Analysis of the Budget Call Circular of 2014 in Zimbabwe

Contents

Contents.................................................... Contents............................. .............................................. .............................................. .............................................. ....................................1 .............1 Introduction.............................................................. Introduction....................................... .............................................. .............................................. ........................................... ....................2 2 Purpose of Budget Budge t Call Circulars............................ Circulars................................................... .............................................. ............................................3 .....................3 Discussion of the guidance offered by the BCC Number 2 of 201.......................................... Issuing of Instructions!Call Instr uctions!Call Circulars.............................. Circulars..................................................... .............................................. ................................ ......... "conomic and fiscal outloo#......................... outlo o#................................................ .............................................. ..................................................$ ...........................$ % guideline amount &hich may not be e'ceeded!budget ceiling...........................................( )orm and content of budget estimates...................................................................................* % general priority indication for e'penditure by the +arious departments.............................* Conclusion........................................................ Conclusion................................. .............................................. .............................................. .............................................. ............................, ....., -eferences..................................................... -eferences.............................. .............................................. .............................................. ....................................................1 .............................10 0

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Introduction

Call circulars are the official notices that are issued by the inistry of )inance or similar agencies to&ards the commencement of each budget cycle. %ccording to /NI)"s guidance series 200* the purpose of the circular is to instruct go+ernment agencies ho& they must submit their demands for budgets for the coming year. In some countries the circular may ha+e another name such as budget guidelines or 4reasury guidelines but the  purpose is basically the same. 4he call circular goes to all spending agencies ministries departments other go+ernment5funded institutions. It usually tells each agency &hat its  budget 6ceiling7 for the ne't year is i.e. ho& much the inistry of )inance or Planning Commission is planning to allocate to that agency. In some cases the call circular describes go+ernment priorities that should be addressed in the coming years allocations.

4he budget preparation call circular is triggered by the issuance of the Budget Call Circular BCC. %ccording to the 2011 8uidelines for Chief Budget anagers in -&anda the BCC  pro+ides the total indicati+e resource en+elope deri+ed from the macro5fiscal frame&or# consistent &ith the broad policy ob9ecti+es. 4he indicati+e ceilings are issued at high le+el at line ministries pro+inces and other high le+el go+ernment institutions. 4his is to allo& coordination and prioriti:ation of acti+ities at the high le+el of 8o+ernment programmes. 4he  parent institutions inistries and other high le+el institutions that ha+e been allocated ceilings are re;uired to pro'imately underta#e consultati+e processes &ith all affiliated agencies to agree on indi+idual agency ceilings that shall be the basis for the detailed budget estimates to be entered in the budget system.

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4his paper &ill e+aluate the content of the 4reasury Budget Call Circular Number 2 of 201 BCC issued by the inistry of )inance and "conomic De+elopment in
Purpose of Budget Call Circulars

4he =agos >tate Budget anual 2010 defines the purpose of BCCs as the pro+ision to go+ernment inistries Departments and %gencies D%s of guidelines for the preparation of budgets instructions for completion of re;uisite budget forms and a timetable for the compilation and submission of the budget proposals. %n appropriately de+eloped BCC includes +arious critical elements &hich ensure an effecti+e budgetary process. % BCC should  pro+ide an economic and fiscal outloo# of the state for the planned budgetary period. 4his &ill situate the budget in the broader economic conte't.

 )urthermore it should furnish D%s &ith spending limits &ith e'plicit planning and contingency reser+es. 4his should include sector spending limits as &ell as input spending  boundary definitions. D%s need to #no& the states priorities therefore this are articulated in the budget call circular. )or administrati+e ease the BCC should pro+ide directions on the  process for admitting pro9ects and programmes into the medium5term sector strategies. oreo+er the form and content of budget estimates.

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Discussion of the guidance offered by the BCC Number 2 of 2014

4his section &ill discuss and offer an analysis of the BCC Number 2 of 201 gi+en the abo+e identified purpose and criteria of budget call circulars. Issuing of Instructions/Call Circulars

% BCC should pro+ide a timetable for submission of departmental draft budgets. "#eocha 2012 by citing 8alston 2012 identifies the capacity to ma#e timely and utilitarian fiscal choices as one of the guarantees of sound go+ernance. ?e again referred to 8alston 2012 &ho e'plained that timely budget inter+entions affect public trust and confidence in the institutions and processes of self5go+ernment in democracies. =ate budgetary submissions ha+e negati+e implications for the functioning of the economy as it interferes &ith the aspects of the free mar#et that runs enterprises. "#eocha &rote that the budget process in Nigeria &as the cause for late submission and poor budget performance.

