Ahmed H Arwo, Somaliland Presidential Economic Advisor
This year Somaliland national budget needs broader consideration, as it is nearly certain that new leadership will take power at the start of the year. The governing party leadership should have their input in the coming budget. The vision of Presidential candidate of the governing party should be given top priority. By any standard review and revised budget by the new leadership is a must. This is normal as a governing party ensures continuity of its plans and injects new projects and schemes seen as essential by the new leadership.
The idea of preparing and planning for better budgeting is within the principle of better accountability. It is cornerstone for enhanced resource management and strengthening good governance. It ought to give an amble time for discussion, consultation, and review prior to its approval in Executive and the Legislative bodies. On the other hand, nearly every item in the budget is flexible, and the government has the possibility of redirecting expenditure or making changes in both revenue and expenditure. That flexibility calls for broad involvement and practical participation of line Ministers throughout its preparation.
Budgeting as part and parcel of national planning starts with President’s vision shared with and committed by the cabinet and tunnelled down through government hierarchy. Leadership provides prioritized resource allocation and targets on social, economic and industrial activities of the nation.
The National Budget has to be developed and properly linked with National Development Plan. There ought to be coordination between all government departments in executing their duties to serve a common purpose and to realize leadership vision. Above all cooperation between MoF(Ministry of Finance) and MoP (Ministry of Planning) is a requisite for a viable and visionary plan that can be tied up with fiscal frameworks both medium and operational.
KULMIYE government lead by HE President Ahmed Mohamed Silanyo, improved public confidence in government. Expectation was high. This made all our budgets highly stretched which calls out for continuous undertaking to make it achievable. It reflects more than anything else, the desire of the government to reserve no energy in serving public for better quality of life. A budget increase from a mere 45 Million US Dollars in 2010 to over $363 Million for 2017 budget is beyond normal growth.
Dedication to financial efficiency both at collection and distribution points played a momentous role in this colossal increase.
Despite extraordinary energy and commitment to enhance the know-how of our staff, yet the capacity and technical know-how is comparably low. With that in mind, collection of data and its analysis should be improved for better decision making. That is necessary to formulate fair and progressive budget across the nation.
Though a remarkable improvement is made in due course, yet we have not realised all ingredients of modern budget.
The new KULMIYE Presidential Candidate Mr. Muse Bihi, more than once accentuated his vision regarding financial control and good governance built upon premises to engage war on corruption and mismanagement. This calls for proper, well defined budget where rules and roles are clearly defined, and responsibilities and authorites are unmistakably distinct. Mr. Bihi also underlined the need of fair and equal distribution of resources.
Budget with that vision needs careful and in-depth analysis of all variables and factors that influence both macro and micro-economy across the nation, by sector and by district. Hefty this task is, it cannot be realised within one budget term but should be the target to realise it, sooner possible and of course within the term of Bihi’s Presidency.
A comprehensive and inclusive planning covering all sectors of government departments and agencies is necessary.
The following has to be considered for an input:
Economic parameters i.e. future rate of inflation, and exchange rate.
Macroeconomic statement, covering GNP and employment level.
Coordinated and shared Budget priorities
Departmental ceilings and targets.
Regional and district sub-budgets (Devolution)
Agreed organization of budget preparation (Timeline schedule)
All these necessitates inter-ministerial coordination and across board cooperation of all departments and agencies.
For better forecasting the following are necessary:
Line ministers are responsible and liable for drawing and implementing policies in their sector. In line with overall targets and priorities, they should be responsible for developing sectoral policies and budgets.
Ministries should have professional capacities to collect and analyse essential information needed for trade-offs among projects and programmes.
They should be responsible to formulate guidelines for their departments and dissecting their draft budgets.
Ministry of Finance has the leading role in budget preparation, coordination, reporting, monitoring and controlling.
MoF should have sufficient authority and power to ensure both fiscal targets and strategic prioritization among sectors.
MoF establishes guidelines for preparing Ministries’ programmes.
It reviews line ministers’ requests, scrutinizes, and adjusts against fiscal policies.
MoF facilitates decisions on major policy choices and allocation of resources, but do not make these decisions all alone.
Equally MoF has to review and screen requests, and not prepare them.
Complex interdependency of macroeconomic constraints as well as government revenue and expenditure needs technical and statistical in-depth analysis. A higher economy growth will most likely lead to increased employment and a corresponding increase in income tax revenue. Higher incomes tend to increase consumption with a resulting increase in custom duties of goo ds. A drop in the unemployment level will have the same effect as it will increase direct tax rev enue. Vice versa results will be achieved from opposite economic trend.
- Visionary input must be the guiding principle and should be physically present.
- Regional involvement will enhance democratization of national resources allocation.
- Due to lack of technical capacity in most Ministries and with good faith, MoF is obliged to extend its contribution taking an extra burden to complete budgetary processes.
- Complete practical review of budget system in each and every level is necessary in order to improve fiscal management.
- A full-fledged civil service reform to raise public sector efficiency is positive and essential contribution to good governance and accountability needed for better budgeting and efficient resource management.
Complex interdependency of macroeconomic constraints as well as government revenue and expenditure needs, technical and statistical in-depth analysis. A higher economy growth will most likely lead to increased employment and a corresponding increase in income tax revenue. Higher income tends to increase consumption with a resulting increase in custom duties of goods. A drop in the unemployment level will have the same effect as it will increase direct tax revenue. Vice versa results will be achieved from opposite economic trend.
According to the vision of fair distribution of national resources, as Presidential candidate Mr. Bihi underscored, tax reforms are essential to enhance the principle of affordability, and fairness. A progressive system of taxation will reduce the heavy burden of indirect tax on the citizens at the lowest level of economy ladder.
Ahmed H Arwo
Somaliland Presidential Senior Economic Advisor