Wednesday, June 12, 2024
BusinessGovernment backtracks on supplementary budget

Government backtracks on supplementary budget

Rolling back on its shift made eight years ago while moving from line-item budgeting to program budgeting, the Council of Ministers once again approved a supplementary budget of 14 billion birr this week. The current supplementary budget came for the eighth year in a row since the introduction of the new type of budgeting in the country.

What makes the recent addition to the record-high budget of 320 billion birr unique is the contradiction it created with Abraham Tekeste’s (PhD), Minister of Finance and Economic Development, warning budgetary federal institutions that they should plan their spending wisely adding that there will be “no supplementary budget this year.”

The supplement to the budget approved by the parliament before the beginning of the fiscal year pushed the government’s spending to 334 billion birr. The 14 billion birr is said to be allotted to the rehabilitation of people affected by human made and natural disasters, support the enrolment capacity of the newly opened 11 universities, for the support of the state broadcaster’s transition to digitalization, and for remainder payments to the beneficiaries of the Youth Revolving fund. The federal budgetary institutions that faced shortage of budget will also have their slice of the cake. People who were affected by the last drought will also benefit from the recent budgetary injection.

Although the government’s transition to program budgeting was meant to avoid supplementary budget, the past eight years’ experience shows that the government could not break away from the habit of supplementing its “planned” spending. In 2016/17 fiscal year, 18.2 billion birr was approved as a supplementary budget which is up from the preceding year’s supplementary budget by 200 million birr. 2014/15 saw an injection of eight billion birr while in 2012/13 there was an extra budget of only four billion birr.

The immediate year that followed the introduction of the program budget in the country saw 7.5 billion birr supplement on top of the 77.2 billion birr budget approved for the fiscal year.

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What the numbers tell is a total diversion from the plan as well as its warning to budgetary institutions as the government’s auxiliary budget has been showing an exponential increase from year to year.

According to the manual prepared in 2010 for budgetary institutions to introduce program budgeting (performance budgeting), as the manual alternatively calls it, it is meant to bring about efficiency to infrastructure and service delivery. Hence it states that, “program budgeting can therefore be seen as the foundation for individual performance assessment.”

Hence, the introduction of program budgeting will put to rest Ethiopia’s challenges which “is to organize government’s budgeting in an output-based program format.”

But, the ambition put forward by the government did not seem to bear fruit with the non-stop additional budgetary allocation year after year.

Macroeconomic commentators stand that supplementary budget that goes to budgetary institutions shows a failure in budget allocation and appropriation and there needs to be strict follow up in order to bring about institutional budgetary effectiveness.

Another push for the yearly increasing supplementary budget is the double digit inflation that has been rocking the country for the past years. Consumer prices in Ethiopia increased 13.6 percent year-on-year in December of 2017, unchanged from the previous month. The headline inflation in may hit 12.3 percent in May with a slight difference from April’s 12.2 percent.

The 15 percent devaluation of the birr which was implemented this year is also another reason for the supplementary budget, according to observers. Whenever there is devaluation, the money in the government’s coffers loses its value decreasing its purchasing power.

Although it is the Council of Ministers that approved the supplementary budget, the Finance Minister has to appear before the House of People’s Representatives (HPR) to defend his proposal and get the budget approved. But, in a parliament all of the seats are occupied by the ruling party EPRDF, the probability of the rejecting the budget is minimal.

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