LUSAKA, September 23, 2024 - A new Public Finance Review (PFR) report has stressed the urgent need for Zambia to boost revenue mobilization and improve fiscal governance. The report calls for significant reforms in public investment management and state-owned enterprises (SOEs) to spur sustainable economic growth and alleviate poverty.
The report, titled "Strengthening Fiscal Governance for Transformative Public Sector Investments", outlines the country's fiscal challenges and provides strategic recommendations to foster economic transformation and create fiscal space for essential public sector investments.
"Zambia has the opportunity to unlock substantial economic growth by improving its fiscal governance and making better use of its resources," said Achim Fock, World Bank Country Manager for Zambia. "With stronger revenue mobilization efforts and more efficient public spending, Zambia can build a resilient economy that benefits all citizens, especially the most vulnerable."
The report highlights key challenges and opportunities for Zambia. The PFR notes that while tax collection is stable, it lags regional averages due to over-reliance on mining, large tax expenditures, and inefficiencies in VAT and customs administration. Poor project execution and weak data management have caused inefficiencies in public investment, showing the need for better coordination and transparency. Zambia's SOEs pose significant fiscal risks, with many being unprofitable. The report suggests strengthening governance and accountability to improve SOE performance and mitigate fiscal burdens.
The report emphasizes Zambia's potential to use its natural resources to create fiscal space for investments in infrastructure, education, and healthcare. The government's commitment to macro-fiscal reforms, supported by international partners, provides a robust framework for economic transformation. Achieving the objectives of the Eighth National Development Plan (8NDP) will be essential to fulfilling these ambitions.
"The World Bank will continue supporting the Zambian government in building a more inclusive and resilient economy," said Albert Pijuan, World Bank Senior Economist for Zambia. "By boosting domestic revenue growth, tackling inefficiencies in state enterprises, and making efficient investments in critical infrastructure, Zambia can create lasting improvements in the lives of its citizens."
The report recommends strengthening tax collection, modernizing revenue systems through digitalization, enhancing data governance, transparency of public investment projects, and establishing a unified legal framework for SOEs.
The World Bank remains committed to providing technical assistance and financial support to Zambia in its journey toward fiscal sustainability and inclusive growth.
