Ramallah – The Civil Society Team for Public Budget Transparency organized its annual public budget conference 2019 to address four themes: Financial performance in the first half of 2019, Austerity and Pending Rationalization Policy, surveying accumulation of Public Debt and Arears and effects of this situation on the services provided to citizens. In its analysis, CSTPBT rang the bell in case of prolongation of the crises and accumulation of public debt and the effect of the financial sustainability of the PNA. It further analyzed governance of some government-managed funds and their effects on macroeconomic indicators. The Team also discussed a report on the integrity environment of the Palestinian Employment and Social Protection Fund and analyzed the needs for real plans to support and employ the youth. It concluded with another report on government policies to support the agricultural sector, which is threatened by the occupation practices, via a study of the Palestinian Disaster Risk Mitigation and Agricultural Insurance.
In AMAN’s speech, Secretariat of the CSTPBT, the Executive Director, Mr. Majdi Abu Zied addressed the Team’s efforts in monitoring budget performance and improvement of public services. The Team’s work is a reference used by institutions, researchers and scholars working in this area. Moreover, the government has adopted its recommendations on rationalization of spending and increase of revenues. Abu Zied reiterated that the Team does not substitute the Legislative Council, but rather supports its oversight role. It is a real partner in the efforts toward financial policies to confront the financial crises and respond to citizens’ priorities on the basis of social justice.
Abu Zied underlined AMAN’s and the Team’s demands to adopt realistic systematic budget-tightening and public spending rationalization policies with specific objectives, mechanisms and responsibilities. He added that such policies must be written and published and underscored the necessity of refraining from undermining the aid programs serving the poor and marginalized communities, specifically those implemented by the Ministry of Social Development. He declared the Team’s commitment to the stipulations of the Public Fund Management Strategy and its realization.
In the first session, Researcher Lamis Farraj, Coordinator of the Civil Society Team for Public Budget Transparency, presented the semi-annual report on budget performance taking into account this year’s contingency. She presented findings and facts, mainly: absence of a legal basis for the adoption of a contingency budget. The President adopted the same budget as 2018 for implementation in 2019, provided that is its dispersed monthly according to administrative instructions to regulate spending. Delay in the law is fully unjustified. The Government should have completed its consultations and budget preparation before end October 2018, i.e. prior to the resignation of the government and the Occupation decision to seized part of the tax and customs clearance money.
In its analysis, the Team diagnosed the problem as lack of enforcement of principles of transparency as relates to disclosure of public budget in detail. The monthly financial reports, which are supposed to be published on the website of the Ministry of Finance, were unjustifiably stopped following the adoption of the contingency budget. Furthermore, the revenues achieved in the first half of this current year represent half of the projected in reason of non-reception of tax and customs clearance money and the political positon. However, this crisis did not affect local collections, which remained close to their level in the same period of the previous year. As regards tax evasion on tobacco and fuel, the Team called for the formation of a government committee with membership of all parties to regulate taxes on cigarettes and tobacco and stop the visible and common smuggling as a first step to hold all responsible parties accountably.
On spending, compliance with procedures for cash rationalization and reduction of spending on cash basis shows rise in government’s burdens and debts. The operational costs were reduced without clarification of the items of such operational costs that will be reduced. It is necessary to refrain from jeopardizing the developmental sectors that affect public services to citizens. Furthermore, data showed that the net lending is rising not to mention the increase in budget deficit and local debts and arrears.
Speaking of public debt and private sector arrears in Palestine, scholar researcher Nasr Abdelkareem presented a research paper detailing government’s internal borrowing from banks and external loans from international governments and institutions to compensate for the budget deficit. He explained that current expenses represent the majority of the Palestinian budget expenditure (85%) while the budget deficit in 2018 reached $ 1 billion, as expenses represented $ 6 billion, compared to $ 5 billion revenues. Local collection represented 25% while foreign donations and grants represented another 25%. The other half of the revenues is secured through tax and customs clearance money. Public debt is importance since it affects the standard of living and basic services of current and future generations and impacts social justice. Addressing accumulation of public debt is also compounded with accumulation of arrears to the private sector and staff salaries in reason of the economic crisis of the PNA, which resulted partly from the cuts of US aid and non-reception of clearance funds.
The study showed that the public debt resulted from the PNA financial policy and deficit in current balance of the Palestinian public budget, which endures a fragile and unsustainable situation, especially when 75% of its revenues are subject to political conditions. This entails rise in public debt and increase of private sector arrears. The paper showed that Palestinian public debt increased with PNA growth of expenditure and expanding of institutions without any sound developmental basis or consideration of the economic conditions and the volume of resources under PNA control, as well as low local taxes and PNA inability to impose other taxes. It goes without saying that the major cause is Israeli occupation control of local resources and borders as well as clearance money transfers.
Abdelkareem concluded his presentation with some recommendations including: working on regulation and rationalization of spending, tax reforms to improve tax collection and confront tax evasion, refrain from borrowing for operational cost, and increased transparency and accountability in public debt management by the Ministry of Finance.
