities or work programmes expressed in monetary form. Thus the aim of this paper is prepare a comprehensive paper on the types of budgets and budgetary process in Zambia to be presented to the workshop. KEY DEFINITIONS Budgeting is the process of planning future business activities by establishing performance goals and putting them into a formal plan (Llienert, 2003). In other words, budgeting is the process of making financial goals for a company and creating a plan to achieve those goals. Budgeting is a process whereby future income and expenditure are decided in order to streamline the expenditure process. TYPES OF BUDGETS There are different types of budgets that are used and these include; (1) balanced, (2) revenue, (3) performance, Program and Planning (Programming) Budgeting (PPB) and (4) zero-based. Mostly, budget preparation follows one of these methods. The public budgets are different from other forms of budgets in many ways. To begin with, a balanced budget as suggested by the name a balanced budget is that which has no deficit or surplus. A government budget is said to be a balanced budget if the estimated government expenditure is equal to expected government receipts in a particular financial year. Advocated by many classical economists, this type of budget is based on the principle of “living within means” (Jones, 1996). Secondly, revenue budget is just about the details of the revenue received by the government through taxes and other sources and the expenditure that is met through it. The revenue budget consists of revenue receipts of the government (revenues from tax and other sources), and its expenditure (Griesemer, 1983). Revenue receipts are divided into tax 1|Page

and non-tax revenue. Tax revenues are made up of taxes such as income tax, corporate tax, excise, customs and other duties that the government levies. Thirdly, performance budget is mostly used by the organizations and ministries involved in the developmental activities. This process of budgeting, takes into account the end result or the performance of the developmental program thus insuring cost effective and efficient planning. With the increasing developmental challenges and awareness regarding the usage of tax payer’s money, new methods of budgeting are required of which the performance based budgeting has emerged as a transparent and accountable method (Folscher, 2002). It relies on three aspects of understanding of the final outcome, the strategies formulated to reach those final outcomes and the specific activities that were carried out to achieve those outcomes. With a very detailed and objective analysis, this budgeting process is very result oriented in its approach. Zero-based budgeting (ZBB) is an approach to making a budget from scratch (Jones, 1996). The budget is not based on previous budgets. Instead, the budget starts at zero. Zero based budgeting has its clear advantage when the limited resources are to be allotted carefully and objectively. It is quite flexible in nature and relies on rational methods, systematic evaluation to reallocate resources and justify the usage of funds. It starts from a zero base unlike traditional budgets where incremental approach is used. Zero-based budgeting (ZBB) budget is futuristic and may or may not be equal or more from the last year’s budget as traditionally calculated (Zaherawati, 2004). Finally, Program and Planning (Programming) Budgeting (PPB) is another type of budget which refers to a variety of different budgeting systems that base expenditures primarily on programs of work and secondarily on objects. It is considered a transitional form between traditional line-item and performance approaches, and it may be called modified program budgeting. THE BUDGETARY PROCESS IN ZAMBIA The budgetary process has over the years become a very important aspect of macroeconomic management, resource allocation and governance in the country. This is evidenced by the high state of public discourse, which prevails in the country just before and after the Minister of Finance and National Planning (MOFNP) has presented his annual budget to Parliament (Mwanawina, 2002). The budget is the most important economic policy tool for macroeconomic 2|Page

management and resource allocation for any government. It provides a comprehensive statement of the nation’s priorities. Over the years, the budget has evolved from being a simple accounting tool to a planning and governance document upon which the success or failure of government policy can be evaluated. To begin with, the drafting and formulation stage is the first stage of Zambia’s national budgeting and this is the initial stage in the budget process. Through this consultative process with other stakeholders, the Ministry of Finance and National Planning (MOFNP) comes up with a national budget every year. The drafting stage involves four steps which include the call circular, the submission of estimates, the discussion of revenue and expenditure and the preliminary budget (Government of the Republic of Zambia, 1996). Budget drafting and formulation represents all the phases prior to the implementation of the budget. This encompasses the work on the estimates with ministry technocrats and controlling officer who are collectively referred to as the civil executive lead by the secretary to the cabinet and the cabinet led by the president and composed of the full ministers called collectively as the political executive. In the formulation stage several phases exist which include; Ministry input- the call circular in which there is issued out budget guidelines and sector ceiling. Budget preparation is the second stage of Zambia’s national budgeting process and the past years, the Ministry of Finance prepared a budget based on requests of ministries and departments for funds to execute the policies of the Government. The Ministry of Finance then prepared a preliminary consolidated statement on the estimates of revenue and expenditure which was passed on to the Cabinet for discussion. Upon approval by Cabinet, the Ministry of Finance prepared a consolidated Estimates of Revenue and Expenditure Statement which was presented to the National Assembly in the Budget Address by the Minister of Finance and National Planning (Centre for Policy Research and Analysis, 2002). However, currently and in part due to the ongoing parliamentary reforms, Members of Parliament and the citizenry at district level have been included as stakeholders in the budget preparation process. Therefore, the Ministry of Finance and National Planning advertises for submissions on the budget from the citizenry at District level, Members of Parliament, the private sector and the civil society. Budget authorization by Parliament is the third stage of Zambia’s national budgeting process and after a few weeks, following the official opening of Parliament by the President each year, the 3|Page

