2014 Activities

Position paper about Budget 2014, the civil Society Team to enhance public Budget Transparency

Position paper about Budget 2014, the civil Society Team to enhance public Budget Transparency

The Civil Society Team condemnsMinister of Finance, Mr. Shukri Bishara's refusal to respond to theCivil Society Team'srequest to hold a public hearing regarding the 2014 budgetdespite numerous attempts to communicate initiated by the AMAN Secretariat . The team also condemns thefailure to submit the public budget on the set deadline contrary to procedures followed in recent years.
The Civil Society Team to Support General Budget Transparencyis also astounded by the cold shoulder presented by the Ministry of Finance in dealing with the Civil Society Team which presents a dangerous trend in the obstruction of public accountability and transparency on thegeneral budget and in managing public fundsand enforcing a culture of obstruction ofthe law. The Civil Society Team notes that civil society organizations have continuously for the past eight yearsheld hearing and accountability sessions with the Ministry of Finance regarding the general budget, economic and financial policies as well as government spending. These hearings were held with the participation of citizens, representatives of various sectors, international organizations and the media in order to offer analysis, criticism and to provide recommendations.
Accordingly, the Civil Society Team to Support General Budget Transparencydecided to publicly announce its position regarding the 2014 general budget that was recently approved for public disclosure despite the scarce availability of information on the budget:
1. The 2014 general budget was presented in the midst of a veil of darkness regarding the process of how the budget was prepared, discussed and adopted. This is a setback to the previous participatory approach of the Ministry of Finance which heard from relevant experts, academics and civil society organizationsand contradicts the principles of transparency and open dissemination of information. This is also a clear violation of the Budget Organization Act Number (7) for the Year 1998 which states that the general budget, after endorsement, shall be publicly published, and a clear violation of the amended Basic Law for the Year 2003 that states that the general budget shall be submitted to the Legislative Council two months prior to the end of the year (November 1) along with the relevant articles in organizing the general budget and financial affairs ofthe Budget Act. The Ministry of Finance submits the general budget under the wire, which does not provide the various sectors adequate time to express their opinion on the budget. This action negatively affects the rights of all parties to discuss this issue which concerns every Palestinian citizen. TheGeneral Budget Law, as in the previous general budgets, does not include some of the required tables stipulated in Article (21) of the Budget and Financial Affairs Act. These tables include the following:
A. Table clarifying the financial and monetary status of the general treasury account.
B. Table demonstrating the long or short-term debts and loans (internal) to/of the Palestinian Authority, as well as the suggested plans for collection and payment.
C. Table clarifying the contributions and investments of the Palestinian Authority in local and non-local bodies and companies.
However, the tables contained in the 2014 general budget provide key data without detailing disclosures and data related to any income and expenditure items or those related to any of the centers of responsibility.
2. There is an absence of a budget address to outline the financial and economic policies of the Palestinian Authority and the economic and social goals it wants to accomplish either entirely or partially, in addition to the key considerations and pillars the income and expenditures estimates relied upon. These key considerations and pillars govern the priorities and amount of expenditure which reflects an absence of a clear vision regarding the 2014 budget goals and lack of consistency with the current government’s pledge to improve the overall situation of Palestinian citizens and pledges to reduce the budget deficit and public debt. Accordingly, the government approves relevant policies and controls the budget in a manner that serves its own vision without taking into consideration the vision of civil society and the private sector, as discussed in the National Dialogue meetings with the government. These meetings were held after the outbreak of protests in various locations in the West Bank in 2011 and 2012 to protest against the increase in commodity prices, the delay in paying government employee salaries and the diminished value of salaries and wages.
3. The 2014 general budget includes the same structural flaws in terms of income and expenditures despite the adoption of programs and performance balancing by the Ministry of Finance. The budget does include detailed information, numbers and items regardingallocated programs, plans and projects and implementation of working mechanisms for each sector in the budget. Running costs exceeded its resources and responsibilities which  contributed to inflation in the Palestinian Authority structure, this took place due tothe expansion in establishing ministerial and non-ministerial institutions that led to fixed running costs and career service inflation that reached 153,000 employees. Therefore, salaries had a direct impact on inflation and comprised a heavy burden on the general budget.
