2014 Activities

Ministry of Finance Fails to Attend Accountability Session….How Government Saves FY14 Budget

Ministry of Finance Fails to Attend Accountability Session….How Government Saves FY14 Budget

 

 

 

 

 

 

 

 

Organized by the Civil Society Team to Enhance Public Budget Transparency

Ministry of Finance Fails to Attend Accountability Session….How Government Saves FY14 Budget
Organized by the Civil Society Team for Enhancing Public Budget Transparency (CSTPBT)
AMAN and partner institutions in the Civil Society Team for Enhancing Public Budget Transparency held a meeting scheduled to be attended by the Palestinian Finance Minister. The meeting is planned to provide representatives of civil society team with answers to their queries, but the Minister failed to attend that meeting held in Ramallah.
AMAN representatives welcomed the attendees and participants and then presented the outcomes of an analytical financial study of the public budget for the first half of the current year. This observational analytical study, produced by researcher Mo’ayyad Afaneh from the team of public budget transparency, reached to a set of conclusions and questions that need to be answered, justified or explained to the attendees and the media. These conclusions include:
Figures show a real problem in Palestinian National Authority (PNA) reliance on grants and foreign aid where it did receive nearly half of their amounts. Significantly, FY2014 budget is fully developed to bridge the budget deficit of 2014 from grants and foreign aid.
The study exposed the question, “Does the Ministry of Finance have alternatives in the event of continued failure to receive the scheduled grants and foreign aid?”
Furthermore, there is still inflation and a significant increase in salaries and wages item in June bill amounted to NIS 50 million compared to January bill by an increase of nearly 9% of monthly salaries and wages. All of this contradicts with government repeated announcements of suspending appointments unless when necessary???
The study also indicated that a problem in the development expenditure is still in effect. The actual expenditures are far less than the scheduled ones despite their importance. Noteworthy, the year 2014 witnessed the launch of the National Development Plan 2014-2016 which needs to be translated into a reality by means of adequate budgets and considering that the development budget of 2014 is similar to the budget of 2013. Moreover, it is noted that the development expenditures of ministries providing social services are very low. They did not reach to 4% of the total expenditures of each ministry at their best. The Ministry of Health expenditures, for example, was less than 1%, and did not exceed (0.33 %) despite the fact that the government has launch its National Development Plan 2014-2016.
The study indicated that there is a problem in the net lending item in the general budget; it is a twofold problem. The first fold is related to the principle of transparency where there are no details except prime numbers even though this item is important and sensitive. The second one is related to massive deviation from what is planned and last year plans where spending was higher than to what is planned to be achieved in 2014 by 70%.
Being presented by Hama Zidan, AMAN member and the coordinator of the (CSTPBT), and Mo’ayyad Afaneh, the researcher, the study concluded that the PNA constant dependence on grants and foreign aid to bridge the budget deficit has created a problem resulted in the accumulation of arrears. These arrears are building up rapidly each month and reached by the end of the half year an amount of NIS 1351.5 billion. Yet, PNA has got no clear vision of how to settle those arrears in the event of not receiving the foreign aid and grants bearing in mind that they are snowballing each month.
Salaries and wages drain most of the budget of the Ministry of Education and Higher Education by 80% of its total expenditures. Meanwhile, development expenditure accounted for less than 4% of its total   expenditures.
The study suggested that the goods and services items accounts for nearly 52% of the total expenditures of the Palestinian Ministry of Health, while development expenditures constitutes (0.33%) of its total expenditures. As for the transfer expenditures item, it accounts for nearly 93% of the total expenditures of the Ministry of Social Affairs, while the development expenditures form (1.73%) of its total expenditures.
Additionally, the study concludes that the ongoing financial crisis that PNA faces, which becomes as plain as a pikestaff in the analysis of the first half of the year of the general budget 2014, is an enduring crisis. It is simply the difficult financial situation that prevents the achievement of actual financial sustainability. Such a financial situation can be identified through several indicators, including: chronic deficit in the general budget, the accumulation of arrears to the private sector, the high PNA public debt compared to GDP and the direct dependence on foreign aid to bridge the general budget deficit.
