Resource Allocation and Flows, Resource Allocation and Flows, Decentralisation, and Poverty Decentralisation, and Poverty

Reduction: The Case of Rural Water Reduction: The Case of Rural Water Supply and Sanitation in ZambiaSupply and Sanitation in Zambia

Research Team:Research Team:

Eric GutierrezEric Gutierrez WaterAid, Regional Advocacy WaterAid, Regional Advocacy and and Research Adviser for Southern Research Adviser for Southern AfricaAfrica

Webby WakeWebby Wake University Zambia, Acting Chair, University Zambia, Acting Chair, Department of EconomicsDepartment of Economics

Savior MwumbwaSavior Mwumbwa WaterAid, Research OfficerWaterAid, Research Officer

Outline of PresentationOutline of Presentation

Brief on the Annual Budget ProcessBrief on the Annual Budget Process Findings of the studyFindings of the study Estimating finances needed to meet Estimating finances needed to meet

MDGsMDGs

Notes on the BudgetNotes on the Budget

Annual Budgets Annual Budgets (Parliament)(Parliament)

Poverty Reduction Poverty Reduction Strategy Paper 2002-2004 Strategy Paper 2002-2004

(Multi-stakeholder (Multi-stakeholder consultations)consultations)

Transitional National Transitional National Development Programme Development Programme

2002-2005 2002-2005 (Multi-stakeholder (Multi-stakeholder consultations)consultations)

Medium-Term Expenditure Medium-Term Expenditure Framework 2003-2005, Framework 2003-2005,

(Ministry/ Sectoral Advisory (Ministry/ Sectoral Advisory Groups)Groups)

Public Investment Public Investment Programme 2002-2005 Programme 2002-2005 (Ministry of Finance)(Ministry of Finance)

Tools for shaping and structuring Tools for shaping and structuring the Annual Budgetthe Annual Budget

The Resource EnvelopeThe Resource EnvelopeSourceSource Projection (as Projection (as

percentage of GDP)percentage of GDP)Amount in kwachas Amount in kwachas

(1 = 1 billion)(1 = 1 billion)

2002 Tax revenue 2002 Tax revenue 18.4% of GDP18.4% of GDP 2,940 ($588 m)2,940 ($588 m)

External supportExternal support 5.6% of GDP5.6% of GDP 891 ($178 m)891 ($178 m)

Deficit FinancingDeficit Financing 7.3% of GDP7.3% of GDP 1,168 ($234 m)1,168 ($234 m)

Total for 2002Total for 2002 4,999 4,999 ($1000 m)($1000 m)

2003 Tax revenue2003 Tax revenue 18.5% of GDP18.5% of GDP 3,403 ($681 m)3,403 ($681 m)

External supportExternal support 5.3% of GDP5.3% of GDP 986 ($197 m)986 ($197 m)

Deficit FinancingDeficit Financing 4.3% of GDP4.3% of GDP 787 ($157 m)787 ($157 m)

Total for 2003Total for 2003 5,176 5,176 ($1035 m)($1035 m)

2004 Tax revenue2004 Tax revenue 18.6% of GDP18.6% of GDP 3,782 ($756 m)3,782 ($756 m)

External supportExternal support 5.1% of GDP5.1% of GDP 1,043 ($209 m)1,043 ($209 m)

Deficit FinancingDeficit Financing 4.1% of GDP4.1% of GDP 832 ($166 m)832 ($166 m)

Total for 2004Total for 2004 5,657 5,657 ($1131 m)($1131 m)

Source: PRSP, May 2002

Finance Ministry calls for budget submissions

April

Budgets made by all spending bodies

May

Head offices consolidate budget submissions and sends them to Finance Ministry

June-July

“Estimates” produced and sent to Parliament for approval

August

Parliament deliberates on the budget; conducts budget hearings

Sept - November

Parliament approves the budget for the following year; Appropriation Act

December

THE BUDGET PROCESS THE BUDGET PROCESS OF ZAMBIA (IN OF ZAMBIA (IN

THEORY)THEORY)

Finance Ministry calls for budget submissions

April

Budgets made by all spending bodies

Aug-Sept

Head offices consolidate budget submissions and sends them to Finance Ministry

December

“Estimates” produced and sent to Parliament for approval

January

Parliament deliberates the budget as ‘committee of the whole’

Jan - March

Parliament approves Appropriation Act

March

THE BUDGET THE BUDGET PROCESS OF ZAMBIA PROCESS OF ZAMBIA

(IN PRACTICE)(IN PRACTICE) With no legislative authorisation for a budget when the financial year starts, President issues a warrant authorising release of funds from Treasury.

