2017年-世界发展银行全球_The_Impact_of_Fiscal_Policy_on_Inequality_and_Poverty_in_Zambia_39页_1mb

Summary of "The Impact of Fiscal Policy on Inequality and Poverty in Zambia"

Core Content

This working paper analyzes the redistributive effects of Zambia's fiscal policy and its components on income inequality and poverty, using data from the 2015 Zambian Living Conditions Monitoring Survey (LCMS) and other secondary sources. The study highlights how fiscal policy, while reducing inequality, also increases poverty due to inefficiencies in tax and transfer mechanisms.

Main Findings

• Fiscal Policy Reduces Inequality: Zambia's 2015 fiscal policy had a significant impact in reducing income inequality, particularly through in-kind public service expenditures on education, which was the largest contributor to this reduction.

• Poverty Increases: Despite the reduction in inequality, the implementation of fiscal policy led to an increase in the poverty headcount ratio, especially among poor and vulnerable households.

• Key Factors Contributing to Poverty Increase:

  • Low Targeted Direct-Transfer Spending: Zambia's direct-transfer spending is relatively low compared to other countries, limiting its ability to directly alleviate poverty.
  • Energy Subsidies Fail to Reach Poor Households: Subsidies on fuel and electricity, although large in absolute terms, do not effectively target poor households.
  • Tax Burden Outweighs Benefits: The value-added tax (VAT) and other indirect taxes create a significant burden on households, which is not fully offset by subsidies or direct transfers.

• Subsidy Elimination and Compensation: Eliminating subsidies without compensatory mechanisms, such as increasing the Social Cash Transfer Scheme (SCTS) coverage and benefit levels, could have a muted impact on poverty reduction. Therefore, it is suggested that targeted cash transfers should be scaled up to compensate for the loss of indirect tax benefits.

• Fiscal Reforms and Priorities: The government has been moving toward full cost-recovery pricing in the energy sector, aiming to address fiscal imbalances and create fiscal space for capital spending and social programs. However, this shift has led to tariff increases that have been reversed due to public backlash.

• Fiscal Policy Trade-offs: The study emphasizes the trade-offs between the government's current fiscal priorities (e.g., energy reforms) and its social goals (e.g., poverty reduction). It underscores the need for evidence-based policy-making to ensure that fiscal instruments are effective in reducing inequality and poverty.

Key Components of Fiscal Policy

Social Spending and Transfers

• Social Spending: Accounts for over 25% of total government expenditure in 2015, including education, health, and housing.
• Social Protection: Comprises Social Cash Transfers (SCTS), Farmer Input Subsidy Program (FISP), and other programs.
• Education Spending: A major component of public expenditure, with a growing focus on secondary and tertiary education.
• Health Spending: Has increased significantly over the past decade, but expenditure execution remains a challenge, with a high proportion of funds going to salaries and wages.

Taxes

• Main Taxes: Include personal income tax (PIT), value-added tax (VAT), and excises on alcohol and tobacco.
• VAT Impact: The VAT system, while exempting a portion of the consumption basket, does not fully eliminate the tax burden, especially for poor households.
• Fiscal Imbalances: The government is addressing public debt levels and payment arrears, which are seen as critical for macroeconomic stability.

Methodology

• The study uses a pre-fiscal and post-fiscal income approach to measure the impact of fiscal policy.
• Pre-fiscal income includes market income before taxes or transfers.
• Post-fiscal income incorporates the effects of subsidies, direct transfers, and taxes on household income.
• The primary data source is the 2015 Zambian Living Conditions Monitoring Survey, with administrative data used for additional insights.

Policy Implications

• Targeted Cash Transfers: Should be scaled up to effectively reduce poverty and inequality.
• Efficient Tax and Transfer Systems: Are essential for ensuring that fiscal policy supports equitable growth and social protection.
• Subsidy Reform: Needs to be accompanied by compensatory mechanisms to avoid worsening poverty.
• Improved Expenditure Execution: Is crucial for ensuring that public funds are used effectively to support basic services and poor households.

Conclusion

Zambia's fiscal policy has a mixed impact on poverty and inequality. While it reduces inequality, especially through education spending, it increases poverty due to inefficient tax and transfer mechanisms. The study recommends a more targeted and efficient fiscal approach to better align with poverty reduction goals.