Zambia's National Budget: From Proposal To Law

Zambia's national budget is presented by the Ministry of Finance and National Planning. The budget is formulated with input from state and non-state actors, and it undergoes a rigorous process of review and approval by the National Assembly before becoming law. The budget outlines revenue streams and expenditures, with key allocations directed towards social and economic sectors, governance, and infrastructure. Zambia's budget aims to promote economic growth, address challenges, and improve the lives of its citizens.

The budget is presented to the National Assembly by the Minister of Finance and National Planning

The Minister of Finance and National Planning is responsible for presenting the national budget to the National Assembly. On 27 September 2024, Dr. Situmbeko Musokotwane, the Minister of Finance and National Planning, presented Zambia's 2025 National Budget to the National Assembly. This budget was particularly significant as Zambia faced challenges such as severe climate change impacts, economic difficulties, and ambitious growth targets within a context of limited resources.

The Minister of Finance and National Planning plays a crucial role in preparing and submitting the national budget to the National Assembly for approval. This process involves several key steps. Firstly, the minister leads the formulation of the budget, taking into account the country's economic and social priorities, revenue streams, and expenditure allocations. This includes consultations with various stakeholders to ensure that the budget is comprehensive and aligned with national goals.

Once the budget is formulated, the minister presents it to the National Assembly, where it undergoes scrutiny and debate. During this process, the minister engages with members of the assembly, providing clarifications, answering questions, and addressing concerns raised by the representatives. This back-and-forth discussion ensures that the budget is thoroughly vetted and that all relevant considerations are taken into account.

The national budget presented by the Minister of Finance and National Planning covers various sectors and aspects of the country's economy. It includes allocations for social and economic sectors, governance, and infrastructure. The minister ensures that the budget is aligned with the broader goals of promoting economic recovery, inclusive growth, and improving the livelihoods of Zambians.

In the case of the 2025 National Budget, Dr. Musokotwane outlined ambitious targets and fiscal reforms. The budget aimed for a GDP growth rate of 6.6%, a significant shift from the projected 2.3% at the end of 2024. To support this growth, the government targeted an increase in domestic revenue and a reduction in the fiscal deficit. Additionally, the budget addressed debt management, allocating significant funds to deal with external debt.

The presentation of the national budget by the Minister of Finance and National Planning is a critical step in the budgetary process. It marks the point at which the proposed budget is introduced to the legislative body for review, discussion, and eventual approval. This stage provides an opportunity for members of the National Assembly to engage with the budget, ask questions, and offer amendments before giving their final approval.

The budget is formulated in a transparent and accountable manner

The budget formulation process in Zambia has four major dimensions:

• Setting fiscal targets and expenditure levels that align with these targets.
• Formulating expenditure policies.
• Allocating resources in line with the established policies and fiscal targets.
• Addressing operational efficiency and performance issues.

The Minister of Finance leads the budget formulation and implementation process. The process begins with the drafting of the budget by the Ministry of Finance (MoF), which involves several stages, including:

• Preparing a Consultation Paper for the Cabinet.
• Updating the Macro-Fiscal Framework for the upcoming three years and drafting a Green Paper.
• Obtaining Cabinet Approval for the Green Paper and disseminating Budget Guidelines through a Call Circular.
• Conducting Budget Hearings on the Draft Budget Estimates of MPSAs.
• Securing Cabinet Approval for the Draft Budget and Budget Speech.

The second stage of the budget process is the enactment of the national budget, which begins with the presentation of the budget statement to Parliament by the Minister of Finance, as mandated by the Constitution of the Republic of Zambia.