FindingsFindings

2001

HeadingHeading MinistryMinistry Line item in the BudgetLine item in the Budget Authorised provisionAuthorised provision Actual expenditureActual expenditure

02/03 OVP-DOR Water Supply and Sanitation 50,000,000 -

13/01 MEWD Grants to the Water Board 550,000,000 602,970,213

13/01 MEWD Grants to NWASCO 550,000,000 324,037,330

13/03 MEWD Poverty Reduction Programme - Rural Water (Boreholes, Wells)

17,873,404,000 5,345,856,860

13/03 MEWD Strengthening of Hydrological Stations 450,000,000 551,473,891

13/03 MEWD Rural Water Development - Eastern Province 200,000,000 118,313,774

13/03 MEWD Drought/Flood Mitigation 500,000,000 49,079,881

13/03 MEWD Zambezi River System 110,000,000 97,936,129

13/03 MEWD Hydrological Assessment and Strengthening of Network

300,000,000 503,292,132

13/03 MEWD Rehabilitation/Construction of Earth Dams 593,460,000 765,414,946

13/03 MEWD Kafue Basin Action Plan 200,000,000 199,510,847

13/03 MEWD Rural Water Supply Program - Eastern Province 6,600,000,000 839,946,612

13/03 MEWD Chongwe Multipurpose Dam 185,690,000 167,987,110

13/03 MEWD Ground Water Monitoring and Exploration 339,790,000 759,293,828

13/03 MEWD Hydrogeological Mapping 184,800,000 26,252,234

13/03 MEWD Water Resources Information Center 33,970,000 45,970,000

13/03 MEWD Water Resources Action Programme 235,400,000 220,422,830

13/03 MEWD Rural Water Supply and Development Support 116,000,000 350,520,316

13/03 MEWD Rural Water Development for Drought Prone Areas 5,175,000,000 228,662,340

20/01 MLGH Livingstone WSS Services 20,300,000,000 6,945,525,023

20/01 MLGH Six Townships Water Supply - NW Province 790,000,000 -

20/01 MLGH Lusaka Water Supply Scheme (Rehabilitation of Distribution System)

10,500,000,000 -

1. Allocations in the Budget are 1. Allocations in the Budget are Greater than the Resource EnvelopeGreater than the Resource Envelope

Year What the resource envelope provides, if divided equally over

three year

Capital expenditures budgeted for water

and sanitation

Actual expenditure

2002 70.6 billion K ($14.13m) 135.7 billion ($27.1m) No figures yet

2003 70.6 billion ($14.13m) 152.1 billion ($30.4m) No figures yet

2004 70.6 billion ($14.13m) No figures yet No figures yet

Source: PRSP, May 2002 and Estimates of Expenditures, 2002 and 2003.

2. Great variance between 2. Great variance between provision and actual expenditureprovision and actual expenditure

Year Authorised Provision for water

and sanitation

Actual Expenditure for water and

sanitation

Expenditure/Provision

1999 35,974,179,010 3,473,308,922 9.65%

2000 52,213,690,709 8,176,348,001 15.65%

2001 197,587,575,884 48,787,082,154 24.70%

2002 135,696,095,997 No figures available -

2003 152,107,960,726 No figures available -

Source: Consolidated from 1999, 2000 and 2001 Financial Reports and 2002, 2003 Estimates of Expenditures. See Annex 1 for breakdown.

Year Authorised Provision for water

and sanitation

Actual Expenditure for water and

sanitation

Expenditure/Provision

1999 28,220,854,000 553,648,165 1.96%

2000 13,591,979,000 614,906,368 4.52%

2001 34,197,514,000 11,196,941,273 32.74%

Source: Consolidated from 1999, 2000 and 2001 Financial Reports and 2002, 2003 Estimates of Expenditures.

Table 7 – Comparison of Authorised Provision and Actual Spending on WSS Capital Expenditures,

Ministry of Energy and Water Development, 1999-2001

3. Local authorities have little say in the 3. Local authorities have little say in the allocation and decision-making on allocation and decision-making on

resourcesresources

• Local officials get to know about allocations only if central offices inform them

• Local government personnel and machinery lie idle for most of the year because no funds are released (even when they are approved)

• District governments do not have the power to budget for capital expenditures, only salaries and other recurring expenditures.

4. The budget process appears to be 4. The budget process appears to be unsystematic and unclearunsystematic and unclear

• Are the tools for the annual budget (PRSP, TNDP, PIP) actually being used as tools?

• Lack of clarity between the functions of the MEWD and the MLGH.

• MFNP identified as spending body for WSS capital expenditures; not clear from budget whether this ended up in MEWD

• Some bodies bid for more money than they can spend, because it will be cut anyway.

• At the end of the year, unspent sums are transferred to other accounts

• Parliament does not engage critically in the budget process.

5. WSS financial resources could easily 5. WSS financial resources could easily be redirected away from unserved into be redirected away from unserved into

better-served areas. better-served areas.

• Urban centres getting the lion’s share of allocations for projects that were not identified as priorities for expenditure under the PRSP.

• Not clear if poor peri-urban areas are prioritised under these allocations.

