Zambia
Technical Assistance Report-Government Finance Statistics Mission
Author: International Monetary Fund. Statistics Dept.
Publication Date:
14 Mar 2019
eISBN:
9781498303170
Language:
English
Keywords:
ISCR; CR; town council; excise duty; economics department; chart of account; local government; government control; income tax; Zambia State lotteries Board; government ministry; export duty
Download PDF (915.3 KB)

This Technical Assistance (TA) report focuses on four key work areas which may lead to improvement of Government Finance Statistics (GFS) for fiscal analysis, support policy making decisions in Zambia, and improve African Department surveillance. The mission found out that the Coordinating Committee, recommended in the previous TA mission, was not yet established. The mission reviewed progress on the legal and institutional arrangements supporting the compilation of GFS as a follow up from recommendations of the previous GFS TA mission and found that the legislation reforms were on track, especially regarding the Public Finance Act. The report also found that Central Statistical Office (CSO) is working on the revision of the Statistics Act to follow the new strategy for National Development of Statistics. For sustainability and consistency purposes, the mission recommended that the CSO staff produce a GFS manual for compilation and dissemination of GFS data.

Abstract

This Technical Assistance (TA) report focuses on four key work areas which may lead to improvement of Government Finance Statistics (GFS) for fiscal analysis, support policy making decisions in Zambia, and improve African Department surveillance. The mission found out that the Coordinating Committee, recommended in the previous TA mission, was not yet established. The mission reviewed progress on the legal and institutional arrangements supporting the compilation of GFS as a follow up from recommendations of the previous GFS TA mission and found that the legislation reforms were on track, especially regarding the Public Finance Act. The report also found that Central Statistical Office (CSO) is working on the revision of the Statistics Act to follow the new strategy for National Development of Statistics. For sustainability and consistency purposes, the mission recommended that the CSO staff produce a GFS manual for compilation and dissemination of GFS data.

Summary of Mission Outcomes and Priority Recommendations

1. A Government Finance Statistics (GFS) technical assistance (TA) mission visited Lusaka, Zambia, during November 27–December 8, 2017, to support the Central Statistical Office (CSO) in improving GFS for decision making and surveillance. The mission assisted the authorities in enhancing methodologies and the compilation of GFS according to the updated Government Finance Statistics Manual 2014 (GFSM 2014) and the Public-Sector Debt Statistics Guide 2011 (PSDSG 2011); and followed up on the findings and recommendations of a previous GFS TA mission conducted in April 2016, that had as main recommendations: (i) the establishment of a coordinating committee between relevant departments to facilitate compilation of GFS; (ii) the review and finalization of institutional coverage and sectorization of public sector units; and (iii) addressing a number of compilation issues.

2. The limited institutional coverage of currently compiled GFS; and data quality and coverage issues of public and publicly guaranteed debt hampers the IMF’s African Department (AFR) surveillance. The coverage of GFS is currently limited to budgetary central government (BCG) units. AFR considers broadening the institutional coverage of fiscal statistics critical given the large extra-budgetary operations. In addition, given recent deterioration of risk rating of debt distress, and increase in public investment projects undertaken by state-owned enterprises (SOE), AFR considers the quality and coverage of public and publicly guaranteed debt statistics even more critical.

3. The mission focused on four key work areas which may lead to improvement of GFS for fiscal analysis, support policy making decisions in Zambia, and improve AFR surveillance:

  • (i) Coordination of the GFS compilation process and methodology – the mission found that the coordinating committee has not yet been established. The mission advised on steps towards the establishment of such a committee and discussed with the CSO on the need to draft a memorandum of understanding (MoU), and have all relevant departments involved with GFS source data provision, and use, to sign the MoU. The content of the MoU, the possible structure of the Committee, the entities that would be part of Committee, and their responsibilities were the main issues discussed. The mission also advised on drafting a Zambia specific GFS methodology and compilation guide (manual) as a reference material for data provider, compilers, and users. Such a manual would contribute to improving data consistency of GFS and other macroeconomic statistics. The mission supported and further encouraged the CSO initiative to create a new annual publication on financial statistics.

