An Analytical Desk Review of the Implementation of Fiscal Decentralisation in Zambia: Challenges and Opportunities

Abstract

Fiscal decentralization, coupled with effective intergovernmental fiscal relations, stands as a cornerstone in the evolution of modern governance structures. This paper analyzes the implementation of fiscal decentralisation in Zambia as part of its initiatives across diverse socio-economic and political contexts for accelerated national development. The review was guided by three objectives which were: to review the existing legislation that supports implementation of fiscal decentralisation in Zambia; to assess the revenue and expenditure autonomy assignments of fiscal decentralisation in Zambia; and to recommend a fiscal transfer system to be used to enhance the implementation of fiscal decentralisation in Zambia. The study is based on secondary data on fiscal decentralization collected in official sources of Zambia’s Ministry of Finance and National Planning, Ministry of Local Government and Rural Development, and Cabinet Office – Decentralization Secretariat. All the data was processed by and used in the right format for the analysis of implementation of fiscal decentralization in Zambia. Through a combination of qualitative and quantitative methodologies, this study analysed the real level of fiscal decentralization made in Zambia. Key findings of the study was that Zambia does not have an institution to supervise fiscal decentralization except a desk at Cabinet Office – Decentralization Secretariat. Besides, Local authorities have little autonomy in administering revenues and expenses as such, one of them requires approval by the Minister of Local Government and Rural Development. This hampers innovation around revenue generation as there is no known parameter used to grant or deny approval. Additionally, some of the aspects of the Zambia Intergovernmental Fiscal Architecture have not been implemented thereby depriving local authorities of revenue. These include Matching grants, revenue sharing of tolls and Road Transport and Safety Agency (RATSA) fees which are supposed to be shared between Central Government and local authorities as road maintenance is a concurrent mandate and revenue sharing for national income collected by Central Government from local authority jurisdictions. Finally, the connection between the level of fiscal decentralization and the scheme of intergovernmental fiscal relations is very important, to ensure maximum effectiveness of local government financing. The quality of the distribution of funds provided by the scheme of intergovernmental fiscal relations and the level of fiscal decentralization has a direct relationship. Balancing these two mechanisms is the most important way to increase the quality of public services at the local level as a way of enhancing the implementation of the fiscal decentralization. Arising from the study’s finding, there is need for amendment and harmonization of legislation governing the devolution process and procedures in order to empower the designate entities to carry out their mandate without unnecessary cob-webs. The local authorities also need autonomy on revenue mobilization and expenditure which are devoid of central government interference and/or rent-seeking pursuits. Furthermore, there is need to balance the level of fiscal decentralization and the scheme of intergovernmental fiscal relations in order to improve the quality of funds distributed and the effectiveness and efficiency in local government financing.