4he BCC number 2 of 201 had a timeline &hich is sho&n belo&. % critic &riting in the ne&spaper 4he Independent argued that the 201$ budget statement announced by )inance minister Patric# Chinamasa last &ee# &as disappointing. 4he budget reflects the lac# of engagement and consultation &ith #ey sta#eholders as it failed to address some of the #ey challenges facing the economy. 4he argument &as that it failed to inspire confidence and  pro+ide much5needed support to #ic#5start the economy.

4his inade;uate consultation may ha+e been due to limited timeframe one month for consultations. 8i+en the current poor economic performance of


on consultations &ith the +arious sta#eholders. @hile the timeframe is pro+ided it is not sufficient to tac#le the current challenges &hich re;uire capital in+estments. 4he @orld Ban# in its Budgeting and Budgetary Institutions publication ad+ises that in %frican de+eloping countries se+en or eight months is a more appropriate budget preparation period from issue of the budget circular to legislati+e appro+al.

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cti!ity Issuance of Call Circular "ubmission of #$penditure Proposal

Due Date 1* Actober 201 31 Actober 201

'

by %ine &inistries Budget Consultations (ith

20 Actober521 No+ember 201

4 +

sta)eholders Budget *earings (ith %ine &inistries Presentation of the 201+ Budget to

351 No+ember 201 2* No+ember 201

Parliament "ource, -reasury Budget Call Circular Number 2 of 2014 #conomic and fiscal outloo) 

4he BCC pro9ected an economic gro&th of 3.2 &ith #ey dri+ers being agriculture * mining 3.$ and construction 2.. 4his is a do&ngrade belo& the aharan %frica gro&th of $.,. %n opinion &riter in the Independent argued that this is unsatisfactory especially &hen considering the potential for gro&th for
$

 guideline amount (hich may not be e$ceeded/budget ceiling

>ection $.1* gi+es a Capital Budget ceiling of />F30 million &hile >ection (.1 caps the e'penditure proposals for line ministries at />F$ **0 000. 4here is no scope for redirecting any amount from one e'penditure head to another. )urthermore priority &as to be accorded to programmes and pro9ects for &hich contractual obligations already e'isted. @hile the BCC  pro+ided a ceiling for the e'penditure proposals for each of the line ministries it is difficult to follo& on this from merely reading the budget. 4he budget &as presented rather in cluster format in line &ith the >"4 &hich is the ustainable >ocio5 "conomic 4ransformation.

@hile e+aluating the proposed budget for 201$ in the National %ssembly chairperson for the  parliamentary committee on ?ealth -uth =abode challenged Chinamasa to defend &hy his  budget fell short of the >outhern %frican De+elopment Committee 1$ specified apportionment to the health sector as it &as only allocated (, of the national budget. 64he  budget falls short of the %bu9a declaration &hich this state agreed to and as committee &e feel that the ministry of ?ealth has been do&ngraded from being among the top three to number fi+e &e dont #no& &hy considering its importance7 4he
.orm and content of budget estimates

%ccounting officers administering funds in terms of the Public )inance anagement %ct are re;uired to submit their budgets to 4reasury for appro+al. %nne' 1 of the BCC pro+ides the format of presentation for the e'penditure proposals. It clearly stipulates that section % of the (

e'penditure proposals should summarise the Gote o+er+ie& #ey result areas and priorities in alignment &ith >"4. It further ad+ises that part B should encompass a summary of re+ised estimates for 201 proposed estimates for 201$ and indicati+e estimates for 201(51* the format for &hich is pro+ided in schedule GI. )or capital e'penditure a standardised  proposal submission form &as gi+en on >chedule III. 4his should suffice though this is a line  budgeting method.

 general priority indication for e$penditure by the !arious departments

)urthermore priority &as to be accorded to programmes and pro9ects for &hich contractual obligations already e'isted. "fficiency is called for in the collection and retention of income and its subse;uent deployment. %n estimated ,1 poised to reach 2 of the />F1bn  budget is allocated to recurrent e'penditure meaning +ery little for capital e'penditure. In fact the budget &as re+ised do&n&ards to />F3.$ bn. 4his is +ery &orrying since it is inconsistent &ith the four cluster of >"4 &hich rely on gro&th. >ustainable gro&th can only come through long5term capital in+estments.