  • (ii) Sectorization of public sector units – the mission noted that the CSO made progress with sectorization of public sector units. The CSO carried out an inventory of all public sector institutional units and made some progress with classification of these units according to the GFSM 2014 as recommended by the previous GFS TA mission. The mission received confirmation of the structure of local government (LG), revised the preliminary list of public corporations (i.e. SOEs) and social security funds (SSF), and compiled a preliminary list of extrabudgetary entities. Details are reported in the institutional coverage of general government and public-sector section.

  • (iii) Source Data – the mission found that except for revenue and expenditure data (including data on expenditure arrears) of BCG entities, the GFS compilers at the CSO were currently not receiving any other data on BCG and other public entities from the Ministry of Finance (MOF) or any other Zambian agency. The mission worked with GFS compilers at the CSO in collecting excel based source data on: (i) debt (stock and flows) from the Government of the Republic of Zambia (GRZ) Financial Reports for Fiscal Year (FY) 2010–2016; and (ii) financial statements data on: revenue, expenditure, assets and liabilities of some public institutions (extra-budgetary entities, SSF, SOE and LG) essentially for FY 2012–2016. Templates to support the collection process of financial data, that would be used to compile GFS of other public entities apart from the BCG, were created during the mission as a special request from CSO. Accuracy of the data in the Integrated Financial Management Information Systems (IFMIS) is questionable due to incompleteness of transactions, lack of bank reconciliations and consistency issues in the transactions recording process.

  • (iv) GFS Compilation process – the mission noted that CSO had managed to compile GFS for 2011–2014 consistent with recommendations from the previous GFS TA mission. The mission reviewed compiled GFS for 2011–2014 and assisted with the compilation of GFS for 2015–2016. GFS for BCG operations are being compiled and disseminated on an annual basis and there is already a trial on quarterly basis statistics. However, it does not help to correctly understand fiscal policy making and analysis and to measure the governments’ fiscal activity in the economy, as the mission detected some relevant inconsistencies mainly with data sources. Timely and preliminary quarterly GFS will facilitate early identification of inconsistencies in the fiscal data and will also greatly assist in the compilation of other key macroeconomic indicators like quarterly GDP.

4. A bridge table from Zambia’s Chart of Account (CoA) to GFS classifications exists and is being used to compile GFS. CoA structure has detailed information for producing useful analytical information and the compilation of comprehensive GFS statements. However, the mission reviewed and amended the table as there were few accounts not correctly classified and new accounts recorded in the IFMIS. Details of Zambia’s accounting rules and systems are discussed under Coverage, Source and GFS Compilation Section.

5. The mission assisted in revising the multi-period GFS compilation file for BCG for fiscal years 2011–2016 and produced revised series that had: (i) a more consistent and coherent classification method for revenue and expenditure in the five years and (ii) incorporated financial assets (GRZ deposits) and liabilities (GRZ debt stocks) with respective flows (disbursements and repayments). It is expected that the new series would improve the AFR’s surveillance and would also be used for the IMF’s annual Government Finance Statistics Yearbook (GFSY) questionnaire. The mission also reviewed expenditure using the classification of the functions of government (COFOG) series for FY 2011–2016 and compiled an Integrated Financial Balance Sheet for BCG for the same period. On the other hand, the mission assisted with compilation of GFS for General Government (GG) for FY 2015, which included: (i) BCG, (ii) Seven (7) extrabudgetary units, (iii) one (1) SSF and (iv) the largest council of LG.

6. To support further progress in the above work areas, the mission reviewed the five-year action plan that was developed during the previous GFS TA mission, focusing on the activities for the next three years to incorporate new actions and more realistic deadlines. The following priority recommendations are carrying particular weight to make headway in improving GFS. Further details on the priority recommendations and the related actions/milestones can be found under Detailed Technical Assessment and Recommendations.

Table 1.

Priority Recommendations

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Introduction

7. A Government Finance Statistics (GFS) Technical Assistance (TA) mission (referred to hereafter as the mission) visited Lusaka, Zambia, during November 27–December 8, 2017 to assess progress with (GFS) compilation and reporting. The mission followed up on an earlier GFS TA mission during the period March 29–April 8, 2016. This activity was undertaken within the context of the five-year GFS Module of the United Kingdom’s Department for International Development (DFID) - funded Enhanced Data Dissemination Initiative 2 (EDDI 2) project.