Minister of Finance presents the Budget Address to the National Assembly containing information on the economic performance of the Government for the previous year and indicators for the following financial year (Buidet, 1993). It presents proposals for expenditure levels and how the expenditure is to be financed. These are reflected in the estimates of revenue and expenditure presented to the National Assembly during the budget address. The Budget address is followed by deliberations by Members of Parliament on policy issues arising from the budget address and, soon after, the whole House resolves into the Committee of Supply to look at the expenditure proposals, ministry by ministry. At the same time, the House resolves into the committee of ways and means for purposes of approving revenue proposals for the funding of expenditure as reflected in the estimates of revenue and expenditure. This includes the relevant legislation for the raising of revenue required to fund the expenditure. Furthermore, budget execution is the fourth stage of Zambia’s national budgeting process . Once the appropriation Act is in place, the President issues a General Warrant addressed to the Secretary to the Treasury in the Ministry of Finance which authorizes the Secretary to the Treasury to release funds to Controlling Officers through Treasury Authorities. The General Warrant contains information to the effect that the Permanent Secretary is authorized and required during the financial year to spend from the general revenues of the Republic, the amounts specified in relation to the estimates of expenditure for that financial year as they become due in accordance with the laws and financial Regulation of the Republic, together with the accounts, certificates as prescribed by the aforesaid Laws and Regulations (Buidet, 1993). Upon approval of the Estimates of Revenue and Expenditure, the Minister of Finance appoints Controlling Officers for each particular Head of Expenditure as accounting officers. The Controlling Officers involves Permanent Secretaries in ministries or Chief Executives in Government Institutions. The Legislative is the fifth stage of Zambia’s national budgeting process and after the approval of the proposed budget by Cabinet, the Constitution of Zambia mandates the Minister of Finance and National Planning to present it to the National Assembly. Only the National Assembly has the authority to raise tax and expend revenues. Article 117(1) of the Constitution stipulates that “the Minister responsible for finance shall cause to be prepared and shall lay before the National Assembly within three months after the commencement of each financial year estimates of the 4|Page

revenues and expenditure of the republic for the financial year (Centre for Policy Research and Analysis, 2002). The time span of the authority to spend is restricted to twelve months from February. The Minister’s presentation of the budget to the National Assembly is traditionally referred to as the ‘Budget Address’. The implementation stage is the sixth stage of Zambia’s national budgeting process and once the Appropriation Act is made by the National Assembly, the President signs a General Warrant. This is passed onto the Minister of Finance and National Planning (MOFNP). The Warrant empowers the controlling officers in the budget units to start spending their allocations on current and capital projects. The Permanent Secretary, Minister of Finance and National Planning (MOFNP) uses the General Warrant to apportion funds with respect to the requirements of the budget units.

Finally, auditing and Parliament stage is final stage of Zambia’s national budgeting process and at this stage the Annual Appropriation Act does not contain details of sub-heads but total amounts on each head of expenditure and if the expenditure appropriated for each head is exceeded, the excess is called unconstitutional expenditure. This matter is contained in the report of the Auditor-General whose responsibility is to satisfy herself/himself that the sums granted by the House to a particular body have been used for their intended purpose, and that the Appropriation Accounts produced by each body properly present the transactions during the year. The Auditor-General then reports on these matters to the House, through the Sessional Committee on Public Accounts. The Zambian budgeting process receives views on a number of community based organizations, NGOs, professional bodies and individuals inclusive have the freedom to present their suggestions and proposals to the budget office at Ministry of Finance and National Planning (MOFNP) that Zambia requires to reform in its budget process in order to make it more efficient, effective and accountable to the people of Zambia. CONCLUSION It can be concluded that, the budgeting process in Zambia like many other countries is a complex process that is often very demanding and it is for this reason that the national planning department is kept separate from the finance department. If therefore effectiveness and efficiency is to be attained, administrative reforms are needed in the structure and function of the ministry of finance and national planning to ensure the minster is made more effective and responsive. 5|Page

REFERENCES

Buidet, J. (1993). Zambia, Rehabilitating Tax Administration. An SGS Report. Centre for Policy Research and Analysis. (2002). The Budgeting Process in Zambia: Is there Need for Reform? Lusaka. Folscher, A. (2002). Budget Transparency, and Participation, Five African Case Studies. IDASA Griesemer, J. (1983). Accountants and Administrators Guide: Budgeting for results in Government. New York: Ronal Press. Government of the Republic of Zambia. (1996). Constitution of Zambia (Amendment). Government Printer, Lusaka. Jones, R., and Pendlebury, M. (1996). Public Sector Accounting. London: Publishing.

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Ljungman, G., (2009). Top-Down Budgeting—An Instrument to Strengthen Budget Management. International Monetary Fund Working Paper. Llienert, I. (2003). A Comparison between two Public Expenditure Management Systems in Africa, OECD Journal on Budgeting – Volume 3 – No. 3 © OECD. Ministry of Finance and National Planning. (2003). 2004 – 2006 Mid-Term Expenditure Framework – Lusaka. Mwanawina, I., M. Akapelwa., J. Sampa and Moonga, J. (2002). Transparency and Participation in the Budget Process: Zambia Country Report, IDASA. Zaherawati Zakaria, (2004). Financial Administration. lib.kedah.uitm.edu.my/psblibrary/notes/am110/layout/.../h1.pdf

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