4. Based on the anticipated local income analysis (local collecting+ clearing), we find a clear deficiency in transparency and lack of information. Details in this regards were not mentioned with the exception of providing an overview of numbers for local collecting and clearing items. It is expected that the 2014 general budget will include an increase in local income by 10.7% (an increase in local collecting by 11% and in clearing by 10.5% to the 2013 figures); however, working mechanisms to achieve this increase have not yet been clarified. Based on this information, the government will realize this income through increasing taxes on citizens. This was witnessed after the President issued a decision on 11/3/2014 to amendthe Law Number (8) for the Year 2011 through allocating a full tax exemption on capital gains resulting from selling securities from portfolios and imposing income tax on severance payments . Whereas, the Income Tax Law for the Year 2004 states that severance payments and farmers are fully exemptfrom taxes. This measure deduces that the government takes sides with a group of big players at a time when it should redistribute income in amanner that bridges the gap among various community groups in order to reduce poverty, support low-income citizens and realize social justice.
5. There is considerable dependence on foreign aid and grantswhich totals an increase of 23% i.e. equaling$1,629 million dollars compared to the 2013 budget, of which 1,329 went to support the budget which comprises 31. 5% of the overall 2014 budget. However, no details were disclosed regarding these numbers, nor was thereany elaboration regarding available alternatives if this support becomes unavailable;particularly as this matter is related to developments on the political track. Therefore, if this aid is not available as anticipated, negative economic and financial impact will ensue as was the case when the previous budget was prepared.
6. Despite the fact that the Palestinian Authority has launched its Development Plan 2014-2016, the budget allocated for development, has remained $350 million dollars as in the 2013 budget. Furthermore, only a third of the budget was spent in 2013 which equals 8% from public expenditures, 86%, $300 million dollars, depends on unsecured foreign aid and no further details were available regarding the development plan or guarantees to obtain foreign funding for development for that matter. This means that the Palestinian Authority did not obtain grants for developmental projects, which will negatively impact implementation of these projects. It is worth noting that a development plan was launched without incorporating it in the required budget. Accordingly, this will increase the gap between developmental and financial planning.
7. The 2014 general budget does not include specific details related to public debt and payment mechanisms, as well as considerations and standards that were adopted. Dr. Rami Hamdallahstated that public debt is $5 billion dollars and the government was able to reduce this figure by $400 million dollars. Despite this fact, the General Budget Law of 2014 does not include any tables or details related to public debt, creditors or the size of loan installments, the value of interest paid from the budget to serve the public debt, the advances the government obtained from companies in 2013 and the mechanisms to deal with and calculate them related to the 2014 budget, etc. Furthermore, there is no clear mechanism to bridge the largecumulative deficit for the GDP. This raises questions again regarding the transparency and clarity of the general budget.
8. It is expected that the 2014 budget will include a lending net of$167 million dollars. However, no items or details were provided regarding the lending net which was estimated by $105 million dollars in the 2012 budget. The lending net, however, was larger than expected with $162 million dollars even though the lending net was identified as $81.1 million dollars in the 2013 budget; however, it was $205.4 million dollars.
Based on the aforementioned, the Civil Society Team to Support General Budget Transparencyfinds that the Palestinian Authority budget does not reflect the financial policy of the government, and it is a budget that is not based on a development plan with clear goals. To the contrary, it is an emergency and crisis management budget that was established solely by the Ministry of Finance and it still suffers from a severe lack of transparency and open dissemination of information.
Accordingly, the Civil Society Team to Support General Budget Transparencycalls on the Ministry of Finance to refrain from the cold shoulder and overlooking others policy. It also calls upon the government to adopt a clear and genuine policy towards involving the active participation of various community parties and groups including civil society, the private sector, unions and popular organizations in order to set economic and financial policy in a manner that realizes social justice and reduces poverty and unemployment rates. Moreover, we call upon the Ministry of Financeto reconsider the mechanism of preparing the general budget to take into consideration its commitment to rule of law, and announced public policies of the Palestinian Authority in order to serve as a real tool to develop financial policiesthat are prepared with specific and clear goals to possess adequate transparency and clarity and to guarantee the active participation of civil society and citizens in reviewing and monitoring the budget process.
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