Analysis of the Public Finance Management Act of 2018
Public Financial Management (PFM) refers to the set of laws, rules, systems and processes used by sovereign nations (and sub-national governments), to mobilise revenue, allocate public funds, undertake public spending, account for funds and audit results (Lawson, 2015). It encompasses a broader set of functions than financial management and is commonly conceived as a cycle of six phases, beginning with policy design and ending with external audit and evaluation. A large number of actors engage in this “PFM cycle” to ensure it operates effectively and transparently, whilst preserving accountability.
Why Public Financial Management (PFM) is Important
A strong Public Financial Management (PFM) system is an essential aspect of the institutional framework for an effective Government because:
- Effective delivery of public services is closely associated with poverty reduction and economic growth, and countries with strong, transparent, accountable PFM systems tend to deliver services more effectively and equitably and regulate markets more efficiently and fairly. In this sense, good PFM is a necessary, if not sufficient, condition for most development outcomes.
- A key element of statehood is the ability to tax fairly and efficiently and to spend responsibly. These are fundamental characteristics of ‘inclusive’ state institutions, which generate trust, promote innovative energies and allow societies to flourish.
Improving the effectiveness of a PFM system may generate widespread and long-lasting benefits, and may in turn help to reinforce wider societal shifts towards inclusive institutions, and thus towards stronger states, reduced poverty, greater gender equality and balanced growth (Lawson, 2015) . For this reason, the Public Finance Management Act and other support regulations have been contentious matters for long time in Zambia.