6. Donors provide 70-80% of allocations 6. Donors provide 70-80% of allocations to WSS sector, and are driving much of to WSS sector, and are driving much of

the process. the process.

• On-budget donor support up to 70% of total spending; including off-budget, it could reach 80%

• With this leverage, why have donors not pushed for decentralisation reforms in WSS?

• Certain donor-supported sectoral reforms are evident, e.g. privatisation of urban water utilities.

Table 10: Identified On-budget Donor-Supported Items in the 2001 Zambia National Government

Budget Allocations for Water and Sanitation

Description of Item Authorised provision

Donor and amount provided Actual Expenditure

Livingstone WSS Services 20,300,000,000 19,800,000,000 KfW loan 6,945,525,023

Six Townships WSS NW Prov. 790,000,000 600,000,000 KfW loan -

Lusaka Water Supply Scheme 10,500,000,000 9,810,000,000 ADB/AFD loan -

Kitwe Water Supply Scheme 1,675,000,000 1,225,000,000 ADB/AFD loan 402,854,193

Solwezi WSS System 850,000,000 670,000,000 KfW loan -

Urban Restructuring & Expansion of Water Supply

2,835,000,000 1,800,000,000 IDA grant 1,397,362,981

Improvement of Water Supply of NW side of Lusaka City

7,750,000,000 6,500,000,000 EU grant 1,000,012,830

Lusaka Water Supply Rehabilitation Project

31,869,398,000 15,304,732,000 ADB loan 2,583,641,500

TOTALS 139,974,804,000 99,19399,193,532,000,532,000 14,881,980,416

Source: pages 147 to 155 Estimates of Revenue and Expenditure, 2002. Source for column on actual expenditure are pages 168-175 of Financial Report, 2001.

7. The approach to WSS provision is 7. The approach to WSS provision is largely an engineering solution. largely an engineering solution.

8. Sanitation is not on the agenda8. Sanitation is not on the agenda

Estimating Finances Needed to Meet MDGs

Starting Baseline – 1993-97 Water Starting Baseline – 1993-97 Water Point Inventory of ZambiaPoint Inventory of Zambia

Province District Rural Popn No of WP WP in use WP NIU WPD all WPD IU

Southern Choma 142,596 298 223 75 2.09 1.56

Southern Gwembe 41,326 72 50 22 1.74 1.21

Southern Kalomo 197,875 299 189 110 1.51 0.96

Southern Mazabuka 136,918 389 233 156 2.84 1.70

Southern Monze 115,868 454 327 127 3.92 2.82

Southern Namwala 90,420 390 263 127 4.31 2.91

Southern Siavonga 30,395 88 28 60 2.90 0.92

Southern Sinazongwe 63,794 130 66 64 2.04 1.03

Western Kalabo 87,817 114 101 13 1.30 1.15

Western Kaoma 135,059 178 125 53 1.32 0.93

Western Lukulu 53,355 118 103 15 2.21 1.93

Western Mongu 108,796 402 296 106 3.69 2.72

Western Senanga 136,912 552 432 120 4.03 3.16

Western Sesheke 61,574 124 98 26 2.01 1.59

Calculate what is needed to bring WPD Calculate what is needed to bring WPD in each district to 4 water points per in each district to 4 water points per

thousandthousandTable 5: Projections on the needed growth in number of rural water points in Kaoma District, Western Province, Zambia

Year Rural Population Estimates

(constant growth of 3.3%)

New Water Points Added

Number of Water Points at the End of the year

Water Point Density at end of the

year

2003 162,779 192 1.18

2004 168,151 64 256 1.52

2005 173,700 64 320 1.84

2006 179,432 64 384 2.14

2007 185,353 64 448 2.42

2008 191,470 64 512 2.67

2009 197,788 64 576 2.91

2010 204,315 64 640 3.13

2011 211,057 64 704 3.34

2012 218,022 64 768 3.52

2013 225,217 64 832 3.69

2014 232,649 64 896 3.85

2015 240,327 64 961 4.00

Make national projectionsMake national projections

• Total number of water points needed each year – 1813

• Very rough calculation of cost – K 45 billion ($9 million) each K 45 billion ($9 million) each yearyear; reductions can be made if inventory is updated, and lower-cost technology options chosen.

• This figure looks high but is not unaffordable. This is also high-value investment because of the impact of water provision on economic productivity, health and primary education.

• Note: Equity in distribution is not shown here

• Cost of updating inventory -- $1000 per district, at most 1 month work in each district, involving 8-10 local district and D-WASHE personnel; includes local district-level planning workshop

Some RecommendationsSome Recommendations

• Undertake local level planning that is consolidated at district level

• Decentralise financial allocation and decision-making through conditional grants from national to district governments (e.g. Uganda experience)

• Strengthen budgeting mechanisms; non-state actors can lobby for the institutionalisation of budget reforms.