To ensure transparency and accountability in the budget formulation process, the following steps can be taken:

• Enactment of the Budget and Planning Law: The Minister of Finance should advocate for the enactment of a Budget Act, a critical piece of legislation to guide the budget process. This law will enhance consultations among stakeholders, leading to improved ownership, participation, and accountability in budget implementation.
• Review of the Legal Framework: Some legal provisions related to the budget may not fully adhere to transparency and accountability principles. For instance, Article 117 (4) of the Constitution, which provides for Supplementary Expenditure, lacks clarity on the types of activities qualifying for such expenditure, leaving it open to potential abuse. A review of the legal framework can address these gaps and ensure that supplementary expenditure is limited to unforeseen and necessary expenses.
• Adequate Time for Parliamentary Consideration: Parliament should have sufficient time to study and approve the budget. Inadequate time and limited technical expertise can impact the quality of debates and decision-making during the budget approval process.
• Transparency in Disbursements: The Ministry of Finance should improve transparency by disclosing relevant information to the public when disbursing funds. This could include displaying disbursement details on notice boards in local areas, as practiced in other jurisdictions.
• Improved Fiscal Management: Effective management of public resources is crucial. Mismanagement due to corruption, lack of anti-corruption efforts, socioeconomic decline, and deterioration in public services can hinder budget implementation.
• Full Budget Cycle: The budget cycle should run its entire course without interruption. Starting a new budget formulation process before the completion of the current cycle can create challenges for implementation agencies and the treasury.
• Early Decision-Making: Budget preparation involves making difficult choices and trade-offs. Postponing these decisions until budget execution can make them harder and lead to an inefficient budget process. Clear signals about expenditure limits should be provided to spending agencies at the beginning of the budget preparation process.
• Hard Constraints for Line Ministries: Providing line ministries with hard constraints from the initial stages of budget preparation encourages a shift from a "needs" mentality to an "availability" mentality. This approach helps align spending with available resources and government priorities.

The budget is presented with a focus on economic recovery and inclusive growth

Zambia's 2025 National Budget, themed "Building Resilience for Inclusive Growth and Improved Lifestyles", was presented by the Ministry of Finance and National Planning, Dr. Situmbeko Musokotwane, on 27 September 2024. The budget focuses on economic recovery and inclusive growth, with ambitious targets and fiscal reforms aimed at stabilising the economy and improving the lives of Zambians.

The country is facing significant economic challenges, including severe climate change impacts, a drought that has affected its hydroelectric power-dependent energy sector, and the aftermath of the Covid-19 pandemic. These factors have led to a reduction in agricultural output and electricity generation, causing widespread food insecurity, power outages, and water shortages, resulting in price increases and reduced economic growth. Despite these challenges, the government remains optimistic and focused on infrastructure development, the reopening of mines, and strengthening social safety nets.

The 2025 budget is projected to be K217 billion, representing a 22% increase over the 2024 budget. The revenue streams to finance the budget include taxes, non-tax revenues, natural resource revenues, and both domestic and foreign funding assistance. Key expenditures include social and economic sectors, governance, and infrastructure. The government aims to increase domestic revenue to at least 21.4% of GDP while reducing the fiscal deficit to 3.1% of GDP.

The primary focus of the budget is on economic recovery and promoting inclusive growth. The government has set ambitious targets, aiming for a GDP growth rate of 6.6%, a significant shift from the projected 2.3% at the end of 2024. This growth is expected to be driven by key sectors such as mining, agriculture, and information and communication technology (ICT). The budget includes a significant increase in funding for geological mapping, aimed at enhancing mineral discovery, mining investment, and output. The mining sector is expected to be a major contributor to economic growth, with elevated copper prices playing a crucial role.

The 2025 National Budget also prioritises social protection programs, allocating significant resources to safeguard vulnerable groups. The social program allocation has increased by 67%, with the social cash transfer program doubling from K4.1 billion to K8.3 billion. The government has introduced a Cash for Work program, allocating K2.0 billion to pay citizens for community work to mitigate drought effects. Investments in education and health remain a priority, with plans to recruit new teachers and health workers and focus on essential learning infrastructure.

