As we publish our 1400th edition today, a milestone no other weekly private press has reached to date, wo would like to revisit a topic we touched not long ago, namely the lack of transparency regarding the financing and expenditure aspects of off-budget mega projects. Since Prime Minister Abiy Ahmed (PhD) came to power in April 2018, a slew of large-scale projects whose funding does not come from the public purse are being executed throughout Ethiopia. The federal government, in particular, has been facilitating or undertaking itself off-budget projects worth billions of dollars. By some estimates the cost of the projects is equivalent to around ten percent of Ethiopia’s GDP. In the past few months the projects have come under scrutiny by several lawmakers due to the dearth of information on how they are funded and whether they are audited. Prime Minister Abiy though has staunchly argued on numerous occasions that the legislature does not have oversight authority of projects for which it has not allocated a budget.
Lately however the Prime Minister seems to have relented somewhat in his opposition to any semblance of subjecting off-budget projects to some form of auditing. For the first time since parliamentarians began to raise probing questions about the financing of the projects, the premiere said yesterday during a budget hearing that his administration has no problem with subjecting them to an auditing process in cognizance of the imperative to combat corruption. True, in the absence of a mechanism that enables the verification of the proper expenditure of the funds allotted to the projects it is impossible to determine with a degree of certainty that any wrongdoing or criminal act has been perpetrated during the execution of these projects. Nevertheless, the terse manner in which the government dismisses lawmakers’ concerns has left many to conclude that it has a low regard for Parliament and the constitutional safeguards placing the executive branch of the government under the legislature.
The pitfalls attending off-budget projects underscore the paramount importance of a principle the government needs to abide by—fiscal discipline. In general terms fiscal discipline refers to the exercise of control over total government expenditure, including central/federal and local government budgets, state-owned enterprises and extra-budgetary funds. Practicing fiscal discipline is vital in terms of bolstering and sustaining economic performance, assuring macroeconomic stability, and minimizing vulnerability to shocks. Furthermore, it is instrumental in ensuring that economies meet the challenges and reap the benefits deriving from the globalization of the economic and financial spheres. As such it gives them the room to utilize the opportunities offered by increased levels of free trade and open capital markets as well as to enhance their longer-term economic prospects. Aside from this, it is equally essential to lessening their exposure to negative market sentiments and crippling capital outflows, and in relieving the effects of debt stress.
Poor fiscal discipline is by and large a function of the imprudent use of policy discretion. It has often prompted macroeconomic instability that has led to economic and financial crises. One of the hallmarks of weak fiscal discipline is a government’s increased appetite for off-budget transactions. Impervious to budgetary and other fiscal laws, such transactions are not subjected to the same level of reporting, regulation, or audit as other public finance items. The fact that terms the funds for these transactions are obtained or if the funds’ mismanagement entails accountability are shrouded in secrecy renders them susceptible to irregularity and illegality. This will entail a steep political cost for the government by robbing it of credibility in the eyes of the public. That is why lawmakers and other sections of the public are continuously asking questions of the off-budget projects.
The body of laws governing the administration of public finances in Ethiopia provides for different obligations that the federal government must obey. Among others they stipulate that the heads of public bodies, defined as any organ of the Federal Government which is partly or wholly financed by state allocated budget, owe the duty to ensure that all of the resources for which they are responsible are used for proper and approved purposes and that they are used economically, transparently and accountably. The heads are also responsible for developing a system of financial administration which ensures transparency and accountability as well as monitoring the system developed within the public body to ascertain it is functioning well. These grave responsibilities point to the indisputable exigency of instituting a system promoting fiscal discipline and implement same strictly. Fiscal discipline is not something the Ethiopian government can practice when doing so serves its purpose and forsake it when it stands in its way; it’s a principle it must adhere to at all times. For the sake of Ethiopia and its people the federal, regional and municipal governments would all do well to take this lesson to heart and apply it to the off-budget projects they are executing.