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budget framework sets the tone for 2012, 2013, 2014 fiscal planning
Southern African Parliamentary Support Trust
October 13, 2011
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presentation of the Mid
Year Fiscal Policy Review Statement (MYFPRS) by the Honourable
Tendai Biti, Minsiter of Finance on 26th July, 2011 we featured
an analytical piece on the 10th August, 2011 and noted some positive
developments on the country’s fiscal planning radar. We applauded
the Minister for introducing the Budget Strategy Paper (BSP):
“On a positive
note the MYFP review introduces a Budget Strategy Paper (BSP): Government
will commencing 2012 prepare a Budget Strategy paper to guide budgeting
for the forthcoming year (2012), whilst providing indicative fiscal
priorities for 2013 and 2014. This is a welcome fiscal planning
tool that will give fiscal planning a medium - term perspective,
and hence lock in credibility in public finance management. This
is in line with international best practices, and in Sub –
Saharan Africa (SSA), countries like South Africa, Malawi, Uganda,
Zambia, Ghana, and Namibia have such approaches to national budgeting.
Some countries assign the name Budget Policy Paper, or Medium Term
and Expenditure and Fiscal Framework (MTEF). It will make the budget
a more predictable planning tool, and hence create a platform for
an all inclusive and participatory budget framework in Zimbabwe,
a major pillar for building a durable economic governance and democratic
society”. (SAPST, Daily News, 10 August, 2011).
Since then, we have been patiently waiting for this fiscal planning
instrument, which was eventually tabled in Parliament by the Minister
on the 5th of October 2011.
is a Budget Strategy Paper?
The Budget Strategy Paper
(BSP) is a budget policy framework, which provides the context and
background to the budget. This includes the government's fiscal
and economic strategy, key budget priorities, and overviews of revenue,
expenses, and financial statements for the government as a whole.
It also provides information on recent economic conditions, economic
performance, key economic forecasts and financial relations. It
is a public finance planning tool meant to facilitate broader participation
and in - depth debate on the national fiscal and other macroeconomic
policy issues as a prelude to the 2012 Budget formulation. This
is no new phenomenon to Zimbabwe, given that in the mid nineties
we used to have a Three Year Rolling Budget Framework that provided
for a fiscal framework spanning over three years, and featuring
expenditure control instruments such as stop payment. If you remember
very well, under this system ministries were given ceilings to spent
within for the budget year, with forward expenditure ceilings for
the next two outer years. This was abandoned, when the economy slipped
into economic instability that was characterised by hyperinflation
that accounted for inflation levels of as high as 128 million percent
in 2008, hence rendering fiscal planning a futile exercise.
The major difference
between the BSP and the Three Year Rolling Budget is that the latter
was not available to Parliament, and the public. This approach is
contrary to best practice in public finance management where there
is need to open up the Budget to the society, so as to improve social
accountability in the implementation of government programmes. In
the foreword to the BSP, the Minister submits that …”the
BSP is a new important element we have developed to underpin participatory
democracy, inclusivity and ownership in policy formulation. The
Budget is an important fiscal element that must belong to the people
and the BSP serves to guarantee a bottom – up approach in
budget formulation” (BSP, October, 2011). In line with this
the Minsitry of Finance has since rolled out country wide consultations
to funnel input into the 2012 Budget guided by the BSP, hence our
interest in this Treasury output. These consultations commenced
from the 5th of October, 2011 and will run until the end of October
beyond which they will be consolidated into the 2012 budget for
presentation to Parliament towards the tail of November, 2011.
are the Key elements of the BSP?
It also identifies
issues to be addressed in the 2012 National budget derived from
previous budget consultations, Medium Term Plan (2011-2015), STERP
II, Government Work Programmes, and Sectoral Plans for the country.
The Budget Strategy Paper buttresses the Public Finance Management
Act [PFMA] (Chapter 22:19) as well as rebuilding policy management
capacity and accountability in the management of public resources,
given that it opens up the budget formulation to a wider stakeholder
base, that includes the institution of Parliament.
The Budget, Finance and Investment Committee of Parliament has since
taken advantage of the BSP, and is currently rolling out nationwide
Public Hearings on the 2012 Budget. Stakeholders should thus work
with this Committee to influence the input into the budget, and
hence maximise budgetary outcomes for Zimbabwe’s prosperity.
The BSP provides a medium term planning platform in public finance
management, which in Zimbabwe’s context should foster to align
spending to budget policies, and the Medium Term Plan, 2011 - 2015
(MTP). The BSP has the following key elements: -
1. All macroeconomic
assumptions such as the inflation outlook, exchange rate movements,
national output, movements in production across key sectors of the
economy and any other variables that provide a direction on the
growth of the economy are laid bare. This improves both public sector
planning and that of the private sector as such information improves
the predictability of the business operating environment.
2. A macro – economic
fiscal framework (MFF) giving the revenue and expenditures of government
for the year budget year under and focus (2012) and the medium term
(2013 and 2014). This is the aggregate public resource capacity
of government for the period, or what we usually refer to as the
fiscal space. When talk is about government has no fiscal space,
the issue is that does government have enough revenues to finance
government programmes? If there is no fiscal space, government usually
incurs a deficit, and hence has to shelve some programmes, and even
borrow to fund some of these programmes if they are absolutely necessary.
3. By providing
sector spending ceilings, planning at the ministry and spending
government agencies becomes much more aligned to national priorities
and government policy goals and objectives. This fiscal planning
tool makes it imperative for ministries to fit their programmes
for 2012 within the set expenditure ceilings, whilst allowing them
scope to engage Treasury for a fine tuning exercise to align their
spending to overall government goals. It removes the traditional
incremental budgeting approach which results in wish listing by
government departments, hence compromising credibility in public
fiancé management. Ministries are allowed some degree of
delegated budgetary decision making power, in reviewing the strategic
priorities, and their linkage with central government planning,
hence engendering a fair compromise of the Top - Down approach in
fiscal planning to a fair balance of power that also embeds a Bottom
- Up approach, a major tent of democracy in economic governance.
The BSP thus provides a sound basis for locking in a credible budget
for 2012 if utilised accordingly. In countries such as Uganda, for
example, Parliament is allowed to review the Budget Framework three
months ahead of it being used to prepare the National Budget for
the forthcoming year. In this case, members of parliament retreat
into consultations with their respective constituencies and stakeholders,
and then revert back to Parliament to engage the Minister of Finance
with feedback. The Budget Committee takes a coordinating role to
lead debate on the Budget framework, which once exhausted is adopted
then assigned to the Ministry of Finance to prepare the budget.
Uganda is taken to be a good example of a country that implements
a broad based participatory budget process, which engenders ownership
in the allocation of public resources and hence national development.
In this regard, Zimbabwe is treading on the right path in public
finance management, transparency and accountability.
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