Transcript Zambia: Macroeconomic Constraints, Evolution and Access to

Lusaka, 1 December 2010
Public Expenditure Review Workshop
Outline
 Macroeconomic Constraints
 The Evolution of Fiscal Policy
 Composition of Public Spending
 Benefit Incidence of Public Spending
 Conclusions
Macroeconomic Constraints
 Zambia has made significant strides on the macro
economy over the last decade
 Growth has been the result of favorable external
conditions but based on adequate economic
policies
 Structural reforms, as well as fiscal, monetary, and
exchange rate policies have resulted on a stable
macroeconomic environment of low inflation
 Dependence on copper exports and government
revenues pose a challenge
Economy has been growing by about 6
percent in the last decade
7.0
6.0
Real GDP Growth
(Annual percent change)
5.0
4.0
3.0
2.0
1.0
0.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
Inflation has fallen to single digits
35
30
Annual Inflation
(percent)
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
The Current Account deficit has been
reduced
5.0
0.0
-5.0
External Current Account
(percent of GDP)
-10.0
-15.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
Evolution of Fiscal Policy
 Unsustainable high public (external) debt was caused
by weak fiscal discipline and inefficient state-owned
enterprises
 Privatization initiated a period of fiscal stabilization
reforms in the early part of the decade
 Debt relief (HIPC and MDRI) in 2006 was the result of
a strong reform program
 Higher fiscal revenues are needed to support
government spending priorities (and lower donor
support)
Evolution of Fiscal Policy
2.0
0.0
-2.0
-4.0
Fiscal Deficit
(percent of GDP)
-6.0
-8.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010f
Evolution and Composition of Public
Spending
 Overall public spending rose slowly through 2006
and slightly faster thereafter (falling in 2009)
 Spending rose by 63% in real terms from 2002 to
2009, but only from 20% to 21.5% of GDP.
 Spending does not account for aid (project grants)
 Budget execution has improved (budget cycle and
capital spending)
 Limited availability of resources (both domestic
and external) require greater efficiency (to do
more with less)
Evolution and Composition of Public
Spending
20,000
18,000
16,000
14,000
12,000
under spending
10,000
8,000
Actual
6,000
Budget
4,000
2,000
0
2002
2003
2004
2005
2006
2007
2008
2009
Composition of Public Spending
 Education remains the largest sector
 Spending on transport (roads) has accelerated
 Health spending, which had recovered since 2006, fell
slightly in 2009
 Agriculture spending has increased, but two major
programs (Farmer Input Support Program and Food
Reserve Agency) account for most of it
 Spending on the Water sector remains low
(considering the important effect on health)
Composition of Public Spending
(constant 2009 prices)
3,000
EDUCATION
HEALTH
2,500
TRANSPORT (ROADS)
AGRICULTURE
2,000
WATER
1,500
1,000
500
0
2002
2003
2004
2005
2006
2007
2008
2009
Poverty and Inequality
 National poverty rates have fallen by a small
percentage, from 68% in 1996 to 59% in 2006
 Poverty remains very high in rural areas, at 77% in
2006, compared to 84% in 1996
 But it has continue to fall in the urban areas, to
27% in 2006, from 41% in 1996
 In addition to the rural-urban divide, inequality
has actually increase (the Gini coefficient rose
from 47.4 in 1996 to 52.6 in 2006)
Poverty and Inequality
Population by Consumption Quintile and Place of Residence, Zambia
2006
2,500,000
2,213,092
1,964,024
2,000,000
1,808,104
1,725,915
1,500,000
1,184,320
1,159,760
Rural
Urban
1,000,000
618,667
500,000
536,155
379,167
132,950
0
Poorest
2nd
3rd
4th
Richest
Benefit Incidence of Public Spending
 Poverty reduction is a difficult goal to achieve through
the budget process on an annual basis
 But government should be able to identify which
expenditures have a positive impact in reducing some
of the effects of poverty
 Governments usually concentrate in public goods such
as education and access to health
 Equity analysis does not substitute for need to analyze
efficiency of public spending (ex-ante and ex-post)
Benefit Incidence - Education
 Education is the largest sector on government
spending
 Data from 2006 shows that 32 percent of the
poorest quintile of the 15-19 years old has not
attended school (vs. o.6 percent of the richest)
 Total (primary and secondary) net enrollment rate
for the poorest rural quintile is 66 percent,
compared to 88 percent for the richest urban
quintile
Educational Outcomes
Overall Enrollment Rate of Primary and Secondary Schooling by
Consumption Quintile and Locality, Zambia 2006
100
80
66.4
69.9
73.7
75.7
77.9
81.5
80.4
83.9
87.5
81.9
60
Rural
Urban
40
20
0
Poorest
2nd
3rd
4th
Richest
Benefit Incidence – Access to Electricity
 Only 20 percent of the total population has access
to electricity, but only 3 percent of the rural
population
 Compared to 51 percent of the urban households
 In equity terms, 64 percent of the richest quintile
has access to electricity compared to 0.6 percent of
the poorest quintile
Benefit Incidence- Access to Electricity
Access to Electricity for Lighting by Consumption Quintile and Location,
Zambia 2006
100
76.8
80
64.0
60
Rural
44.6
Urban
40
Total
25.0
24.3
21.0
20
10.8
0.5
2.7
0.6
8.2
2.4
0.8
2.4
5.8
0
Poorest
2nd
3rd
4th
Richest
Benefit Incidence - Water
 Water services are dominated by various publicsector and quasi-public institutions
 Based on data of the 2006 LCMS, 65 percent of the
poorest quintile uses water from an unprotected
well or a river
 Compared to 72 percent of the richest quintile uses
water from a public or private tap
Benefit Incidence - Water
Source of Water Supply by Consumption Quintile, Total
100%
80%
60%
40%
20%
0%
Poorest
River
2nd
Well-unprotected
3rd
Well-protected
4th
Borehole
Own tap
Richest
Public/other tap
Conclusions
 Zambia has achieved significant gains over the last
decade at the macroeconomic level
 Despite faster growth, government spending
remains constrained (by resources and in its
effectiveness)
 No significant results of government spending on
reducing poverty (or inequality)
 Analysis of public spending efficiency limited by
data availability, but more can be done