General Budget Support

The Embassy provides, together with other Cooperating Partners (CPs), about 20% of its bilateral support in the form of general budget support. As such, it contributes to strengthening the GRZ’s capacity to manage public resources more effectively and transparently. Through this support and its periodic reviews, the Cooperating Partners enhance their partnership with GRZ and lower the transaction cost of development assistance. It further contributes to;

Strengthening the budget preparation and execution
Improving the government‘s accountability to parliament and Zambian public
Strengthening the intra-government dialogues
Improving the quality and effectiveness of the dialogue between the GRZ and CPs
Improving the predictability of aid in Zambia.

For more information see www.mofnp.gov.zm

The Embassy and 6 other CPs provided in 2007 a total USD 144 million of general budget support to the GRZ-budget. With a contribution of USD 10.7 million, the Embassy was one of the smaller contributors. The total planned support for 2008 increases to USD 160 million.

Although general budget support is GRZ’s preferred aid modality, the Embassy only provides this kind of support upon Zambia’s continued commitment to underlying principles, which include satisfactory progress on poverty reduction. The Embassy and other CPs measure progress through a performance framework. If progress is good this will led to more budget support. Performance is measured and reviewed annually with the help of about 30 key performance indicators (Word doc).

In June 2008, the GRZ, CPs and civil society reviewed the GRZ performance over 2007. A major role was played by the Zambian Civil Society and Zambia Members of Parliament. In general terms it was concluded that the GRZ achieves moderate progress to the implementation of the Fifth National Development Plan 2006-2010, but that it is failing to achieve the rural development goals; while most poor are living in the rural areas. As a result of the budget support dialogue, it is envisaged that the GRZ will pay more attention to the rural areas. For more detailed findings click here.

8.1 Overview of general budget support

(in million USD)	2007-real	2008-planned
United Kingdom	49,5	52,8
European Commission	36,8	32,9
Norway	19,0	31,8
Sweden	14,2	15,0
Netherlands	10,7	13,6
Finland	6,7	6,8
Germany	6,7	6,8
TOTAL Budget Support	143,6	159,7

8.2 Findings of the June 2008 review

The joint donor group assessed that Zambia continued to meet the underlying principles for receiving budget support. Implementation of the Fifth National Development Plan takes place although results show the Government of Zambia is failing to achieve the goals in rural development:

Serious concerns have been expressed on agriculture, rural classrooms, rural roads and rural water supply and doing bussiness in rural areas in Zambia.
Public Finance management improves - as evidenced by the preliminary indicators of the Performance Framework and analytic instruments of the OECD-DAC.
Also government of Zambia's commitment to macro economic stability continues to remain strong which will benefit the economy of the country.
Commitment to democratic governance varied across the broad range of issues covered by this subject, but overall the progress was positive albeit often gradual.

The budget support CPs have assessed the GRZ progress in achieving key result indicators in 2007, which had been previously agreed between GRZ, CPs and stakeholders. It appears that 67% of the targets set by the government have been achieved. The 2007 percentage is lower than the previous years (70% to 85%). Under-achievement was especially noted in rural infrastructure and agricultural reforms. For 'social equity' 82% of the targets were met: access to schools and health centres improved, HIV/Aids. These results triggered a discussion facilitated by the Zambia Ministry of Finance between civil society, members of parliament and the CPs over their performance in agriculture, infrastructure and private sector development. All participants agreed that rural development required a higher priority in Zambia. The statements of the CPs at the June 2008 review meeting can be downloaded here (Word doc) and here (Word doc).

The attainment of underlying principles and the 67% score on achieving results mean that the Embassy will not start discussion on changing its budget support commitment in 2009 and 2010. The lower score, however, also means that the Embassy will not pay an incentive tranche of USD 2.9 million in 2009, which would have been provided when an 80% score would have been reached. As such, the Embassy’s budget support for 2009 will remain the same as in 2008.