8. The main purpose of the mission was to assist the Zambia Central Statistical Office (CSO) to improve their fiscal statistics compilation methods and to disseminate data in accordance with the guidelines of the Government Finance Statistics Manual (GFSM) 2014 and Public-Sector Debt Statistics: Guide for Compilers and Users. The mission made recommendations on a migration plan for the implementation of the GFSM 2014 for reporting annual and high-frequency fiscal data to support surveillance.

9. The major tasks of the mission were to: (i) Review the recording of revenue, expense, transactions, and other economic flows in assets and liabilities, and financial balance sheets; (ii) Help to improve the accuracy and integrity of the monthly series disseminated to the IMF’s African Department (AFR) and the IMF’s Statistics Department (STA); (iii) Discuss the constraints that need to be addressed to expand the institutional coverage of GFS from the Budgetary Central Government (BCG) to the General Government (GG); (iv) Review Classification of the Functions of Government (COFOG) and assist on the reporting of annual data; (v) Attempt compilation of annual (and sub-annual) GG GFS for the latest three years; (vi) Evaluate consistency of GFS and other macroeconomic data, and in particular, between financing transactions in the statement of operations and monetary statistics; (vii) Assess the availability of information, quality, and compilation methods of public sector debt statistics, with a focus on debt contracted by SOE (guaranteed and not guaranteed by central government); (viii) Assess progress with the migration plan for continued implementation of GFSM 2014 guidelines.

10. Structure of this report. Section II: (i) describes the coordination of GFS compilation process and methodology; (ii) reviews institutional coverage of General Government and Public Sector; discuss (iii) accounting rules and (iv) system and data sources. It also presents (v) main finding from the compilation and reporting exercise done during the mission; reports issues (vi) concerning consistency of GFS and other macroeconomic data and (vii) resources and technical assistance. Section III of this report presents detailed technical assessment and recommendations including Action Plan for Implementing the GFSM 2014 in Zambia, institutional structure of GG with list of public entities, table of data and its possible sources, Bridge Tables linking Chart of Accounts codes and GFSM 2014 Classifications and the list of officials met during the mission.

Coverage, Source Data and GFS Compilation

A. Coordination of GFS Compilation Process and Methodology

11. The public entity responsible for the compilation of GFS in Zambia is the CSO. It is a government agency divided into 4 divisions: i) Economic and Finance, ii) Agriculture, iii) Social and iv) Information Research and Dissemination. GFS is compiled under the Public Finance unit of the Economic and Finance division. Other units that are also part of this division are: i) National Account, ii) Living Conditions, iii) External Trade, iv) Price Statistics and (v) Industrial Production.

12. The mission found out that the Coordinating Committee, recommended in the previous TA mission, was not yet established. Since CSO is not a provider of data, the current mission reiterated the need to organize the process of data sharing between the different Zambian agencies and encouraged the CSO to lead to process of establishing the Committee. The mission discussed the content of Memorandum of Understanding (MoU), the possible structure of the mentioned Committee, the entities that would be part of Committee and their responsibilities. Regarding the entities that were previously identified, the TA mission recommend the inclusion of the Office of the Auditor General (OAG) and the Asset Management Division (AMD) of the Ministry of Finance, Zambia (MOF).

13. The mission reviewed progress on the legal and institutional arrangements supporting the compilation of GFS as a follow up from recommendations of the previous GFS TA mission and found that the legislation reforms were on track, especially regarding the Public Finance Act. The Act has been revised and submitted to Parliament but was not yet approved. While the Act is supposed to create the legal and institutional environment for compiling fiscal data in Zambia, however, currently, it does not provide sufficient clarity on financial reporting standards or institutions that are required to be covered in the financial reports of the Government of the Republic of Zambia (GRZ).

