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PONDER MY THOUGHTS: 2014 BUDGET: MARAH’S ARTFUL JUGGLERY

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PONDER MY THOUGHTS: 2014 BUDGET: MARAH’S ARTFUL JUGGLERY

By Andrew Keili

Formulating a national budget in a country like ours is an unenviable task for various reasons. Some may say it is an impossible juggling act. Expenditure not only surpasses income, but it is near to impossible to seriously address many of our socio economic challenges. Every man and his dog wants to increase the budget for his preferred area of expenditure to comply with one international or regional “declaration” or another. The Government, wanting to meet one campaign promise or another finds out that “the spirit is willing but the body is weak“.

The Finance Minister, Dr. Kaifala Marah and his team have gone to great lengths to make the formulation process transparent. Participatory Budgeting, which they have emulated, is rapidly gaining attention from governments, civil society, and development agencies as an effective platform for strengthening transparency, voice, and accountability in public expenditure management, and service delivery. Indeed there was extensive consultation on the budget, although the Finance Ministry did wield its big stick to ensure that MDAs were kept in check and tailored their demands to augur with the Ministry’s new thrust for budget preparation.

It would be patently unfair to pass judgment on Marrah’s juggling Act because of the aforementioned difficulties. A few comments and concerns should however be in place, especially when a considerable number of novel ideas have been included into the process. Marah says that “Government has therefore dedicated this budget to the youth, women and our workforce. Hence, the Theme: “Improving the Livelihood of Youth, Women and our Workforce”.”  The amounts (if you were to think of them in dollars rather than trillions of Leones) are quite small. Domestic revenue is projected at Le 2.58 trillion ($593m).  Of this, income taxes are projected at Le 909.9 billion ($209m)-Corporate taxes constitute nearly 30% of this and personal income taxes the rest. Goods and Services Tax (GST) are projected at Le 523.4 billion ($120m) and Customs and Excise Duties are projected at Le 650.4 billion ($149m). Total grants from our development partners will amount to Le 639.6 billion ($147m).

Here is a listing of some goodies in the budget:

  1. The budget will accommodate the minimum wage of Le 480,000 per month for public sector workers and will also allow a minimal structured salary increase for higher grades in the Public Service. The minimum gross monthly salary for Teachers, Police and the Military would be Le 600,000. The gross salaries of MPs is also increased by 85 percent. Paramount Chiefs will be paid salaries as from  2014.
  2. To ease the problem of transportation, the Government will procure additional One hundred new buses for the Sierra Leone Road Transport Corporation in 2014.

There are also a host of innovative ideas listed in the budget. These include:

  1. The establishment of the following new funds:
  • SME Fund to support business entrepreneurial skills, innovation, expansion and development as well as Youth and Women’s access to credit.
  •  Skills Development Fund for eligible Sierra Leoneans to undertake highly specialised skilled, technical and vocational training programmes, for example, pediatrics, heart surgery, mining engineering and aeronautical science.
  • Export Diversification Fund
    • Women and Youth Empowerment Fund- Government for a start is allocating Le 800 million for this.
    • Transformational Development Fund – All natural resources revenues will be deposited into the TDF, which will be used to finance transformational projects, stabilize Government expenditures to save for future generations.
    • Project Preparation Fund, and
    •  Constituency Development Fund- Government is allocating Le7.8 billion to support MPs for this.

Development Partners and the Private Sector will be asked to contribute to these Funds.

  1. The government is considering issuing a two to three year bond to support the financing of infrastructure projects.
  2. Le 400 million ($92,000) is also provided to the Ministry of Labour for the creation of job centres and Le 1.5 billion ($345,000) to the Ministry of Youth Affairs as Government’s contribution to the World Bank supported Youth Development and Capacity Building project.
  3. Government will establish a National Health Insurance Scheme and is allocating Le 3.5 billion to the Ministry of Health and Sanitation to be utilized in collaboration with NASSIT to pilot this.
  4. The Ministry of Finance in collaboration with the Bank of Sierra Leone will explore the possibility of establishing Islamic Banking (non-interest banking) in the medium term.
  5.  Government will resuscitate the National Development Bank to facilitate medium and long-term investments especially in agro-industry and has allocated Le 2.4 billion towards this.
  6. To improve on the effectiveness of the operations of Cooperatives, Government is allocating Le900 million ($207,000) to provide financial support for cooperative groups.
  7. The World Bank is providing US$ 8.2 million in support of the Public Sector Pay and Performance Project . To support this programme, Government is providing an amount of Le 2.2 billion to the implementing institutions.
  8. To regularize the setting of salaries and eliminate disparities in salaries across the public sector especially subvented agencies, Government will set up the Salaries and Wages Commission in 2014.

