Public expenditure and development: A human expenditure ratio analysis for Zambia,1990-2011

Despite sustained economic growth in the Zambian economy as shown by real Gross Domestic Product (GDP) growth of more than 5 per cent in recent years, the majority of Zambians continue to live in poverty. This paper assesses the link between public expenditure and human development in Zambia by analyzing the Human Expenditure Ratio (HER). The paper adopts the 1991 UNDP Human Development Report norm to at least spend 5% of GDP on human priority concerns if public expenditure is to have a significant effect on human development.
To assess the link between public expenditure and human development, the HER is decomposed into three ratios (PER- Public Expenditure Ratio, SAR- Social Allocation Ratio, and SPR- Social Priority Ratio) so as to effectively measure public expenditure on human development. The norms around these ratios requires PER be at least 25 per cent, SAR at 40 per cent and SPR at 50 per cent, so that a multiplication of these ratios results in a HER of at least 5 per cent.
The paper generated data on public expenditure from the Financial Reports of Zambia prepared by the accountant General at the Ministry of Finance for 22 years from 1990 to 2011.
Findings of the paper reveal that expenditure on human priority concerns as a share of Gross Domestic Product (GDP) estimated by Human Expenditure Ratio (HER) over the period of study ranged from 0.438% to 3.857% with an average of 1.801%. This is far way below the 1991 UNDP Human Development Report (HDR) suggested norm to least spend 5% of GDP on human priority concerns (HER of 5%) which are critical to Human Development if public expenditure is to be effective in human development.
The paper concludes that low values of the HER explain why the country is still lagging behind in human development (High poverty levels and inequality) despite sustained economic growth in recent years, thus the paper recommends that Zambia needs to reconstruct its public expenditure with a bias towards realigning spending in the Social Sectors towards human priority areas if significant human development is to be achieved