14. The mission also found that that CSO is working on the revision of the Statistics Act to follow the new strategy for National Development of Statistics. The latter is expected to provide CSO with a strategy for developing statistical capacity across the entire national statistical system which will include the national, regional, and international needs as part of the country development and poverty reduction policy; serve as a framework for international and bilateral assistance; include all parts of the data production units and address the issues related to the analysis and use of data; follow the international standards including quality; and build on all past and existing activities and experiences. It will present a comprehensive and unified framework for continual assessment of evolving user needs and priorities for statistics and for building the capacity needed to meet these needs in a more coordinated, synergistic and efficient manner.

15. The mission found that the GFS compilation process is dominated by only one of the member of the Public Finance unit and believes that an operation manual (a guide) that is a living, breathing set of systems and work instructions for compiling GFS would be useful for team understanding of the GFS process and would ensure sustainability and consistency in the GFS compilation process. On the other hand, to support CSO initiative to create a new annual publication on government statistics, the mission discussed the development of a publication and left examples of publication made by GFS compilers in other countries.

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B. Institutional Coverage of General Government and Public Sector

16. The Government of the Republic of Zambia (GRZ) comprises 21 government ministries, 5 sovereign institutions and few other boards, agencies and statutory and regulatory bodies. The local government (LG) comprises 10 provinces with a total of 109 councils. There are four social security funds (SSF) identified and a total of 45 nonfinancial public corporations and seven financial public corporations including the Bank of Zambia (Central Bank).

17. The GRZ does not have state governments with expenditure responsibilities but has LG with provinces which are headed by a minister appointed by the President and it is further divided into districts and there are 109 councils within the 10 provinces. Councils are headed by officials elected by the local communities. These officials act totally independently from central government and manage all available public funds and control some public corporations and autonomous funds. According to the LG Act, Councils might receive three types of transfer from Central Government: (i) Constituency Development Fund (Capital expense); (ii) Equalization Fund – given to support operations with a condition that 20 percent of the funds be used as capital expenditure and (iii) Grants. Councils are not allowed to borrow externally, only internally and Ministry of Local Government (MLG) must authorize the process and acts as the guarantor. Councils have under their control, SOE and autonomous funds. The five (5) largest councils are: (i) Lusaka, (ii) Livingstone, (iii) Ndola, (iv) Kit-we and (v) Chipata, which account for 60 percent of LG, of which, Lusaka alone accounts for approximately 40 percent.

18. The list of the BCG entities was obtained from the Integrated Financial Management Information Systems (IFMS). There was no comprehensive list of extrabudgetary units available to share with the mission. With support of CSO staff, the mission researched legislation that regulates government ministries, government agencies, official cabinets and Parliament in order to have an idea on the administrative structure of the public sector in Zambia. The mission also reviewed the list of institutions reported under Appendix 13_Grant Aided Institutions and Government Controlled Entities of the GRZ’s Financial Reports for 2010 – 2016 published by MOF. In addition, after consulting the Yellow Book1, the website of some of the public entities and reports of the Accounts of Parastatal Bodies and other statutory institutions for the year end 2010 – 2015 published by the OAG, it was possible to create a preliminary list that the mission recommends to be refined by the Coordinating Committee.

19. The mission identified four SSF that are controlled by central government and LG and it appears as they are classified as parastatal unit and at the same time, grant aided institutions.

20. SOE are being controlled by a company called Industrial Development Corporation (IDC) that has currently, in its portfolio, 29 public corporations, mainly governed by the Company Acts. It is expected to receive all public corporations including the rest, acted by Parliament decree, that are still under the control of the Investments and Debt Management Department of Ministry of Finance, Zambia (IDM).

21. The following diagram below illustrates the structure of the public sector in Zambia created considering the confirmation of the structure of LG received during the mission; the revision made on the preliminary list of the SOE, SSF and the list of extrabudgetary entities. When considering the “classification of public units” according with GFSM 2014 that considers government control, residency, type of institutional units and main activity (market or non-market producer), the diagram does not consider proper delineation of classification of government units. Regarding this, the mission was pleased to find an advanced “classification exercise for public units” that follow the GFSM 2014 guidelines, that has potential to allow CSO to correctly classify public institutions. The lists of the entities that comprise the Public Sector in the Republic of Zambia are reported in the Detailed Technical Assessment section.

