Improving good financial governance in Zambia

Context

Zambia has enjoyed impressive economic growth in recent years. Despite this, it has not been possible to reduce widespread poverty and reduce inequalities. In 2022, 60 per cent of the population lived below the poverty line, and almost half were living in extreme poverty. In addition, women are often disadvantaged; climate change has an impact on agricultural production and hydropower generation. This is increasing Zambia’s funding shortfall: the country does not have sufficient funds of its own to implement important projects.

After years of increasing budget deficits, Zambia was no longer able to service its foreign debt in November 2020. In September 2022, a programme was therefore agreed with the International Monetary Fund (IMF). In it, the Zambian Government committed to ambitious reforms in the public finance system.

Objective

Zambia is reforming its public finances, giving it the financial leeway to utilise public funds in a development-oriented manner, and reduce poverty and inequality.

Approach

The programme advises the government on reforms and operates in four areas:

• It promotes fiscal sustainability through improved budget planning, risk and debt management. It also provides advice on implementing a decentralised financial structure with more powers for the municipalities.
• It improves efficiency in the use of resources and is committed to taking greater account of gender equality and climate projects in government spending.
• It supports in mobilising domestic revenue in order to create a fairer and more efficient tax policy and increase the tax compliance rate.
• It promotes change management and organisational development as well as in professionalising the public sector so that reforms can be better managed and implemented.

The European Union and USAID are contributing financially to the project.

Last update: November 2023