The budget is financed through taxes, non-tax revenues, natural resource revenues, and domestic and foreign funding

Zambia's 2025 National Budget, presented by the Minister of Finance and National Planning, Dr. Situmbeko Musokotwane, outlines ambitious targets and fiscal reforms to stabilise the economy and improve the lives of Zambians. The budget is projected to be K217 billion, a 22% increase over the 2024 budget, and is financed through various revenue streams, including taxes, non-tax revenues, natural resource revenues, and domestic and foreign funding.

Taxes play a significant role in funding the budget, with the government aiming to raise K174 billion from taxes and domestic revenues. This amount is equivalent to the entire 2024 national budget, indicating that domestic resources could fully fund the 2025 budget without borrowing. The mining sector, in particular, contributes heavily to tax revenue, accounting for more than 65% of total export earnings.

Non-tax revenues also contribute to the budget's financing. This includes revenue from various industries such as energy, utilities, financial services, and consumer and industrial products and services. Additionally, the government generates revenue from natural resources, with a focus on enhancing mineral discovery and increasing mining output. The budget includes a significant increase in funding for geological mapping, from K160 million to K364 million, to boost mining investment and output in the long term.

Furthermore, the budget is supported by both domestic and foreign funding assistance. The government aims to increase domestic revenue to at least 21.4% of GDP, demonstrating a shift towards greater self-reliance. However, foreign funding remains crucial, especially considering Zambia's recent economic challenges, such as the sovereign debt default in 2020, the Covid-19 pandemic, and the mining sector slump.

The financing of Zambia's 2025 National Budget through these diverse revenue streams reflects the country's commitment to economic recovery, inclusive growth, and improving the livelihoods of its citizens. By targeting increased domestic revenue, the government aims to reduce reliance on foreign funding and enhance its fiscal stability.

The budget is subject to approval by the National Assembly

The Zambian budget process is subject to approval by the National Assembly, which is the country's legislative body. The National Assembly plays a crucial role in reviewing and ultimately approving the national budget, which outlines the government's financial plans and policies for the upcoming year. This process involves several steps and the participation of various stakeholders to ensure transparency and accountability.

The budget is first presented to the National Assembly by the Minister of Finance and National Planning. In recent years, this presentation has been made by Dr. Situmbeko Musokotwane, who holds the position of Minister of Finance and National Planning. The budget presentation includes an overview of the revenue and expenditure estimates for the upcoming financial year, along with key economic and fiscal policies and strategies. It also highlights the government's priorities, targets, and allocations across various sectors, such as social, economic, governance, and infrastructure development.

Once the budget is presented, the National Assembly engages in a thorough review process. This involves analysing the budget proposal, assessing the proposed revenue and expenditure plans, evaluating the alignment with the National Development Plan, and considering the potential impact on the country's economic and social development. The National Assembly may also invite input and participation from various stakeholders during this review process, including representatives from different sectors, civil society, and the public. This collaborative approach ensures that the budget is responsive to the needs of the people and aligns with the country's long-term development goals.

During the review, the National Assembly pays close attention to the budget's adherence to the principles outlined in the National Planning and Budgeting Act. These principles emphasise transparency, accountability, equitable distribution of resources, responsiveness to the development needs of the people, and sustainability. The National Assembly scrutinises the budget to ensure that it meets these principles and promotes good governance and effective financial management.

As part of the approval process, the National Assembly may also request additional information, clarifications, or adjustments to the budget proposal. This could include seeking justifications for specific expenditures, requesting detailed breakdowns of allocations, or suggesting modifications to align the budget more closely with national priorities. This back-and-forth discussion between the executive branch, led by the Minister of Finance and National Planning, and the legislative branch, represented by the National Assembly, ensures a robust and dynamic budget approval process.

Finally, after careful deliberation and consideration, the National Assembly votes on the approval of the national budget. This vote typically occurs before the end of the year preceding the budget's implementation, allowing for a smooth transition into the new financial year. The National Assembly's approval signifies the endorsement of the budget and authorises the government to proceed with the proposed expenditures and revenue-generating measures.

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