Has the Government stayed within its 2017 budget strategies?
BY next week the Government is expected to bring down its second supplementary budget – its second this year – to ensure minimum basic services are maintained.
In view of that, this Column thinks it is worth revisiting the 2017 Budget Preparation, which Finance Minister, Snyder Rini, launched on 15th August 2016. The Budget Outline will be presented in two parts. Here is the first.
1) Permanent Secretaries, representatives from development communities, and government officials, I must first of all convey my sincere apology for deferring the launch of the 2017 budget for several times. I would therefore like to thank you for your patience and for finally making it to day.
2) I am also very delighted to be able to officiate on the launch of the 2017 budget preparation. It is important for me to speak as this occasion provides me the opportunity to briefly outline the financial and economic environment under which the 2017 budget is framed, and to outline to you the strategies we will going to adopt to develop and execute the 2017 budget.
3) The strategy for the 2017 Budget is designed to enable Government to develop and implement a budget that is responsible, credible and that available resources are used to ensure services are continued to be delivered to the Citizen of Solomon Islands and that structural reforms and large infrastructure projects that will generate economic growth are pursued. This strategy also ensures sound fiscal and economic management and underpins a stable national budget and credible Government financial management.
4) Projected economic growth in 2017 remains low at 3%. With log export projected to be unchanged, strong growth in fishing activities, and additional growth in excise duties, domestic revenue is projected to increase at 13% in 2017. The challenge, however, is that donor assistance in the form of budget support is declining by 58% for 2017. There are also major upcoming pressures which are likely to come to bear on the Budget including the cost of preparation for the 2023 South Pacific Games hosting, payroll pressures, scholarships and constituency based funding.
2017 Total Expenditure and Financing Requirement
5) In order to deliver needed social services, while maintaining sound fiscal and economic management in 2017, the overall strategy for the 2017 Budget is maintaining the same level of expenditure and services provided in the 2016 Appropriation Act 2015 while applying “spring clean” exercises to remove one-offs and reduce unnecessary and wasteful spending. Total domestic expenditure for 2017 will therefore be $4,297.3 million.
Of this total $1,432.0 million is allocated for development expenditure, $71 million for debt servicing, and $1,028.5 million for payroll spending and $1,522.6 million for other charges. The total expenditure is higher than the revenue projection of $3,868.6 million.
The gap will be financed by using the cash reserve. In order to close the financing gap, attain the projected spending level in 2017, and continue to maintain the provision of services, the Government will adopt the strategies outlined below.
Implement a number of revenue and expenditure control measures to ensure sufficient level of cash reserve is maintained for 2017 fiscal year.
6) These measures will include:
- Improve expenditure quality through better scrutiny of payment submissions against the intended purpose of appropriation, through enhanced compliance processes and procurement;
- Make reservations on any budgetary allocation, the purpose of which (project or program):
- can be deferred to start in 2017;
- is not ready to be implemented in 2016;
iii. bears significant risk of unproductive, wasteful or improper spending;
- The responsible ministry does not have the capacity to implement.
- Potential for wasteful, extravagant and improper spending for operational and development purposes like
- Stationary and printing
- Consultations, workshops and overseas travel that have no bearing on core functions and responsibilities or simply for unnecessary purposes
- Land and property acquisitions for government purposes that are redundant or lacks clear and strong commitment from relevant Ministries and Cabinet
- Minimize and avoid the risks emanating from wasteful, extravagant and improper spending transactions by tightening compliance requirements; and
- Maintain SIG-funded spending within domestic revenue levels by ensuring that CW are approved only if Ministries identify allocations that can be saved and reserved within existing budget, and
- Ensure adequate working capital for essential services and functions of Government;