By Tanu Jalloh
Here we are again today servicing a supplementary budget. Albeit this time for reasons every Sierra Leone should be willing to let go of our wealth. However, I can safely say now that it is fast becoming a pattern, the reccurrence of which this country will find extremely difficult to address in the next three years.
The general plans going forward?Let me tell you what I think about events ahead. In 2015 the government tries to leave a legacy no matter the cost. Of course the tangibles are very appealing to the type of people we are – gullible and small minded, and easily satisfied.
In 2016 the country prepares for elections. In spite of whatever EU support, elections are usually very expensive. Yes they are. Those held in 2012 worth Le88 billion, the equivalent of 20 milliondollars at the time. If those elections were to be held today, two years later, it will cost Le94 billion. Add the same amount accumulated in the last three years, by virtue of the exchange rate ($1 is 4,700 and its dropping) plus other unforeseen expenditure requirements and you will get a little over Le105billion. I assume that that was the administrative cost, announced by the then electoral commissioner, Christiana Thorpe. So how much are politicians expected to expend in the coming elections? Since that is hard to put a finger on, in the last elections a moderate estimate put political party funding and expenses at over $11 million. That amount equalled to more than half the total cost of the whole administrative cost of the electoral process in 2012. In 2017 the elections frenzy heightens to become excited as the country and its people go campaigning and voting.
In 2013 the ministry of finance proposed the most ambitious government budget since the war. There was a new man at the helm of affairs and he needed to prove a point. Dr Keifala Marah was animated and buoyant as the new finance minister. The president and indeed the few who know him knew he wanted a platform to execute a bit of his international stint at the Commonwealth.
When a government faces several policy challenges, like it was the case in Sierra Leone in 2011, it sure will have some implications on budget management in terms of the initial financial and activity plans. The budget of a government is a summary of the intended revenue generation strategy and expenditures of that government. It basically means putting together a list of needs, if you like, and identifying ways to raise money to meet those needs within a given period. The emphasis here is getting the money to meet the needs of government within one year.
Let’s make this clear that a budget does not necessarily mean that this government has the money already stashed somewhere safe when the minister of finance and economic development, Dr. Marah, says the government will expand the 2014 budget by hundreds of billions of leones to expend trillions of leones on ambitious projects.
Budget simply means this is a plan with timelines and targets to find the money and undertake proposed activities. It also means that a government intends (or wishes) to do XYZ in the year under review if it is able to raise the required amount of money to do so. My fear is that government may not be able to service a voracious budget when part of the resources it needs to do so is determined by external factors, some of them with very fluid attitude to meeting commitments and can cause delays beyond government control. Even internally generated revenues are based on projections, which means the structures to harness these resources may also fail to meet their targets. Where the two unfortunate scenarios exist, a crisis sets in and manifests itself in many ways to affect deliverables and basic bread and butter issues.
But I am not surprised at all that an ambitiously bigger budget is in the offing based on the behavior of the 2013 budget, which proved obstinate in terms of how government controlled its spending. Thus, no matter how hard the government would later try to live within the available resources of the 2013 budget, exigencies set in and these would have to be addressed immediately because they hinged on credibility and governance. Yes I saw it coming when a supplementary budget was called for in just a few months into the 2013 financial year. The justification was to ease and take care of some roll over activity, mostly infrastructure development and in particular roads and energy. The truth is infrastructure developments are still being rolled out and they may be rolled over again. With medical emergencies like the Ebola outbreak, the cost must increase.
Therefore, as you would expect, the wage bill will increase in 2014 to a significant percentage in GDP terms because of additional hiring in the public sector if only to create more jobs for the youth. When parliament last year unanimously agreed to a Le200 billion supplementary budget proposed by the ministry of finance under Dr. Marah, it was obvious he wanted to test the waters. So that come 2014, he would raise the stakes and justify the use of a supplementary purse the previous year. Now we have a second request. And may we should expect a third one by close of this year. As a matter of fact budget supplements are normal with governments. But where the reason could not be adequately convincingly stated for the public to understand, then there is a problem. We hope a supplement is not an option with a budget as ambitious as the 2014’s.
Dr. Marah, is on record to have said that, just two months into the implementation of the 2013 budget, some unforeseen expenditure requirements emerged. This meant that the assumptions on which the domestic revenue projections were based no longer existed. In 2014 the government has promised that such mistakes, as the ones that characterised last year’s, will be surmounted.