The study stated that the current financial situation requires that PNA is to take actions, to adopt radical and gradual solutions to reduce the impact of the bottle neck situation and to create a sort of financial stability. In this regard, there is a need to create a participatory approach between the Ministry of Finance, academics, researchers and civil society organizations to contribute to find a way to end the financial crisis.
There is a substantial dependence on foreign aid and grants even higher than the budget of 2013 with an amount of NIS 5,865million of which NIS 4785 million to support the budget. Indeed, it is a significant figure. There are no details on what basis it has been approved and what are the alternatives if such support is not available, especially it is linked to the political track.
Despite the launch of PNA Development Plan 2014-2016, the budget allocated to achieve development has remained the same, $350 million. It only accounts for 8% of public expenditures, and 86%, $300 million, is based on foreign aid. Additionally, there are no details available pertaining to any development plans! What are the guarantees to receive the external funding for development? How can we launch a development plan without allocating the necessary budgets to keep pace?
The study pointed out the public debt problem that PNA is still facing, and what has been achieved during the first half of this year (June 2014) is the slight reduction of the public debt compared to the end of 2013. The public debt went down from NIS 8264.8 million to NIS 8082.1 million, i.e. 2.2% of its total.
Notwithstanding, security provisions accounts for the lion's share of the general budget. During the first half of 2014, security expenditures were approximately equal to the sum of expenditures of the Ministry of Education and Higher Education and the Palestinian Ministry of Health. The Ministry of Interior and Public Security got nearly 28% of total public expenditures, and the bill of salaries and wages to the Ministry of Interior and Public Security accounts for 80% of the total expenditure allocated to both of them.
The attendees concluded it is important that PNA adopts the participatory approach in the processes of preparing the general budget. Also, it is vital to involve economists, academics and relevant civil society institutions to take advantage of their cumulative experiences and achieve greater transparency for the budget and its processes of preparation.
Likewise, there is a need to horizontally broaden the tax base through having access to segments who are still evading taxes. Also, it is vital to raise tax awareness among traders and improve the collection and control process to sort out the issue of tax evasion. This goes in line with forcing citizens to open tax files to disseminate the culture of tax compliance among citizens.
As for the austerity plan announced by the government, it is necessary that the government should take actual measurable steps to implement it. This includes, the rationalization of public expenditures, especially the various operating expenses, including travel expenses and government vehicles. Also, it is essential to revisit the salaries and privileges of the former and current ministers and members of the Legislative Council.
The meeting was inaugurated by AMAN Acting Executive Director by welcoming the attendees saying that such a session comes in the context of the need to guarantee the right of citizens to access information related their lives life and the entity that manages public money. Professor Abdel Kader Husseini, head of the Board of Directors, stated that there is a decline in the former approach adopted by the Ministry of Finance in terms of the collaboration with the Civil Society Team to Enhance Public Budget Transparency. The previous years witnessed multiple meetings with the Ministry of Finance staff and the Minister of Finance to answer questions addressed by citizens, media and civil society on justifications regarding budgets items and expenditure. He invited the Minister of Finance to increase the level of interest and cooperation with representatives of the Palestinian citizens, and to stop ignoring calls of civil institutions and organizations and the media.
Dr. Azmi Shuaibi, Commissioner of AMAN, concluded the session by addressing a key recommendation where he urged Civil Society Team to Enhance Public Budget Transparency to address a letter to the Prime Minister to see if it is the Ministry of Finance policy to withhold information and turn down to cooperate or it is the Minister’s of Finance personal policy. The second recommendation was to call for the President of the State of Palestine to invite the Legislative Council to convene in order to play its role in controlling the general budget.