8o+ernment needs to drastically curtail consumpti+e e'penditure such as &ages and di+ert funds to capital de+elopment. 4here ha+e been reports of Hghost &or#ers and duplication of duties &ithin the ci+il ser+ice. Capital e'penditure &ill boost economic acti+ity and create more 9obs. It is sad noting that capital spending to the end of Actober 201 &as />F2(, million against a budget of />F01m as reported by 4he >ource &ebsite.

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Conclusion

Call circulars are official notices issued by inistry of )inance near beginning of each budget cycle. 4hey are meant to instruct go+ernment ministries departments and agencies on ho& to submit demands for the coming financial year. BCCs typically specify to each agency a  budget Hceiling and pro+ide other instructions for the construct and format the draft budget. In addition BCCs ad+ise on ho& to present moti+ations for the e'penditure proposals.

4his inade;uate consultation may ha+e been due to limited timeframe one month for consultations. 8i+en the current poor economic performance of
8o+ernment needs to drastically curtail consumpti+e e'penditure such as &ages and di+ert funds to capital de+elopment. 4here ha+e been reports of Hghost &or#ers and duplication of duties &ithin the ci+il ser+ice. Capital e'penditure &ill boost economic acti+ity and create more 9obs. 4he absence of a firm e'penditure restraint at the start of the budget process &hich forces early decisions &ill in+ariably result in dysfunctional practices in budgeting. 4his restricti+e stance to line ministries from the start of budget preparation fa+ours a shift from a 6&ishes7 mentality to an 6a+ailability7 mentality. 4his is &hat r Biti the former )inance minister referred to &hen he said that the go+ernment should Heat &hat it #ills.

,

oreo+er to translate strategic choices and policies into programs line ministries re;uire clear indications of a+ailable resources. )orecasting of re+enues therefore has to be realistic. It saps confidence a&ay &hen a budget has to be re+ised do&n&ards a fe& &ee#s after its  presentation as happened in this case. )inally a budget ceiling increases the de facto authority and autonomy of the line ministries &ea#ening the prerogati+e of the ministry of finance to a role in defining the internal configuration of the line ministries budgets.

A+erall the Budget Call Circular Number 2 of 201 ga+e a +ery tight timeline &hich rendered consultation ineffecti+e the e'penditure ceilings it offered &ere not in congruency &ith the stated priorities of de+elopment &hile the re+enue forecasts &ere too ambitious and erroneous re;uiring a do&n&ards +ariation. It is only the administrati+e guidelines &hich are not really of material conse;uence to policy success that are commendable in this BCC. 4he  budgetary process in
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eferences

"#eocha Patterson Chu#&ueme#a 2012 %n %nalysis of the )ederal Budgeting Process in  Nigeria Implications for Institutional -eforms for %chie+ing 4imeliness. De+eloping Country >tudies Gol 2 No.( 2012 8ender -esponsi+e Budgeting Program 8uidance sheet series 5 No. 1 Eanuary 200* http!!&&&.theindependent.co.:&!201!12!0$!:imbab&e5stuc#5holding5pattern! %ccessed 02 arch 201$ http!!&&&.the:immail.co.:&!201!12!1*!parly5tears5into5201$5national5budget! %ccessed 02 arch 201$ https!!&&&.ne&sday.co.:&!201$!01!1!land5grab5intensify5mnangag&a! %ccessed 02 arch 201$ =agos >tate 8o+ernment Budget anual 2010. inistry of "conomic Planning and Budget inistry of )inance and "conomic Planning IN"CA)IN 8o+ernment of -&anda >implified Public )inancial guidelines for Chief Budget anagers Euly 2011 >har %. 200*. "ditor Budgeting and Budgetary Institutions Public >ector 8o+ernance and %ccountability >eries. 4he International Ban# for -econstruction and De+elopment ! 4he @orld Ban#  www.source.co.zw/2014/11/2015-budget-highlights/  %ccessed 02 arch 201$

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