Analysis of Zambia’s 2022 financial statements – Part 3
By Andrew Chibuye
What does it all mean?
I have decided to go back to basics to provide an overview of how the financial performance of the government impacts citizens, the community and the country as a whole. Zambia is currently developing its budget for 2024 and so I’ll take some time to discuss a few basics that should hopefully help us understand the country’s finances better.
Ultimately, I hope that more of us will be able to participate in the process as a result of having a better understanding.
The way that a government generates then utilises resources is a critical element of any country’s economic and social well-being. The budget is the plan that outlines this.
That budget presentation answers the questions:
1. What are the country’s PRIORITIES?
2. What are the FINANCIAL IMPLICATIONS of the outlined priorities?
3. To deliver on the priorities, HOW MUCH must be spent and ON WHAT?
4. HOW will the country RAISE THE RESOURCES needed to deliver? i.e… What policies or measures will help deliver what is required?
5. HOW will the shortfall be funded?
The reality is that many variables influence the successful implementation of any budget. There are factors within and outside the control of the country and its citizens.
So, what is the significance of the financial statements that were published?
As I’ve said, they tell us the story of how resources were raised and how these were spent.
THE IMPORTANCE OF GOVERNMENT SPENDING IN ANY ECONOMY
The reality is that no matter how economically prosperous any country is, a government’s spending patterns have a fundamental impact on that country.
DIRECT EFFECTS (EXAMPLES)
1. Jobs are created… Think about the 30,000 teachers and 11,000 health workers hired by Zambian government.
2. Infrastructure development… e.g., roads, schools, hospitals etc.
3. Social and community support and investment… Think CDF, Social Cash transfers etc.
4. Government service delivery… A very broad category which generally is costs incurred by the government to function for the service of citizens.
5. Economic stimulus and indicator changes… Government activity also directly contributes to economic outturn. Have you ever come across the term “Economic stimulus package(s)”? This is simply expenditure by the government aimed at directly driving economic activity.
INDIRECT EFFECTS
To a large extent, these are similar to the direct effects except that they occur through the activity of individuals and the private sector.
For example; the hiring workers by the government (direct effect) leads to more people who are getting paid and are then spending money in the economy buying various goods and services (indirect effect).
On Monday 24th, I’ll discuss the meaning and implications of outcomes such as budget surpluses and deficits and positive and negative variances etc.
Keep sending me your questions.
Have a great weekend!
