Fiscal transparency panacea to Zim socio-economic problems?

Zim economy

ZIMBABWE is expected to hold harmonised elections in August 2023. Major political parties have already concluded or are at the final stages of primary elections to select their candidates.

There are 210 constituency seats and over 1 000 wards up for grabs for parliamentary and local authorities’ representatives respectively. The government also indicated that preparation for this occasion is now at an advanced stage.

The major aspect of elections is access to public resources through an electoral victory hence the reason they are often the object of fraught competition and conflict.

This is more pronounced in developing nations where fiscal transparency is not a big deal despite it being a prerequisite for good governance. In anticipation of increased opaque fiscal activities during the election season, this week’s columnis,therefore, highlighting the importance of fiscal transparency and accountability (T&A) in government.

Fiscal transparency apprises citizens of how tax revenues are used by the government by providing them a window into Treasury budgets and in turn, those citizens will be able to hold  their government accountable.

Thus, underpinning market confidence and sustainability. In the same vein, fiscal accountability entails compliance with stipulated laws and regulations, consistency with suitable principles of accounting, accuracy, and fairness of financial statements, and enforcement of the legitimacy of fiscal expenditures.

In other words, accountability is the acceptance of responsibility for honest and ethical conduct towards others.

According to Zimbabwe’s constitution, financial management must be responsible, fiscal reporting must be clear, and public borrowing and all transactions involving the national debt must be carried out transparently and in the best interests of Zimbabwe.

All public funds must be used transparently, prudently, economically, and effectively. There should also be accountability and participation to ensure that the government and all other public institutions are accountable in theexercise of their PFM functions.

In addition, there should be formal and increased opportunities for the public including disadvantaged groups and marginalised communities to engage in all national and local budget processes.

The constitution further highlights that all public oversight institutions including the Office of the Auditor-General (OAG), Zimbabwe Anti-Corruption Commission (Zacc), Parliament, and other bodies with oversight functions concerning PFM should be adequately resourced and be independent to provide effective oversight of the executive branch’s financial management processes.

This must be buttressed by the responsibility principle which entails that all public bodies and officials assigned to PFM-related processes are expected to regard their responsibility to exercise their functions in the interest of the public.

Furthermore, there must be fiscal equity where all PFM systems are directed towards national development, and in particular the burden of taxation is shared fairly; revenue raised nationally is shared equitably between the central government and provincial and local tiers of government; and expenditure is directed towards the development of the nation, and special provision is made for marginalised groups and places.

Generally, fiscal transparency and accountability (T&A) are the major building pillars for governing democratic nations. Fiscal transparency serves to open the government to those it serves, that is, allowing the public to participate and to keep informed of the government’s budgets, spending, and projects.

It is also a powerful weapon against corruption because when government processes become transparent, there will be limited scope for public officials to engage in corrupt activities.

In an ideal world, there is a full implementation of PFM-related legislation, which is key in bringing maximum efficiency in all financial management.

If this holds, one would expect the presence of all budget (fiscal) transparency indicators. For example, the government would be ensuring that budget documents and data are open, transparent, and accessible through the availability of clear, factual budget reports which should inform the key stages of policy formulation, consideration, and debate, as well as implementation and review.

Also, all the budgets and government spending will be approved only by the Parliament. In the same vein, the Parliament will be awarded adequate time to scrutinise budget proposals and approve them after extensive public parliamentary debates.

At the same time, the citizens will be provided with equal opportunities to directly participate in public debates and the design of fiscal policies. This mainly includes budget consultations and the publication of simplified citizens’ budgets.

Furthermore, there will be unlimited access to all public information, adequate resources, and maximum statutory independence of oversight and control institutions such as the Office of Auditor-General (OAG).

There will also be maximum integrity in public sector procurement.

This largely entails the opening up of the entire public procurement cycleincluding openness in the procurement system (procedures, regulations and institutional frameworks), competitive tenders, bidding documents, contract documents as well as evaluation reports.

Nevertheless, the reality shows that there is a lot to be desired in Zimbabwe’s quest for fiscal transparency. For instance, the parliament follows a whipping system where MPs are whipped/coerced to vote according to their party’s given positions rather than according to their ideology or the will of their constituents.

This helps to explain why over the years Treasury is realising budget overruns even without parliamentary blessing knowing that the same Parliament will approve the request for condonation without any repercussions whatsoever.

For instance, despite budget surplus rhetoric, Treasury incurred cumulative budget overruns of ZW100,7 billion during the period of the Transitional Stabilisation Programme (TSP) (2019-2020).

It also reportedly spent more than what was planned (US$10 billion) during the 2015-18period. In the upcoming electoral season, Treasury is likely to incur budget overruns again as spending pressure continues to mount.

The dismal performance of the ZWL against the US dollar year-to-date attests to excessive spending and increased liquidity.

Also, underfunding of parliamentary businesses like the Parliamentary Budget Office (PBO) over the years has fuelled the brain drain.

The massive exodus of experienced PBO employees is nowconstraining a more informed engagement between the legislative branch and its executive counterpart.

A weak legislature is a free window for Treasury to propose and implement fiscal policies and budgets that are unsustainable. The longevity of Parliamentary underfunding has degenerated into severe capacity issues thereby inhibiting it to perform its crucial oversight function.

More so, there is a clear disregard for public audit requirements as shown by the continuous late submissions of accounts by public institutions for auditing by the Auditor-General.

For instance, the latest 2021 OAG report shows that 71/92 local authorities had not submitted their accounts for auditing as of May 2022.

The OAG recommendations are also being ignored as out of 141 findings reported in the 2021 report, only nine were fully addressed.

The nation is also characterised by procurement scandals associated with tenderprenuership deals.

These closed deals, such as the US$60 million Drax Covid-19 scandal and the over US$300 million Pomona Waste to Energy deal for Harare fail to ensure a fairer and equitable treatment of all potential government suppliers and eliminate competition thus contributing to poor value for money for citizens.

In addition, the nation is failing to account for revenues and expenditures in natural resources mostly due to escalating cases of mineral smuggling.

For example, government statistics show thatforex-strapped Zimbabwe is losing approximately US$100 million of revenue per month(US$1,2 billion per year) to gold smuggling alone.

All this is undermining fiscal transparency and accountability and breeding corruption and abuse of public resources.

The foregoing shows that Zimbabwe has weak fiscal transparency and accountability systems, a situation that keeps deteriorating.

This, coupled with other election transparency issues such as election procedures, the voters’ roll, and election results counting andtabulation processes poses great risks to theeconomy and Zimbabwe’s Vision 2030.

Sibanda is an economic analyst and researcher. He writes in his personal capacity. — [email protected] or twitter: @bravon96

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