1. Corruption in practice - Case of Zambia Francesca Di Mauro Governance Seminar - June 2011, Brussels

2. Outline Context in Zambia 2009: a difficult year Response and dynamics Lessons learned

3. Context in Zambia CPG: all 17 donors active in ZM – highly harmonized context: JASZ, DOL, sector MoUs PRBS Group: GRZ + 7 CPs (Germany, Finland, Norway, UK Aid, AfDB, EU and World Bank) PRBS MoU signed in April 2005 – with 4 Underlying Principles: Macro, PFM, poverty reduction, good governance (rule of law, democratic principles, anti-corruption) 3-years rolling PAF used by all, with 25 indicators covering several areas, but NOT governance/political conditionality in particular (except AC); mix of output, outcomes, process

4. 2009: a difficult year Ministry of Health scandal: funds misappropriated, including donor basket funds; SW and NL suspend funds; Ministry of Works and Supply documents show huge over-commitments in the sector in 2008 (election year); Agriculture audits show that main policies are not effective (fertilisers input, maize purchase) Meeting with President and all ambassadors in May: Gov asked to clearly identify concerns

5. Response and dynamics Health: Governance Action Plan – internal audit strengthened, financial audit, repayment to donors Roads: Sector Management Plan - launching of a series of audits PRBS CPs launch formal dialogue on UPs in June, using a Roadmap – GBS put in question Generally (with few exceptions) all interested in Gov response, set of remedial measures

6. Response and dynamics - PRBS PRBS Roadmap coverage: PFM reforms: procurement, IFMIS, treasury management, budget cycle; Public sector reform: decentralisation, pay policy; Good governance: anti-corruption policy; funding of oversight institutions OAG and ACC, freedom of information Sectoral issues: Health, Roads, Agriculture Intense dialogue, will last 6 months, regular meetings with Gov; tensions at EDF Committee on EU GBS (V-FLEX) PRBS structured dialogue around clear issues (changing goalposts) Outcome : final meeting of 25 November concluded positively, disbursements and future commitments would depend on progress on outstanding issues – some donors breaking the ranks

7. Response and dynamics – Roads EU in the lead: let the national process operate Auditor-General audits: financial, procurement, technical Public Accounts Committee: debate over audits – set of recommendations (incl. removal of top management) Dialogue still on-going…SBS still suspended…process very long

8. Lessons learned Support rather than undermine national process: AG, PAC, ACC more-long lasting effects (difference between Roads and Health) But trade-off is slow process/no disbursement Under PRBS, several areas actually moved: reform by threat? Importance of clearly identifying concerns - transparency Keep unified donor position (at least within EU) – not always easy, especially with new mood on GBS

9. Annexes Current Underlying Principles in PRBS MoU: GRZs commitments to fight poverty, including through a pattern of public expenditure consistent with poverty reduction priorities as identified in the National Development Plan GRZs commitment to peace, democratic principles, the rule of law, good governance and integrity in public life, including the fight against corruption; GRZs commitment to public financial management reforms; GRZs commitment to pursuing sound macro-economic policies, as evidenced by a positive IMF assessment of overall macro-economic performance.