Transcript Cash Budgeting Strengths, Weaknesses and Prospects

Case Study – Cash budgeting, strengths,
weaknesses and prospects
Budget execution course
November 3-5, 2003
Presented by: Joel Turkewitz, WBI
Nicola Smithers, PEFA
Page 1
Overview of the budgetary system
Budget system
Issues
•Legal basis in Constitution
•Urgent expenditures and
supplementary estimates
•Controlling Officer
responsible
•Enforcement
•Budget classification
•Transparency of grants to government entities
•Budget heads
•Virement
•Expenditure categories
•Aid flows outside the budget
•Staffing and accounting
systems
•Lack of skilled staff and
computerization
Page 2
Cash budget system
•Cash budget introduced in response to economic crisis
•Cash release to ministries limited to funds in Treasury bank
accounts
•Treasury prevented from borrowing from Central Bank
•Strong support from Cabinet and public at the beginning
•Joint Data Monitoring Committee (MOF and Central Bank)
monitored aggregate position daily (and later monthly) and reported
to political leadership.
•Small committee in MoF decided monthly allocations
Page 3
Cash budget process
Resources estimated
for the month
MoF committee
allocates to 51 budget
heads
Releases made to line
ministries during
month based on
priorities
Controlling officers
submit list of checks to
Central Bank and
Accountant General
Funds equivalent to
approved list
transferred by Central
Bank to ministry bank
account
Ministries submit
monthly expenditure
statements to Acc Gen
Acc Gen (rather than
Controlling Officers)
prepares financial
statements based on
ministry statements
Incomplete
reconciliation with Acc
Gen statements by
ministry accountants
Financial statements,
prepared by Acc Gene,
audited by Auditor
General
Page 4
Impact
Impact of the adjustment program on the overall budget situation
1992 1992 1993 1994 1995 1996
1997
1998
K billion at 1998 prices:
Personnel emoluments
RDC
Subsidies etc.
Other non-debt(grants and
capital)
Total (non-debt)
644
354
528
292
605
283
47
504
363
255
66
287
351
193
404
272
343
213
404
183
327
161
567
421
293
283
354
1,818
1,439
971
1,110
1,097
849
870
842
% of GDP
total domestic revenues
Total recurrent expenditure
Balance
18.7
29.3
-10.6
18.4
27.2
-8.8
15.9
26.3
-10.4
20.1
27.9
-7.8
19.9
24.2
-4.3
20.6
18.5
+2.1
19.8
17.5
+2.3
18.1
16.7
+1.4
100.0
165.1
183.7
54.6
34.9
43.1
24.5
24.4
Inflation per cent (period
average)
Page 5
Composition of the budget deficit
in % of GDP
Quasi-fiscal activities and the budget deficit
1995
1996
Central government budget
Pension funds
Public enterprises
Local governments and others
Central Bank (implicit deficit)
TOTAL
4.6
1.0
0.3
3.4
9.1
18.4
1997
2.5
0.9
6.2
2.0
6.2
17.8
2.3
0.9
4.9
2.1
3.4
13.6
Page 6
Unexpected results
•Revenue forecasting improved but
expenditures fluctuated
•Monthly deficits and expenditure arrears
•Meeting quarterly ESAF targetsconcentrated adjustment on last month
•Extra-budgetary expenditures
•Major month-to-month fluctuations for
ministries
Page 7
Impact on resource allocation
Reallocation occurred within the year compared to budget
•General public service ministries received more than budget
•Economic services lost most
•Social services had modest gains
•Personnel emoluments higher
•General service ministries overspent non-salary current expenditure
•Long term development expenditure suffered
•Deliberate under-budgeting of high priorities
Cash budget replaced the enacted budget
Page 8
Questions
1. Key features of cash budget system? Effect of cash budget system on
•
Macroeconomic/Aggregate Fiscal Discipline
•
Resource Allocation
•
Efficiency in Service Delivery
•
Accountability, transparency and control
•
Effectiveness of annual budget as resource management tool
2. Impact on relative roles and responsibilities
3. Why were expenditures less predictable than revenues
4. Could it have been implemented differently?
5. What should the government do?
Page 9