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Diagram of the Public Sector in the Republic of Zambia

Citation: IMF Staff Country Reports 2019, 078; 10.5089/9781498303170.002.A001

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C. Accounting Rules and Systems

22. Financial Management Information System (FMIS) and Integrated Financial Management Information Systems (IFMIS) are being used to support the budget execution of ministries and agencies funded from the budget. FMIS is the old system and IFMIS is the new system with implementation around 90 percent, meaning that it is not reflecting automatically data of five (5) BCG entities: (i) Electoral Commission; (ii) Zambia Security Intelligence Services-Office of the President; (iii) Anti-Corruption Commission; (iv) National Assembly and (iv) Office of the President-State House. The approved budget is uploaded into the systems and GRZ executes the budget and maintains the accounts in cash basis in the FMIS and IFMIS.

23. Regarding the debt management system, the mission found that there are two main systems in use to manage public debt: (i) the Debt Management and Financial Analysis System - DMFAS and (ii) Central Securities Repository for Treasury Bills and Government Bonds, but they are not interfaced to each other and to the IFMIS, an aspect that would promote transparency, process reliability and reduce the proneness to errors significantly. Within DMFAS, MOF is reporting only external debt. Although the system has capacity to manage domestic debt, they are not using it. Debt instruments are only reported at face value and interest expense on cash basis.

24. The current Chart of Account (CoA) structure has detailed information for producing useful analytical information and the compilation of comprehensive GFS reports. For compiling GFS, CSO must combine codes (combining subhead, item, subitem and subsubitem codes from IFMIS) to correctly classify data. A detailed review of the bridge table (GFS vs. CoA coding system) in line with the guidelines presented in the GFSM 2014 was done during the mission. Accrued expenses are treated as normal expenses; Interest is accounted in GFS code “24” along with financial commissions and other financial charges. On the other hand, Zambia CoA accounts code “240000” should be revised to guarantee that there is only interest and not loan principal repayments registered. GFS accounts with code “28” should be also revised as they include compensation of constitutional staff. The mission left the revised version of the bridge tables that is presented in Section III, however, CSO should investigate further the recording process within the Accountant General (AG) of MOF.

25. The authorities informed the mission that they are considering to implement the International Public-Sector Accounting Standards (IPSAS). MOF is currently in the process of contracting consulting companies and the road map is due to be ready in March 2018. MOF intends to have it implemented by 2021.

26. Regarding LG, the councils are recording financial transactions under accrual basis while BCG uses cash basis. They use their own CoA that is different from the one in use by BCG. They do have own accounting system although from AG the mission learnt that there is a pilot exercise in place regarding implementation of IFMIS in five councils. On the other hand, there are other initiatives within the MLG to create other system as they believe IFMIS might not address all their needs.

27. Some public institutions including some of the SSF, are reporting financial data on a year end March 31st differently from BCG and majority of public sector which reports on a calendar based year ending 31st of December.

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D. Source Data

28. Revenue and expenditure data is being manually collected from MOF managed system IFMIS, submitted by email every time CSO requests. CSO is receiving annual data from AG and quarterly data from Budget Office without problem, however there are issues regarding its quality since quarterly are based on preliminary budget execution and does not match annual accounting data.

29. There is no consistency in the descriptions of the revenue items from one year to another which makes it difficult to correctly classify data. In the FY 2011 and 2012, revenue needed to be adjusted to reflect the currency reform (revaluation of the Kwacha to remove 1000).

30. The mission noted that there were no grants registered in 2015 and authorities confirmed that information was correct. Grants and loans data coming out of IFMIS regarding “budget support grants”, “Project support grants” and loans (in-cash and in-kind) from foreign and international donors is rather confusing as it does not total what is being reported in GRZ financial reports.

31. Within GRZ Financial Reports, the receipts on taxation do not total the detailed items provided and data provided in the IFMIS. So, reconciliation of source data between data from IFMIS and FMIS versus GRZ Financial reports with its supporting detail should be a standard practice.

32. As for the expense, data for FY 2011 was also adjusted to reflect revaluation of Kwacha. The mission noted that the recording process in not consistent along the years. Some accounts have been discontinued and the descriptions of activity or account name does not match with what is being registered in some CoA accounts, as accounts registering allowances are also registering administrative expenditure. On the other hand, the mission found that, accounting basis of reporting is not pure cash as it includes arrears, pre-payments and other advances.