Some of the innovative ideas in the budget are certainly worthwhile but would have to be thought through carefully. Introducing too many funds at one time may prove problematic if not managed carefully. The idea of having long term bonds may be a good one as it will help government fund long term infrastructure projects. It however needs a disciplined government that will spend the monies wisely and will engender confidence in those buying such bonds that the returns will be appreciable and bonds will be redeemed without hindrance. Money provided for some of the initiatives may be ridiculous-like the $92,000 for job centres. It will also be interesting to see how Islamic banking is introduced. A lot of thought needs to be put into the operation of the Transformational Development Fund. The salary increases are welcome as long as they do not prove to be unduly inflationary. Some may say also it is a good thing to pay MPs well as long as they end up doing their jobs diligently. They will support this part of the budget-after all turkeys don’t vote for Christmas!

It is also heartening to note that there is some convergence between this budget and some of the proposals in the SLPP manifesto. The SLPP manifesto also did propose special funds for women, youths and sports. In justifying the establishment of the Women’s Development Fund, it was recognized that most women lack the capital to start or expand their businesses. Credit opportunities are narrow for them and business management experience limited.  The SLPP manifesto also went to great lengths to propose a universal health insurance scheme. The following is stated in this manifesto: “This will entail the setting up of a Fund to be managed by a supervisory agency. This scheme will cover primary and secondary (District hospital) services. The formally employed will contribute towards a compulsory scheme (like the NASSIT scheme with employer and employee contributions). The vulnerable including minors and disabled will not make payments to the scheme but the rest of the population will contribute towards an annual premium. Additional funds will be obtained by reallocating health expenditure, part of the GST and other funds and from donor contributions. This will be gradually implemented over a four year period.”

I am particularly pleased that money seems to be available for power sector reform. The budget proposes Le 35.9 billion for rebuilding the national transmission and distribution network;

The World Bank, European Commission, AfDB, IDB, EBID, United Nations Industrial Development Organisation (UNIDO) and China EximBank are providing an amount of US$ 206.9 million to support various projects in the Energy Sector, including the West African Power Pool project US$ 140.3 million; the Unbundling and Restructuring of the energy sector, US$ 54.0 million; and   the rebuilding of the National Transmission and Distribution Network, US$ 11.3 million. One only hopes these will come to fruition.

It is however disconcerting, as noted in the budget statement that despite the drop in the 3-months Treasury bill rate from 19 percent in December 2012 to 3.5 percent in October 2013 and the interest rates on Treasury Bonds from 20 percent in December 2012 to 6 percent in October 2013, lending rates for commercial Banks remain high. Also the normal problems with the national budget still predominate. Consider the following absurdities:

  • The tourism budget of Le  2.2 billion($506,000)indicates we may not be that serious about developing this sector.
  • Budget appropriations to Local Councils are still so low as to suggest we may be paying lip service to real decentralization.
  • The budget for education is highly skewed towards tertiary education. There is very little appropriated for primary education and technical and vocational education.

 

One very much hoes that the strategies outlined by Government  as espoused in the budget speech for domestic revenue mobilisation will be pursued with seriousness-“Domestic revenue collection efforts in 2014 and the medium term will focus on (i) broadening the tax base; (ii) reducing customs and GST duty waivers; (iii) combating tax evasion; (iv) enhancing transparency and accountability in revenue collection, (v) strengthening enforcement and compliance and (vi) strengthening revenue administration through administrative reforms including use of advanced information technology. A specialised Unit for the administration of revenues from the Extractive Industries will be established at the National Revenue Authority (NRA).”

Quite an artful juggling exercise, Dr. Marah! May the Lord bless you and keep you, as well as make your political colleagues meaningfully pursue your vision.

 

Ponder my thoughts.


 

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