(Published by the PFM consortium
comprising Budget Advocacy Network, (BAN), Centre for Accountability and the
Rule of Law, (CARL), Christian Aid, (CA), and Restless Development, (RD) with
support from UK aid under a project titled “Strengthening PFM, Anti-Corruption
and Accountability Institutions in Sierra Leone “,
this report is independent and is done by the Civil Society of Sierra Leone).
Budget credibility describes the ability of
governments to accurately and consistently meet their expenditure and revenue
targets.
Why doing budget credibility
analysis?
Budgets are one of the key tools that governments use
to turn policy intentions into concrete interventions to achieve their
objectives.
Budget credibility highlights performance against the
budget at the total and sector levels, to draw out some of the reasons behind
this, and identify the impacts on public service delivery.
It assists government in addressing some of the
challenges that are adversely affecting budget credibility.
Methodology
Coverage
This work has
been carried out on both a macro level, as well as doing some analysis of key
sector ministries (health, agriculture and basic/tertiary education).
The macro
analysis is focused largely on an update to selected indicators in the Sierra
Leone PEFA assessment 2018.
Assess
revenue measures contained in the 2019 budget.
PEFA is a methodology for
assessing public financial management performance. A PEFA assessment measures
the extent to which Public Financial Management (PFM) systems, processes and
institutions contribute to the achievement of desirable budget outcomes.
Assessment of PEFA indicators PI 1, 2 and 3 has been
based on the 2016 PEFA framework, with data from 2017, 2018 and 2019.
Budget Reliability Indicators
Scoring Method
Dimension Rating, 2017 –
19 (2014-16 in parenthesis)
Overall Rating
PI-1
Aggregate expenditure outturn
D*(D*)
D*(D)
PI-2
Expenditure composition outturn
M1
D*(D*)
D*(D*)
D*(D*)
D(D)
PI-3
Revenue outturn
A(A)
D*(D*)
C+(C+)
Information for assessment
The
assessment was undertaken using the most recently available data from the
fiscal tables prepared by the Budget Bureau.
Assessment
used other Government documents such as the Government Statement of Financial
and Economic Policies and the Finance Act, 2019.
The
annual statement of government account prepared by Accountant General
Interviews were also conducted with some
government officials
FINDINGS
Aggregate expenditure out-turn –
The score is D*
Definition: The difference between actual expenditure and
the originally budgeted expenditure. The purpose of this indicator is to assess
the accuracy of the budget and whether the aggregate expenditure levels as
approved by Parliament are implemented/or enforced.
Fiscal Year
Original
Budget (A)
Actual
Expenditure (B)
B/A
(Percent)
2017
4,175,000
4,201,570
100.6%
2018
6,263,119
5,843,336
93.3%
2019
5,098,666
4,779,152
93.7%
Aggregate expenditure out-turn
The implementation of the 2018
supplementary budget resulted in restraining recurrent expenditure and a pause
in disbursement of expenditures relating to domestic capital.
As with
the PEFA report 2018, the omission of significant donor expenditure means that
data is not available to score this indicator in accordance with PEFA 2016
requirements, so the score is D*.
However,
excluding donor expenditure, 2017-19 has seen a slight improvement from the 2014-16
PEFA score (from C to B)
The
credibility of the expenditure composition remains a big challenge
Expenditure
composition out-turn by economic type
This indicator is intended to
measure the extent to which reallocations between budget lines have contributed
to variance in expenditure composition
This is assessed from three
(3) perceptive
Expenditure composition
out-turn by function
Expenditure composition
out-turn by economic type
Expenditure from contingency
reserves
Expenditure compositions out-turn by function –D*
This measures the difference between the originally
approved budgets and actual out-turns. The classification by administrative
head (Ministry/Department/Agency) that are included in the approved budget is used
for this analysis. Expenditure is taken excluding contingency items and
interest on debt
Score
Minimum
requirements for scores
A
Variance less than 5% in at least two of the last
three years.
B
Variance less than 10% in at least two of the last
three years.
C
Variance s less than 15% in at least two of the
last three years.
It is also important to note that the budget heads
have changed since the last PEFA assessment. For instance, there were 75 budget
heads in 2017, 83 budget heads in 2018 and 87 budget heads in 2019.
In 2017, the 20 largest administrative budget heads
accounted for 87 percent of actual expenditure. In 2018, the 20 largest
administrative budget heads accounted for 80.4 percent of actual expenditure.
For 2019, the 20 largest administrative budget heads accounted for 74.2 percent
of actual expenditure.
The absence of donor funded data will also prevent the
indicator from getting a higher score.
Expenditure composition
out-turn by economic type
Expenditure composition
out-turn by function
The very high variance appears
to be due to a number of reasons;
Over the review period, although some MDAs continue to
get more than their approved budget, the Office of the President, pension
payments and the Ministry of Works, Housing and Infrastructure have been
constantly receiving more resources than their approved budget.
The implementation of new programmes in-year which
often results in the re-allocation of resources within the MDA.
Poor budget preparation on the part of MDAs
-allocations have hardly matched the approved budget over the years. For
example, the Ministry of Energy under budgeted for fuel supplies in the
provinces
Furthermore, the in-year execution of new activities
diverts resources away from other activities which had already received
Parliamentary approval.