33. Regarding Classification of the Functions of Government (COFOG), CSO produces a detailed exercise of budget execution of all BCG entities. Currently, CSO construct a four to five-character functional classification code, using division, head and department codes from the IFMIS which allow them to capture this expenditure and makes it possible to produce coherent GFS data. Nevertheless, the mission was pleased to hear from MOF that the developments they are making on IFMIS currently allow the system to automatically calculate COFOG although it does still need some revision. During a meeting with AG, the mission recommend that this exercise was done with support of CSO as compilers of the GFS.

34. There are no official data available reporting stock positions of nonfinancial assets. The mission tried, without success, to set a meeting with the Asset Management Division of the Ministry of Finance (AMD), to find out about the types of nonfinancial assets that GRZ holds and its valuation methods.

35. The mission collected data on financial assets (Deposits) from the annual financial reports and high frequency reports provided by BOZ. Deposits received from BOZ were by currency, by institution holding it (Central bank and commercial banks) and by public entities however, the annual positions do not reconcile with what is being reported in the GRZ’s financial reports and the mission was not able to further investigate on that. Regarding others financial assets, authorities confirmed that there are no given loans to account for as financial assets in the past five years.

36. Government debt stock and flows, both domestic and external and by financial instruments (treasury bills, treasury bonds and other loans), are being published in GRZ Annual Financial Reports (Statement E). With support of CSO staff, the mission collected debt data from 2010 to 2016 of which, debt data for FY 2011 was adjusted to reflect the revaluation of Kwacha. The mission requested debt statistics of public corporation and received among other, outstanding pension contributions of public corporations and data on on-lending projects regarding 2014-2016. It was rather difficult to understand the data since it did not match with what was being published in the GRZ Financial Reports and it was not presented in a way that would allow the mission to understand whether it comprised all debt of all public corporations.

37. IDM stated that there were three issuances of Eurobonds in 2012, 2014 and 2015 although the financial reports only present data regarding 2012 and 2013 with no disclosure on whether it refers to the three issuances. The mission also found that Eurobond data is not being recorded by types of investors (resident and non-resident) and eventually, if domestic investors exist, it would not allow a correct presentation of the debt statistics.

38. The mission identified inconsistencies regarding opening and closing stock of liabilities and could not make any informed guess since there is no disclosure made in the official documents referring to the changes in the stock position other than transactions. As for the disbursements and amortizations of the liabilities, it looks as part of the repayment transactions are being recorded in the IFMIS but the mission was not able to properly understand the debt recording process. Thus, the mission found it particularly difficult to reconcile liabilities data available in the various sources.

39. Data on the rest of the public sector is being collected from financial reports of the public entities and reports of OAG. In collaboration with CSO staff, the mission took initial steps in trying to collect data for GFS compilation process of GG. At the end of the mission, financial statements of 22 public entities (SOE, extrabudgetary units and Lusaka Council) were collected.

40. Regarding LG, the mission learnt that Zambia recently approved a new Local Government Act that demands Councils to produce financial statements as the former Act did not ask for such reports. With the new Act, Councils will be audited by OAG but before they were audited by MLG. For this reason, there are only few councils reporting financial statements. The mission managed to get preliminary financial statement of Lusaka City Council for FY 2016.

41. As a special request from CSO, the mission created templates for collecting financial data from other public entities apart from the BCG entities that would be used to compile GFS.

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E. GFS Compilation and Reporting

42. The compilation process is done in Excel, where there is detailed data and mapping of revenue and expenditure that are used to produce the GFS statements and tables. The mission focused on compiling: (i) revised series of multi-period, 2011–2016, budgetary central government; and (ii) a “working in progress” multisector GG for the fiscal year 2015.

