Puntland is in
the throes of a severe economic crisis. In light of the ramifications of this
crisis, I dissect the key
challenges to implementing Puntland's budget, and attempt to discuss the ways
forward.
Challenges
Poor
budget planning, preparation and participation:
Budget planning and preparation are the cornerstones
of an efficient public expenditure management. In Puntland, the ministry does
not provide sufficient time for budget preparation and planning which makes the
implementation phase difficult. In addition, although the responsibility
for preparing the budget usually lies with the ministry of finance with input
from the line ministries, it is a sheer lunacy in the budgeting system that the
Ministry of Finance does not provide adequate timeframes for consultation with other ministries. Furthermore,
the House of Representatives failed to live up to the expectations of the
public and hold public hearings.
Lack
of prioritization and fiscal responsibility: An efficient
budget should aim at making the government's priorities clear, but in Puntland
context, it is apparent that there is lack of allocative efficiency which
resulted in the disbursement of public funds to non-essential activities. In the
fiscal year 2019, Puntland TV was allocated $54,500 per month while the Ministry
of Environment, Agriculture and Climate Change was planned to receive only $25,524.
That is a prime example of resource misallocation and fiscal irresponsibility.
Biased forecasts: Biased forecasts are also a reason for setting
budgets that do not reflect the state’s economic situation. This means that most
of Puntland's budget may be based on inconsistent macroeconomic
assumptions. For example, the current tax system exposes dearth of an in-depth financial
assessment before taxes are set, which led to the imposition of exorbitant
taxes. Punitive taxes imposed on businessmen have resulted in the closure of
many businesses, the loss of many jobs, and exacerbation of financial woes.
Corruption:
Widespread corruption hinders Puntland’s budget implementation, erodes people's
trust in the ministry and its leadership, and undermines the financial
stability. In Puntland, ‘FADLAN’ corruption has become a norm, and this
malpractice means that anyone who is ordered by the president or the finance
minister to be paid will get paid
without checking whether this order is in line with the budget.
Lack of staff motivation: Lack of motivation and lower salaries for the
Ministry of Finance revenue collection staff have led to significant delays in
staff performance and revenue collection. It is noteworthy that sometimes staff
are not paid for certain months. Therefore, you can imagine the consequences of
not paying your employees and expecting all collected revenues to be
transferred to the ministry's banks or relevant offices.
Lack
of monitoring and review: Another critical aspect for the
proper execution of the budget is monitoring and review. The ministry's budget
department rarely produces two reports that may be intended for monitoring; however,
these reports do not cover all issues affecting the budget and the government's
finances in general. In the last few years, no one has held the ministry
accountable for how it has implemented the approved budget and how it manages
the entire state’s finance including the lingering currency crisis.
Ineffective audit: The Office of the Auditor General has become
incompetent and that has severely damaged the accountability of the state's
financial institutions. Having an
effective oversight and audit is a key step to achieving financial transparency, inclusive growth and preventing loss of revenues.
Weak leadership and institutional capacity: Overall the capability of the state's financial institutions to have the
capacity to formulate strategies and policies is terribly weak. While writing
this article, a friend of mine told me that seminars designed to improve the capacity
of the ministry staff benefitted people who were not the right ones for the
trainings. Currently, the Ministry of Finance has reached the nadir of its weaknesses
owing to its inept minister who has neither the knowledge nor the skills to
manage the payroll for a small business, let alone to direct the state’s fiscal
policies. Apart from that, the ministry has several professional consultants
and competent staff who could do much to improve public financial management
under the right leadership.
Limited revenue sources: the scarcity of sources hampers the proper budget
preparation and implementation. It is a pity that, with around
three-quarters of the total budget
being subsidized by foreign governments, our government has
never considered creating new sources of revenue other than raising taxes.
The Way Forward
Reforms in the revenue collection and expenditure
management: Reforming
and modernizing the revenue collection system will help raise
more revenue to finance essential social services, as well as facilitating financial transparency and
accountability. Therefore, it is vital to carry out major reforms in
expenditure management and resource allocation to lay the foundations for sound
financial discipline and efficient service delivery.
Installing Robust IFMIS (Integrated Financial Management Information Systems):
IFMIS is an approach
that allows all revenues and expenses to be managed in one suite of applications.
It will enable the
transparent use of public resources through increased visibility of financial
transactions and the reduction of extravagant use of public resources. Installing sound IFMIS systems can play an indispensable
role in empowering the government to gain effective
control over their finances, boost integrity and combat corruption.
Effective
parliamentary oversight of budget implementation:
In recent years, parliamentary oversight of budget management has been poor. To deal with the current rampant corruption, an effective parliamentary oversight
must be put in place as it is crucial to implementing the budget and
ensuring efficient service delivery to citizens.
Leadership and Institutional capacity: The
ministry of finance suffers from low institutional capacity, with most of the
ministry workforce lacking the tools and trainings needed to perform the
duties. To overcome these barriers, it is necessary to map out policies and
procedures to improve the knowledge, skills, and the competencies of the staff.
Another step that must be taken is to replace the ministry's leadership since they
failed to address the challenges plaguing the ministry.
The
fight against grand corruption and kleptocracy: Rooting out institutional
corruption requires installing more transparent financial system, publication
of user-friendly citizen’s budgets, building strong and independent audit, capacity
building of the staff and reform of the recruitment system, strengthening
parliament's budgetary oversight, criminalizing
kleptocracy, combating improper awarding of contracts and formulating
anti-corruption policies. I firmly believe that corruption, which is currently
a major hindrance to budget implementation, will decrease if we put all the
above steps into effect.
In conclusion, there is a need for the government to address the key underlying challenges, and for that to materialize, the current leadership has to deliver the implementation of reforms that support improving Puntland’s public financial system.
Email: Abdullahisanco@gmail.com
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