When the government talks about corrective measures in the event of such economic exigencies, it does not specify the use of supplementary budget as the single biggest prophylactic measure. Let’s have a situation where policies are not said to be reactionary. But the government is ever confident.
“We stand ready to take corrective measures should adverse shocks materialise and compromise the attainment of programmed objectives”, the government states in its 1 October, 2013 letter to Christine Lagarde, Managing Director of the International Monetary Fund, IMF, requesting that its Memorandum of Economic and Financial Policies (MEFP) be supported under a three-year arrangement under the Extended Credit Facility, ECF in an amount equivalent to SDR 62.22 million.
However, apart from making reference to external shocks and the fact that the previous ECF-supported program for 2010–13 had to be cancelled “to enable the newly elected government to take stock of progress in strengthening institutions, including procedures for public financial management, and to transition to a new economic program that would support the ‘Agenda for Prosperity’”, Dr. Marah and then Bank Governor, Sheku Smabadeen Sesay, did not clearly tell of any possible glitches. Could it well be that Sierra Leone does not have a regular budget?
In the meantime, I am sure Dr. Marah, as finance minister, does not want interest cost to exceed the budget allocations like it was in 2011 under his predecessor, Dr. Samura Kamara. I said it after the 2014 budget was read last year and I will say it again that despite how ambitious his budget for the country is in 2014, there will always be other unbudgeted expenditure demands, including from an increase in fuel subsidies to cushioning the impact of rising international oil prices, higher cost of power generation, plus additional money to parliament, Paramount Chiefs and all other public workers.
“These ambitious targets will be meaningless unless they translate into more money in the pockets of our workers and people. Hence, our desire to translate growth of the economy into improved living standards for all Sierra Leoneans remains our major objective”, Dr. Marah says in his budget speech to parliament.
Like it was in late 2010 and the years that followed, monetary expansion, combined with increasing food and fuel prices will continue to make it increasingly difficult to keep at bay a pliable single-digit inflation as envisaged by the minister of finance. I don’t see a further monetary expansion, indicated in the call for an ambitious 2014 budget, as a panacea to the current economic problems. It nonetheless is a daring move by the minister to once again pump some money into the economy and make some disposable cash available to the working few.
Often government uses such developments as visibly imposing as roads and other tangibles to explain growth as something that is there for all to feel and see. But I hope domestically financed capital expenditures will not exceed the budget by a percentage margin that undermines the country’s GDP. When the budget cannot accommodate such frivolous expenses due to the acceleration of infrastructure projects year-in-year-out, we have a reason to be concerned. And when the activity becomes too ambitious it attracts supplementary budget or leaves the system with no option but to divert funds to meet other “pressing and urgent” demands. Today we have a pressing and urgent need to finance the fight against the Ebola scourge.
An official explanation for spending beyond budgets and running into deficits was first given by former finance minister, Dr. Kamara and Bank Governor Sheku Sambadeen Sesay. In a letter of intent dated November 18, 2011 and addressed to the IMF in Washington DC, USA, they both confessed that generally “program implementation was uneven in the second half of 2010. While domestic revenue overshot projections by 0.3 percent of GDP, spending on infrastructure projects, fuel subsidies, wages, and goods and services led to higher–than-envisaged domestic financing. As a result, the ceiling for net domestic bank credit to government was exceeded”. I am not too sure whether the 2014 budget adequately takes care of spending on the ever expanding flagship infrastructure projects and the perennial food and fuel subsidies that worsen at the close of every year. I still do.
We want to see more effort at matching assured revenue generation with insured government spending. In essence I am saying that this government must try to live and spend within its means and reach. I once suggested in 2012 that a possible way out of borrowing too much could include, but not limited to, a legal requirement that would limit central bank’s credit to governments.
When the Public Financial Management Oversight Committee approved the Public Financial Management Reform Strategy 2014-2017 in June of 2013, the thrust was to ensure budget credibility, fiscal discipline and proper management including understanding those issues of force majeure. The committee predicts new challenges, particularly resource assets.“The ultimate goal is to target improvements in the quality of public financial management which will have a positive impact on aggregate fiscal discipline, the strategic allocation of resources and the efficiency of public service delivery”, it says.
In spite of any progress being achieved in all of the above areas, the focus first should be on establishing budget credibility, comprehensive coverage, and fiscal reporting based on recognized international standards. In short, let’s establish basic control as a basis for medium-term planning, sectoral planning and resource allocation if service delivery should and must improve.
(C) Politico 15/07/14