43. The objective of the evaluation of the compilation process, was to assess and improve methods for using existing source data for the compilation and timely dissemination of GFS. CSO has already GFS and CoA bridged tables and clear and transparent methodology to convert data recorded in the national accounting system to the GFS format. “VLOOKUP” and “if” (VBA) functions are being used to allow some consistency with classification process. The mission reviewed the GFS times series of the BCG for the FY 2011–2016, compiled Statements of Sources and Uses of Cash and Financial Balance Sheet FY 2011–2016, on a best efforts basis. It also reviewed COFOG and found out that IFMIS is automatically producing it, although it should be adjusted according to the GFSM 2014. The main problems are concerning the quality of the available data as previously mentioned.

44. From the Statements of Sources and Uses of Cash, it is possible to notice that GRZ has a steady increase of cash receipts from operating activity and equally performance expenses. Considering the cash flows from investment in nonfinancial assets, GRZ had a steady increase in cash deficit since 2013.

45. The main source of revenue is the Income Tax (mainly mineral royalty tax and tax paid by individuals) with average of 46 percent of total annual revenue, followed by value Added Tax that accounts on average to 23 percent and customs and Excise revenues (13 percent on average). Grants in 2011 accounted to 17 percent of total revenue and sharply decreased to less than 1 percent in 2016.

46. As for the expense, the data reflects the elimination of subsidies in the end of FY 2013, as there is nothing registered in the following years. In the last years, there has been an increased accumulation of expenditure arrears (especially regarding VAT refund claims of exporters). On the other hand, capital expenditure does support development in infrastructure (especially pertaining roads, investments in Copperbert and Lusaka, the economic zone and hospitals) and is being financed by disbursement of foreign loans.

Table 2.

GRZ Statement of Sources and Uses of Cash

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47. Regarding the outlays by Function of the Government, Table 3 below presents the annual series starting from 2011 that is consistent with total reported by CSO.

Table 3.

GRZ Outlays by Functions of Government – COFOG

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48. Despite data quality issues reported above, a “work in progress” Integrated Financial Balance Sheet for the BCG for FY2011–2016 (Table 4) with details on debt stocks were produced. Financial assets and liabilities that are included are currency and deposits, debt securities, loans, equity and investment fund shares/units and other accounts receivable and payable.

Table 4.

GRZ Integrated Financial Balance Sheet

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49. The change in net financial worth between years is not only due to financial transactions over the period, but also to holding gains or losses in liabilities and there is a significant residual amount. There are holdings gains and losses in currency in 2014, 2015 and 2016 within data reported in the IFMS but there is nothing reported in the GRZ Financial Reports and the mission could not effectively explain this impact through change in the stock of currency and deposits.

50. At the end of December 2016, the net financial worth for BCG amounted to negative Kwacha 83.054,92 million. The total residual is equal to Kwacha 1.034,69 million which is less than 1 percent of GDP, demonstrating that despite data quality issues, it is possible to have Zambia GFS compilation with reasonable discrepancies.

51. Regarding the high frequency compilation process, e-GGDS is being compiled and submitted to the IMF by the MOF, although it did not send anything since June 2017 as staff claims to need re-training on how to upload data on the system. CSO has started putting together data for compiling quarterly GFS that intends to start submitting to the IMF. Compilation process is similar to the annual GFS compilation process and data quality is the main issue.

52. Further, the mission found also that the MOF compiles and disseminates quarterly debt data to AFR, and CSO staff currently does not have any view on the accuracy of the data. The mission recommended also that this information passes to be compiled by the CSO and be uploaded on the World Bank website as part of its Quarterly Public-Sector Debt Statistics (QPSDS2). The guiding process on how to upload data was provided to CSO staff during the mission.

53. The mission found that this coordination in the process of compiling statistics between institutions do not guarantee consistency of government statistics for Zambia when two institutions are separately compiling without interaction.

54. The mission took initial steps in developing a GFS compilation process for GG and the next two tables (Table 5 and Table 6) below, report the “work in progress” statement of Sources and Uses of Cash and the Balance Sheet that were left to CSO to carry on with the exercise.

Table 5.

GG – Work in Progress Statement of Sources and Uses of Cash

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Table 6.

