Report queries credibility of Botswana budget
Brian Benza | Wednesday January 22, 2014 17:00
The exposure, which comes two weeks before the presentation of the 2014/15 national budget, not only cast doubts over the ability of the budget to provide a reliable indication of the government’s resource envelope but also detects weaknesses in its usefulness as a tool for allocating scarce resources in line with policy priorities.
This led to the national budget, in the 2013 appraisal report, foundering in three of the four indicators that were used to assess budget credibility.
According to the European Union (EU) sponsored Public Expenditure and Financial Accountability (PEFA) Assessment report, the level of variances between actual and budgeted revenues has significantly increased in the past three years of the review period. This, the report says, has dented the credibility of government ability to forecast revenues as both tax income and non-tax income consistently exceeded expectations. “On the revenue side, actual revenue was consistently above budget, as it had been in the previous three years. The size of the positive variances has increased from five percent, six percent and seven percent in the previous three-year assessment period up to 2009 to 21 percent, 18% and 11% in the current three-year assessment up to 2012.
“Notwithstanding the mitigating factors associated with the international market for diamonds, the unpredictability of Botswana’s share of regional customs revenue and the uncertainty surrounding the speed of economic recovery after the global economic recession in 2008-2009, these results cause the credibility of the budget to be called into question - this time in terms of its ability to provide a reliable indication of the GoB resource envelope,” says the PEFA assessment report. The report seeks to identify changes in performance that have occurred in the financial management of central government since 2009, the date of the previous assessment. As part of reform measures, the report says that revenue forecasting is on the Public Finance Management (PFM) reform agenda and a working group comprising, among others, representatives of the Ministry of Finance, BURS and the Bank of Botswana (BoB) has been set up to develop a more scientific and reliable model for revenue forecasting. On the expenditure side, the report uncovers weaknesses in the composition of the budget allocations with analysis revealing that there have been very large in-year changes in disbursements.
According to the assessment, variances in the changes of allocations stood at assessment 10.4%, 10.1% and 12.1% in the three years to 2012, noticeably greater than they had been in the previous period of 12%, two percent and two percent.
“This suggests that the budget has weaknesses as a tool for allocating scarce resources in line with policy priorities, although the process for managing in-year reallocations is effective and transparent,” noted the report.
The assessment decries the lack of information regarding payment arrears with uncertainties over the quantity and age profile of expenditure payment arrears undermining budget credibility.
According to the report, as in 2009, indicators on stock and monitoring of expenditure payment arrears could not be rated due to the absence of an arrears monitoring system and the situation. “It is likely that payment arrears represent only a small percentage of total expenditure, but there is no readily available information about the volume of payments which are actually overdue or the length of time they have remained outstanding. “This issue is recognised by the MFDP (Ministry of Finance and Development Planning) and staff within the Accountant General’s Department are currently considering the possibility of using a report generated by GABS as a way of monitoring arrears,” added the report.
The report however acknowledges the improvement in the size of deviations forecast and actual spending, reflecting tighter expenditure control despite significant, positive revenue variances.
Finance Minister, Kenneth Matambo is expected to announce the 2014-2015 budgets in the first week of February with either a balanced and marginal surplus anticipated in the coming financial year.