Example-Agriculture, the Ministry received only 40
percent of the approved budget for 2019; most of which was received in the
fourth quarter of the year. Significant amount of the first quarter allocation
to the Ministry of Agriculture was utilized to offset payments arrears for
2018. This has left little resources for the various programmes with
departments.
Expenditure composition
out-turn by economic type
b) Expenditure composition
out-turn by function –D*
This dimension measures the difference between the
originally approved budget and end-of-year out-turn in expenditure composition
by economic classification during the last three years including interest on
debt but excluding contingency items.
Score
Minimum
requirements for scores
A
Variance less than 5% in at least two of the last
three years.
B
Variance less than 10% in at least two of the
last three years.
C
Variance s less than 15% in at least two of the
last three years.
In 2018 and 2019, the variance of 44.8 percent and
46.0 percent was driven by goods and services and capital expenditures. The
weak score is a cause for concern as it shows the actual expenditure on goods
and services economic classification, which is essential for supporting the
activities of Ministries, Departments and Agencies.
It is under the goods and services budget that MDAs
provide estimates for their programmes to be implemented. For example, in 2019,
the Ministry of Health and Sanitation’s Primary Health Care Division received
only Le 740 million from a budget of Le 20.4 billion (4% execution rate)
Another example, the Ministry of Health only received
Le 3.2 billion of their capital budgets from an approved amount of Le 52
billion (6 percent execution rate). In contrast, the administrative division
had an approved budget of Le 10.3 billion but it went on to receive and spend
Le 20.3 billion.
This means that health service delivery at the primary
level will be reduced, hence citizens will not receive adequate healthcare.
Similarly, capital expenditures have been below the approved budget over the
review period
Expenditure composition
out-turn by economic type
c) Expenditure from
contingency reserves
This dimension recognizes that
it is prudent to include an amount to allow for unforeseen events in the form
of a contingency vote, although this should not be so large as to undermine the
credibility of the budget.
Sections 36 (1) and (2) of the
Public Financial Management (PFM) Act, 2016, prescribe a more formal
arrangement for a Contingencies Fund. Any Appropriation Bill for any Financial
Year should make provision(s) for contingencies and should not exceed 2% of
non-extractive revenue for that year. There are three contingency votes under
the PFM Act, 2016.
These are contingencies fund (601),
Special Warrant of the President (611)
Unallocated head of expenditures (612).
However, budgetary allocations are also made to
Miscellaneous Services (501) and is regularly used without any detail
Expenditure composition out-turn by economic type
Expenditure from contingency reserves
Score
Minimum
requirements for scores
A
Actual expenditure charged to a contingency vote
was on average less than 3% of the original budget.
B
Actual expenditure charged to a contingency
vote was on average more than 3% but less than 6% of the original budget
C
Actual expenditure charged to a contingency
vote was on average more than 6% but less than 10% of the original budget.
D
Performance is less than required for a C
score
PEFA Indicator
2014-16
2014-16
(excluding donor data)
2017-19
2017-19
(excluding donor data)
Progress
P1 – Aggregate Expenditure Outturn
D*
C
D*
B
P2 – Expenditure Composition Outturn
a)
By Function
D*
D
D*
D
b)
By Economic Type
C
C
c) Expenditure From Contingency
Reserve
D*
B
D*
A
P3 – Revenue Outturn
Aggregate Revenue Outturn
A
A
Revenue Composition Outturn
D*
C
Year
%
of total expenditure for arrears
2017
2
2018
2.3
2019
0.8
Summary of
findings
Fiscal Management
in Sierra Leone
Public Debt
Even with all these
measures to increase revenue, the government public debt continued to rise. In
2017, total debt was Le 14.9 trillion which represent 51% of the GDP. In 2018,
it increased by Le 18 trillion (59% of GDP) and it further increased to Le 21.5
trillion (58% of GDP) in 2019.
Overall cash deficit/surplus
In 2017,
the cash deficit was Le 1.8 trillion (6% of GDP)
In 2018, the overall cash deficit reduced to
Le 542 billion (1% of GDP).
In 2019,
there was an overall cash surplus of Le 65 billion (0.002% of GDP).
Arrears
In 2017, arrears payment was Le 169 billion,
dropped to Le 112 billion in 2018 and further decreased to Le 86 billion in
2019
Recommendations
Improving
budget credibility entails much more than keeping within the aggregate MDA
spending levels approved by Parliament. It also involves ensuring that MDAs get
their approved budget on time, and can deliver on the activities contained in
the budget (without interference). Delays are having a significant impact on
service delivery.
It is also imperative that the forecasting of revenues
and expenditures over the medium term is improved in order to minimize the
in-year adjustments, which have been a regular occurrence over the years.
Strict adherence to the Public Financial Management (PFM)
Act, 2016, and Public Financial Management Regulations, 2018, will also
contribute towards the implementation of a credible and transparent budget
throughout the year.
Government
should include donor budget and spending in the annual statement of account
More needs to be done on reducing
the difference between approved and actual MDA budgets and improving the
credibility of expenditure composition to reduce changes to individual budget
lines.
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