GG – Work in Progress Integrated Financial Balance Sheet

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55. The exercise uses BCG data for the fiscal year 2015; used financial statements of seven extra-budgetary units: (i) Copperbelt University; (ii) Zambia Institute of Policy Analysis and Research (ZIPAR); (iii) Competition and Consumer Protection Commission; (iv) Energy Regulation Board; (v) Mulungushi University; (vi) Tobacco Board of Zambia and (vii) Zambia Revenue Authority. As for SSF, the exercise utilizes data of the Pension and Insurance Authority and as for LG, the exercise used Lusaka City Council, the largest city council that alone accounts for 40 percent of total Local Government. No consolidation was made, the exercise only considered aggregation of values.

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F. Consistency of GFS and Other Macroeconomic Data

56. The mission was informed about the process of compilation of quarterly and annual GDP especially in regard to the government statistics that are included in the process. The National Account Units of CSO receives from GFS compilers, cross classification (COFOG vs. Economic nature) data that was suggested by a previous IMF TA mission on the System of National Accounts (SNA). Again, the mission found that the methodology is consistent, however, the quality of data available would be the main constraint.

57. The mission met with the BOZ and raised the issue of the need for consistency of macroeconomic statistics; and the linkages of GFS with Balance of Payment (BOP), and Monetary and Fiscal Statistics that are not being paid attention by the Zambian’s authorities. It found that there is no interaction between entities that would guarantee consistency of data.

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G. Resources and Technical Assistance

58. The Public Finance unit of the CSO has five staff, a head, two (2) statisticians, one (1) statistical officer and one (1) intern. The compilation of GFS is done by one of the statisticians with support of the officer that has the task to review excel data files received and make it in format that facilitates the process of compilation GFS. The head of the unit is quite new and is still familiarizing herself to the process.

59. The team is mainly dedicated to the compilation and dissemination of GFS but needs to be trained to acquire sufficient knowledge of the GFS framework to maintain effectively lead of the process, especially when it comes to the compilation of debt statistics. So, overall capacity and knowledge in the GFS needs to be strengthened. Increase in human resources will be required when GFS will be effectively expanded to the public sector.

60. The mission found that CSO staff has not attended any GFS course in more than five years. The understanding was that invitation to attend GFS course are probably being sent for MOF and BOZ. The mission advised CSO to encourage staff to register to available GFS courses.

61. The mission also found that other work conditions are not satisfactory for the process of compiling GFS. CSO staff are using personal computer to compile GFS and personal transport to collect data. CSO staff mentioned that Public Finance Unit has not had an allocation of funds for some years to effectively compile the GFS data.

62. For sustainability and consistency purposes, the mission recommended that the CSO staff produce a GFS manual for compilation and dissemination of GFS data. The mission was pleased to find out that the team was egger to develop an annual publication and incentivize its use in fiscal analysis.

63. A GFS presentation was made during the mission in order to help CSO get a better notion of the GFS framework and to help motivate other Zambian entities responsible for providing and compiling macroeconomic statistics in providing stronger support.

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Detailed Technical Assessment and Recommendations

64. A five-year Action Plan for Implementing GFSM 2014 in Zambia was elaborated in the previous mission and revised in the current mission to incorporate new initiatives and realistic deadlines. It includes recommendations from this mission and the actions. Listed below are the main actions programmed to take place in the next three years.

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A. Action Plan for Implementing the GFSM 2014 in Zambia

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B. Institutional Structure of the General Government

Zambia

Units of General Government

Central Government

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Social security funds

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State Governments

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Local Governments

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Data Coverage

Data in central government tables cover operations of subsectors 1–2

Data in social security funds tables cover operations of subsector 3

Data in state government tables cover operations of subsector 4

Data in local government tables cover operations of subsector 5

A first provisional time series has been estimated for the years 2011 – 2016.

Accounting Practices

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GFSM 2001/2014 Implementation Plan

The Zambian government is participating in the GFS Module of the United Kingdom’s Department for International Development (DFID)-funded Enhanced Data Dissemination Initiative 2 (EDDI 2) project. The project aims at supporting participating countries compile and disseminate full general government GFS, including data on operations, financing, and financial balance sheets.

C. Data and Possible Sources

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D. Budgetary Central Government – Preliminary List of Entities

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E. Local Government – Confirmed List of Entities

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F. Extra-Budgetary Units – Preliminary List of Entities

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