Economic researcher and expert, Omar Abdelrazeq, commented on public debt and confirmed that budget deficit is no doubt the main reason behind this debt. He added, it is not possible for the government to borrow for income-generating developmental projects since this contradicts with its current financial philosophy that does not aim to establish government-owned projects. Thus, focus must be on the role of the Investment Fund, which is managing Palestinian public money, and which is supposed to serve as an economic lever to the government in crisis. However, this Fund is totally disconnected from the government. He therefore recommended to review the relationship between the government and the Investment Fund so that the latter can implement income-generating projects. He further reiterated the necessity to adopt a long-term strategy to expand private sector participation in provision of quality basic services to all, mainly health and education. Abdelraziq also recommended to devise a medium-term plan to downsize employment in Palestinian security apparatuses and concluded by the necessity to adopt a national strategy to confront tax evasion, since most of the tax burden is borne by the poor not the rich.
Acting Director General of Public Budget at the Ministry of Finance, Mr. Tareq Mustapha, commented on the government’s public debt policy noting that public debt increased slightly in the years 2013-2018 because of the financial crisis of the PNA. He mentioned that $ 563 million of the total public debt are rotating grants adding that an agreement was signed with the Islamic Development Bank to invest these funds in developmental projects. He then added that many business dealers are not registered with the tax department. Furthermore, the Ministry of Finance is committed to transferring NIS 25 million monthly to the Palestinian Pension Authority, in addition to NIS 160 million paid directly to the retirees.
The second session started with a research paper on the activities of the Palestinian Employment and Social Protection Fund presented by Dr. Ahmad Abu Dayyah, who explained that the Fund’s raison d’être was to become a reference in employment via comprehensive national employment plans. The objective of the Fund also includes promoting private sector abilities to expand and create new job opportunities and develop the competences of the labor force in addition to improving the working conditions and social protection in the labor market.
The paper concluded some recommendations including: The Fund must prepare a modern law that addresses the problems and lacuna of the current legislation, mainly as relates to objectives, tasks, lines of accountability, guarantees of oversight and auditing of the Fund’s money and its management, building the Fund’s capacities. The recommendations also included development of policies and manuals to be duly adopted with a computerized system to ensure the standards of services and mitigate personal effects in this area. Furthermore, financial resources should be allocated to enable the Fund to perform its mission. The Fund’s page must include regulations, laws, budgets, reports, decisions and remunerations of its board members in addition to the criteria and mechanisms of eligibility to benefit from the Fund’s services.
Economic expert, Dr. Sameer Huleileh, stated in his commentary that horizontal networking between the funds and relevant institutions in the private and public sector is lacking. He added it would be preferable that the Fund leaves some areas to other parties, like conducting periodic studies on the requirements of the labor market provided that the interval between studies does not exceed 5 years, and how they can be interrelated to the requirements of the Palestinian economy. SMEs represent 97% of the total enterprises in Palestine; however, 60% of them fail since the outset according to international statistics for reasons attributed to the surrounding environment. Our system in Palestine does not help SMEs to prosper and grow since it burdens them since the outset and leads to their failure.
Deputy-Minister of Labor, Mr. Samer Salameh, mentioned that the Fund’s legal framework was developed to make it act as a relief fund. It was further transformed into a developmental fund. It henceforth requires a legislative structure to grow. It is a must to revisit its legislative framework alongside other employment and specialized funds and investigate the possibility of their fusion so that they can achieve their goals. The government has already established a committee for this purpose.
Professor at the Faculty of Commerce and Economy at Birzeit University, Dr. Tareq Sadeq, addressed ILO employment policies, which cover the quantitative and qualitative dimensions and non-discrimination among job-seekers. The problem of the Fund resides in the lack of clarity of the relationship it has with the Ministry of Labor and weak community dialogue. Consequently, the quantity and quality of job opportunities available dropped. It is therefore necessary to reflect specializations on the employment policies in Palestine.
Researcher, Eyad Al-Ribahi, presented a report on the status of the Agricultural Disaster Risk Mitigation and Insurance Fund and mentioned that many of its tasks are not completed because of its recent experience and lack of financial resources to implement its activities, mainly in the area of investment. The role of the Fund remained limited in the services it is supposed to provide to farmers to upgrade the agricultural sector. It is further necessary to address the legal framework of agricultural insurance. An executive team is needed to improve the accountability environment in the Fund, where membership will include representatives of different sectors with specific assigned roles. The executive team’s role should not be overridden by the Board or vice versa.
In the end of the report he recommended to improve and develop the system of integrity, transparency and accountability in the Fund. The Board may apply a number of procedures and a proper entry point, namely amending Law Decree (12) for the year 2003 on the Agricultural Disaster Risk Mitigation and Insurances, with focus on its governance framework and role of the Board. The Fund’s experience in operation may be revisited with an executive team with a small group representing all parties.