Zimbabwe 2018

Assessment Purpose, Coverage, Management, and Timing

The objective of the PEFA 2017 assessment is to provide the government with an objective, indicator-led assessment of the national PFM system in a concise and standardized manner to assist in identifying those parts of the PFM systems in need of further reform and development. The assessment also offers an update of progress in PFM systems performance since the last PEFA assessment in 2011 – as part of the Country Integrated Fiduciary Assessment (CIFA) report. 
The scope of the assessment is the central government of Zimbabwe comprising ministries, departments, and agencies (MDAs), non-commercial parastatals (NCPs) and the National Social Security Authority (NSSA). The cutoff date for consideration of data / developments for the purposes of assessment is November 2017 i.e. the last completed fiscal year considered for the assessment is FY2016.
The 2017 PEFA assessment is a joint Government-World Bank exercise, conducted under the guidance of a Government – Donor Oversight Team. The technical work of the assessment is undertaken jointly by the team consisting of Government of Zimbabwe officials and World Bank staff/consultants. Quality assurance of the assessment follows the PEFA Program’s PEFA CHECK procedures as well as the World Bank’s quality assurance procedures. 

Impact of PFM reforms on the three main budgetary outcomes
The PEFA Assessment focused on the extent to which PFM systems are supportive of Government efforts to deliver the three-main fiscal and budgetary outcomes which are – (i) aggregate fiscal discipline, (ii) strategic allocation of resources and (iii) efficient service delivery. 

Aggregate fiscal discipline 
Aggregate budget outturns of the Government show consistent underperformance on aggregate revenue estimates and – in FY2016 - expenditure was significantly above budget, leading to budget deficits far higher than budgeted in each year assessed. On the positive side, existence of some well-functioning systems - including comprehensive macro-economic forecasting, setting of aggregate fiscal targets, such as deficit and debt stock, as well as medium term expenditure planning - supports achievement of aggregate fiscal discipline. Those system strengths, however, are undermined by weaknesses that in particular may include inadequate impact analysis of revenue measures, limited effectiveness in Parliamentary scrutiny of budget estimates and of budget execution, MDAs bypassing of budget execution controls built into the integrated Public Financial Management System (PFMS) and accumulation of excessive payment arrears. The effect of the very substantial extra-budgetary operations on aggregate fiscal discipline is not known due to lack of consolidated data, which increases the risk of unintended macro-fiscal impact of government operations on the national economy.
Strategic resource allocation 
The key processes to achieve strategic resource allocation relate to the budget formulation process, budget execution including investment management and reporting on budget execution. High levels of compositional variance in budget outturns in 2016 – the only year for which data is available to assess this – indicate important issues that need addressing. Strengths of the Government systems in this respect includes medium-term budget planning with performance objectives and targets stated for all votes and functions, and comprehensive sector strategic plans for some of the largest service sectors such as education and health. Weaknesses in systems to support this outcome are found in the not well-developed budget documentation, inadequate public access to budget information including lack of timely budget execution reports comparable to the approved annual budget. Also of concern are the large government operations not reported in the budget or any other consolidated format and the limited effectiveness of Parliamentary oversight of budget execution.

Efficient service delivery
Service objectives and targets set out in budget documentation, combined with medium term budget planning, are existing system features which support efficient service planning. However, large compositional variance in expenditure budget outturns suggest that shifts in priorities during the year lead to some services being deprived of funding for the planned annual service outputs. Transparency of procurement processes is lacking due to missing data by which to monitor the procurement at an aggregate level, and hardly any publicized information other than fragmented tender announcements. Together with a high threshold for use of open tender and bypassing of the purchase order and commitment controls of PFMS, this suggests a high risk of irregularities in procurement. As moreover capital investments for budget funding are selected on the basis of inadequate criteria and project execution monitoring is lacking a standard approach with high level overview, there is a high risk that value for money is not being achieved from much of budgetary funding. Lack of public access to comprehensive information on budget planning and execution as well as inadequate implementation of audit recommendations indicate that accountability for use of public resources and delivery of services may not be as effective as desirable.

Main Performance Changes since 2011 PEFA Assessment
Improvements were noted in the areas of (a) aggregate budget credibility of both expenditure and revenue (b) budget planning and preparation (c) revenue administration (d) annual financial reporting and (e) external audit, whereas areas of deterioration included (i) increasing volumes of payment arrears and revenue collection arrears (ii) poor commitment controls (iii) increasing unreported government operations outside the central government budget and (iv) timeliness and data concerns for in-year budget execution reports.
Overall, the improvements would in particular impact the government’s ability to ensure that strategic allocation of resources in the budget estimates is in line with political priorities and that efficiency in the use of financial resources is improved through timely and audited financial resources.

Ongoing and Planned PFM Reform Agenda
The Government has adopted a development strategy for efficient resource utilisation, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIM-ASSET 2013-2018) which contains fiscal reform measures that include the resolve to “Boost the efficient use of Government resources through timely reporting and strengthening the Public Finance Management Systems”. This Strategy was accompanied by a PFM Roadmap with the objective to provide a comprehensive plan to cover the whole PFM cycle incorporating seamlessly the way forward on development of the integrated and computerized PFMS and the policy recommendations in the CIFA 2012 report. 
This process is supported by the PFM Enhancement Project (PFMEP), which is being implemented with multi-donor funding provided by the Zimbabwe Reconstruction Fund (ZIMREF) administered by the World Bank. The Project aims to (1) improve financial reporting, strengthen fiscal controls, and enhance financial transparency; (2) enhance effectiveness of internal controls and internal audit; (3) enhance accountability through strengthening of external audit; and (4) strengthen the demand side of transparency and accountability by enhancing the parliament’s role in PFM. A separate World Bank executed project under ZIMREF is supporting improvements in Public Investment Management (PIM) and reforms in State Owned Enterprises and Parastatals. In parallel, AfDB has supported the Government’s reforms through four major, PFM related projects, two of which are still ongoing and are focused on transparency and accountability as well as oversight of state enterprises and parastatals. Moreover, UNDP with EU and Sweden have provided support to Parliament and the Auditor General, whilst IMF has provided technical assistance on an annual basis in other PFM related areas such as revenue administration.