2012 budget heads list of challenges

 AFTER the political fallout in parliament last week has settled, the biggest task ahead for the O’Neill administration will be to prepare the 2012 budget.

This is going to be difficult because there is little time left and because 2012 is election year. The pressure on the prime minister and his cabinet would be for goodies to curry favour in the electorates.

Members who have been in opposition all these years would be even more demanding because they had been given scant attention and they would be insistent that it was by their strategising that this new administration had been given a new lease of life.

It is, therefore, of primary importance that the bud­getary process is transpa­rent and that as many sectors of government are allowed the opportunity to participate in discussions leading to the formation and formulation of the budget.

Towards that end, a circular went out from treasury to all departments advising of the 2012 recurrent budget ceilings and advice on preparation of recurrent and development budget submissions.

The departments were given a full month to prepare their submissions and to have them in by close of business last Friday (Aug 5). 

It is hoped the submissions are in.

First up, the budget is framed with improved funding arrangements for provinces arising from the review of inter-governmental financing arrangements (RIGFA) conducted by the National Economic and Fiscal Commission (NEFC). 

Although no preliminary staff ceiling has been provided by treasury, all pro­vinces are expected to submit, along with their budget submission, an existing staff structure.

This should include staff strength, vacancies, unattached officers and proposed structures. So much money disappears to ghost names on the government payroll so this request should be attended to with due diligence.

This month, treasury is expected to discuss the total goods and services cei­ling between the different grants.

Budget meetings between provinces and the budget screening committee is expected from Sept 5-23.

The BSC members repre­sented the departments of prime minister and NEC, justice and attorney-general, finance, national planning and monitoring, personnel management and provincial and local level government affairs. 

These BSC meetings provided agencies with the opportunity to present and discuss their 2012 budget submission with senior officials from central agencies. 

The BSC would then make recommendations to the Central Agencies Coordinating Committee. 

On present schedule, it is expected that next year’s budget would be presented on Nov 8.

The medium-term fiscal strategy 2008-12 lays out three key fiscal rules to assist the government with achieving sustainable economic growth through correct management of its resources. These are:

lKeeping ongoing expenditure in line with normal, sustainable revenues;

lUsing additional windfall mineral revenue to pre-fund public investment projects and repay debt and other liabilities; and

lLimiting the amount of actual public investment expenditure sourced from windfall revenues to a maximum of 4% of GDP in any one year, in order to promote macroeconomic stability and minimise inflationary pressures. 

It is expected that there will be no additional mi­neral revenue available next year to fund additional priority expenditure or one-off investment projects.

Amendments to the Organic Law on Provincial and Local Level Governments in 2008 resulted in the implementation of a revised system for funding most provincial and local level governments. 

For NCD and Bougainville, which are not covered by RIGFA, arrangements remain unchanged.

The revised financing arrangements provide the provinces with higher levels of funding on average, more certainty over their funding, and detailed information about funding earlier in the year to allow for more effective internal budget processes.

One of the key benefits of the revised system is that it determines the amount of goods and services funding available to the provinces and LLGs on a sustainable basis that will grow as the national government’s net revenue grows.