CSTEPBT Calls for improving the critical health sector and ensuring transparency
Ramallah – The Civil Society Team for Enhancing Public Budget Transparency expresses appreciation of the serious government action and quick response to the coronavirus (COVID-19) pandemic since the state of emergency has been declared. The Team commends the publication of the 2020 Emergency Budget Law. As the first budget law to be released by the current government, the Emergency Budget Law is detailed and different with earlier acts, marking a serious step towards public financial management reform. Some provisions are specific and adapted to the current stage. However, the Team has a reservation to the delayed publication of the Emergency Budget Law. According to the Law No. 7 of 1998 on Regulation of the Public Budget and Financial Affairs, it should have been made publicly available at the beginning of the year; i.e., before the state of emergency had been declared. The Team also expresses reservation to the fact that the Law was approved without a public debate. The Team has repeatedly called for circulating and discussing budget proposals before enactment into laws. In particular, the current situation requires community engagement, concerted efforts, and relevant expertise.
Transparency is a prerequisite for successful management of the current situation
In addition to commitment to transparency, the Team stresses that timely publication of statements, budget documents, and financial reports is a key process to be maintained, particularly in the current circumstances. More than ever before, the government needs to pay more attention to making publicly available a detailed account of all public sector projected procurements, tenders, public works, services, and supplies. Highlighting compliance with the Public Procurement Law, these should be published through the unified gateway. All tender stages, from invitation through monitoring and implementation, will be in the public domain. While tracking the provision of assistance, a transparent process will cover activities carried out by relevant ministries, including the Ministry of Social Development (MoSD) and Ministry of Labour (MoL). These ministries meet the emerging needs of workers, who have been unemployed due to the state of emergency. Cash and in-kind assistance is also provided to affected people in neighbourhoods and villages supervised by local committees. Codes of professional conduct need to be applicable in the public sector, local government units, and civil society organisations. These will be subject to enhanced public and official oversight. In addition to increasing trust between citizens and the government, this should strengthen citizens’ capacity to cope with the COVID-19 crisis and economic impact. It should also promote the private sector and civil society’s role in supporting government actions and citizens’ resilience.
In view of the state of emergency, the Team calls for setting a reserve amount. According to Article 37 of the 1998 Budget Law, “[t]o meet the unexpected and contingent funding requirements during the fiscal year, a suitable reserve amount should be approved in the budget law in order to be placed under the disposal of the Council of Ministers. The Minister shall review the funding requests submitted by line ministries and public institutions from this reserve. Together with his recommendations, these shall be presented to the Council of Ministers for making a decision thereon.”
Health sector development is critical
The Team reiterated calls for realigning resources and using currently suspended development expenditure as well as some operating expenses to develop the pivotal health sector, for the sake of which the state of emergency has been in place. Importantly, available resources need to be distributed optimally, ensuring social justice. Under the current circumstances, support and care will be provided to vulnerable, poor and newly poor households. Allocations will be set to compensate for the damage caused by compulsory home quarantine and suspension of many workers.
Revenues, expenditures and deficit estimates in figures
In its Position Paper on the 2020 Emergency Budget Law, the Team provides estimates of projected revenues, expenditures and deficit. Estimated at NIS 8,698 million, revenues will be 30 percent less than 2019 revenue generation. Projected to stand at NIS 1,863 million, local collection will be less by 60 percent than that made in 2019. Clearance revenues are expected to drop by some 15 percent, totalling NIS 6.835 million. These projections are driven by the current crisis, including suspension of most commercial, tourism and production activities. Estimates show that tax revenues will be on a downward trend, particularly VAT and customs duties that make up the largest revenue resource. According to the Team, clearance revenue forecast might be relatively optimistic due to a projected decrease in imports and consequent drop in taxes. This crisis has affected and disrupted trade around the entire world.
Combined, total current expenses, development expenditure and net lending comprise the amount deducted by Israel for utility bills, patient transfers, etc. These are estimated at NIS 17,787 million, or almost double the local revenues. This amount is close to previous years, irrespective of the state of emergency. It includes (1) salaries and wages (NIS 6,881 million); (2) current expenses (NIS 8,606 million); (3) net lending (NIS 900 million); and (4) development expenditure (NIS 1,400 million).
MoSD estimates: 80,000 households will fall in poverty due to the current situation
Current expenses consist of operating expenses (NIS 2,257 million) and transfers (NIS 5,771). The latter reflect a rise of over NIS 1 billion compared to 2019. As amounts paid to a third party, 50 percent of these transfers cover pensions, cash assistance to poor households, and allocations to the families of martyrs, injured citizens and prisoners. Estimates indicate a potential increase in the resources allocated to the poor as new households will be trapped in poverty because of the current situation. Since the beginning of the crisis, 10,000 more households have received MoSD cash assistance. Now, a total of 115,000 households are beneficiaries of the MoSD cash assistance programme, including 80,000 in Gaza and 35,000 in the West Bank. According to the MoSD estimates, almost 80,000 new households will become impoverished due to this situation.
Funding gap… the largest in the public budget history
The Emergency Budget Law estimates that the total deficit before funding is NIS 9,429 million, exceeding the projected revenue amount. It also forecasts that funding will total NIS 4,389 million, including 2,229 million in external funds and NIS 2,160 million in bank funds The Law maintains NIS 5,040 million as a funding gap, the largest in the Palestinian public budget history.
Rising public debt due to Israel’s piracy of clearance revenues and decreasing revenues as a result of the state of emergency
According to the Ministry of Finance and Planning (MoFP), towards the end of 2019, public debt totalled NIS 9,662 million as it increased by NIS 745 million at the beginning of that year. This was driven by Israel’s piracy of clearance revenues, resulting in a government financial crisis in 2019. This year, due to the state of emergency, public debt is expected to rise in view of declining revenues. Against this background, the Team stresses the need for transparency. In line with relevant regulations, all public debt details and tables should be published, including internal and external debt, creditors, loan instalments, repayment mechanisms, etc.
The Team’s position paper also provides both general and specific comments. As much as possible, expenditures should be reduced. Demands will be heightened to restore financial entitlements from Israel, which seizes Palestinian clearance revenues. Claiming that they were allocated to prisoners, the amounts frozen in 2019 should be recovered. Among other things, the 3 percent collection fee, travel fees paid at crossing points, and worker health insurance premiums will also be redeemed.
Responses consistent with the Team’s calls
The Team is of the view that the data presented is so inadequate to provide an opinion on them. However, the Team understands the reasons for a significant budget deficit. This requires extensive efforts to mobilise funds and bridge that deficit. The Team emphasises that the current situation necessitates a rearrangement of priorities accordingly. Of particular note, the 2020 Emergency Budget Law repeals Article 9 of the 2018 Budget Law. The latter grants an exception to the Prime Minister regarding the payment of salaries to newly appointed servants. Article 9 of the 2018 Budget Law sets mechanisms for this salary payment without any exception given to the Prime Minister. Introducing a new item, Article 9 of the 2020 Emergency Budget Law provides that no wages or honorariums without corresponding budget allocations will not be paid for any reason whatsoever. This favourable practice is consistent with the Team’s earlier demands.
The Team also highlights that the Emergency Budget Law includes provisions that accommodate the current situation. Along this vein, Article 6 establishes that all 2020 figures and statements are indicative. These can be adjusted and updated in light of future developments during the fiscal year. Monthly monetary plans will be compiled on the grounds of monetary rationalisation in line with the priorities set by the Council of Ministers. Consistent with the current conditions, this makes projections more realistic. The Team further stresses that this article be used prudently as it adapts the Law to the prevailing conditions.
