2021 draft budget between the Financial Management Law and the government program

Admin Tue Mar 09, 2021 3:51 pm

2021 draft budget between the Financial Management Law and the government program

Dr.. Haider Hussain Al Tohme

Government practices have increased over the past years from the fragility of public finances in Iraq and the ability of its tools to respond to the requirements of economic growth and stability. The imbalance in the structure of government resources and the weak financial management efficiency in terms of planning, implementation and control generated a deep hollow in Iraq's public finances, in addition to a structural imbalance based on the expansion of public expenditures in the periods of oil boom, and the weakness of the ability to coexist with low oil prices and times of oil depression.
The previous explosive budgets did not contribute to generating growth rates that match the limits of possibility, nor public services (electricity, health, education) befitting the export capabilities of Iraqi oil or commercial business opportunities, the steady growth of the workforce in Iraq.
To begin with, it is necessary to conduct a comprehensive review and serious evaluation process for public finance management in Iraq, and the key to that federal budget. The new government was expected to transfer many policies and frameworks, applicable in the short term, from theorizing to implementation by implanting them in the strength of the federal budget. For the year 2021, in order to maximize public revenues, rationalize and control public expenditures, overcome the critical financial situation, and enable economic reform programs and policies to enter the national economy without exorbitant economic and social costs that may harm stability and economic growth.

The draft budget for 2021 and Financial Management Law No. (6) of 2019

Ensuring correcting the course of the federal budget and making it a tool of stability and an umbrella to enable reform policies to penetrate into the national economy requires work to reconsider the usual traditions of public financial management. The Financial Management Law No. (6) of 2019 included many controls and standards that guarantee the production of a general budget that suits the financial reform programs in Iraq. However, the federal government did not abide by the content of this law despite its recent implementation and consistency with the government's efforts to achieve the alleged financial and economic reform. In this context, reference can be made to the most prominent violations included in the 2021 draft budget, including:
1- Article (11) states that the Council of Ministers discusses and approves the draft federal budget law
And submitting it to the House of Representatives before the middle of October of each year, while sending the budget to the House of Representatives was delayed for a period of two and a half months beyond the period specified under the law, which was reflected in the delay in approving the budget until now.
2- Contrary to Article 3 of the Financial Management Law in force, the government is not obligated to prepare reports on the most important financial and strategic policies and the government program for the next three years and submit it to the Council of Ministers for approval and be the basis for preparing budgets for the coming years, including the 2021 budget.
1- The current budget has not been prepared in accordance with Article 4 / First of the Financial Management Law, which stipulates that the federal general budget should be prepared on the basis of estimates of economic development, the pursuit of macroeconomic stability, conformity with the government program, the challenges facing the national economy and the expected risks to ensure the evaluation of the situation The financial situation in Iraq and reducing the fluctuations in government spending, but rather they were contradictions without a realistic goal and do not fit the financial reality or the reform programs included in the white paper.
2- The draft budget for 2021 violated the text of Article (6 // Fourth), which emphasized that the planned deficit in the general budget does not exceed (3%) of the gross domestic product, while the deficit included in the draft federal budget exceeded (30%) of the output Estimated GDP.
3- Contrary to Articles (9/8/10), documents and reports were not attached to the general budget as stipulated in these articles, including:
- The financial plan regarding short-term domestic and foreign loans and guarantees issued by the federal government, the region, the governorates, and companies.
- The limits of the increase in the total government debt in general.
- Determine the maximum limit for the guarantees to be issued.
A plan for foreign trade.
- Report on the foreign exchange budget and the national currency supply plan.
- Balancing the gender.
A detailed report on the contributions of the economic sectors to the gross domestic product and investment projects and the most important other necessary indicators.
A detailed report on the internal and external indebtedness, deposits of all kinds, and other related financial statements.
A detailed report on the quantities of exported oil and the ratio of production costs to oil revenues, as well as data on the ministry's forecast for the next three years.
4- Article (13/3) states that in the event that the draft federal budget bill for a particular fiscal year is not approved, the final financial statements for the previous year are the basis for this year's financial statements and are submitted to the House of Representatives for the purpose of approval, while the financial statements for the year 2020 were not submitted to the House of Representatives. For approval as an alternative to the 2020 budget.
5- Article (28 / first) stipulates that the closing of the final accounts shall not exceed (31) January of the following year, while this law has not been adhered to and the final accounts for the year 2019 or 2020 shall be submitted and it is contrary to the Financial Management Law as well as being an umbrella for the sustainability of corruption in Iraq.
6- Article (44) of the Financial Management Law in force stipulates that the Federal Minister of Finance submits a consolidated report on government debts within (30) thirty days from the date of the end of the fiscal year to the House of Representatives and the Council of Ministers, and this has not happened until now despite the accumulation of government debts during the year the past.

The 2021 draft budget and the white paper

Article 4 / First of the Financial Management Law states that the federal budget must match the government program, and since the current government submitted a few months ago the White Paper as a government program for development and reform to be implemented starting from 2021, it was expected that this document would conform to the general and detailed lines of this The paper, especially since the draft budget is the most appropriate place to include reform policies and ensure their penetration into the economy. However, despite the detailed financial reforms contained in the white paper under the paragraph "achieving sustainable financial stability", the 2021 draft budget was virtually devoid of most of these reforms. Such as:
1- The first paragraph in the rationalization of public expenditures stipulated the reduction of the initial deficit in the budget to (3%) of the gross domestic product, while this was not achieved in the 2021 budget.
2- Reducing the salary and wages bill from (25%) to (12%) of GDP, while employee compensation increased in the 2021 budget by nearly (25%).
3- Establishing a support system based on performance and merit for government institutions and reducing financial support for public companies by nearly (30%), which was not achieved in the project of the 2021 budget.
4- Activating the program to recover smuggled and stolen money, which was not achieved or referred to from near or far in the text of the 2021 budget draft.
5- Increasing customs revenues by improving administration and collection, which was not properly achieved in the 2021 budget, and dependence on oil and debt remained the cornerstone of financing government expenditures.
6- Restructuring the local government debt, while the local debt is still increasing, with the same structure based on deducting treasury transfers at the Central Bank (debt monetization) and borrowing from banks and international institutions.
7 - Establishing a general budget framework based on programs and performance, while the usual item budget was approved annually by the government.
8- Reconsidering the investment budget in a way that guarantees project financing over the life of the project in order to prevent delay in the event of delay in approving the budget, while this was not included in the draft budget of 2021, and reliance remained on the old method of investment allocations.
9- Establishing the official structures and systems to implement fiscal federalism, while the government did not initiate that project despite the aggravation of the center's oil and financial problems, and the delay in approving the budget annually due to this file.
10- Setting targets for public investment as part of the gross domestic product, while this was not implemented in the draft budget 2021.
The deterioration of the financial situation in Iraq is a function of a set of causes, foremost of which is the absence of transparency and governance in most of the joints of the financial institution (the Ministry of Finance), weak compliance with the laws in force by many government agencies and institutions, chronic dependence on balancing items, and the absence of final accounts despite rampant corruption In all government institutions, the weak central government's ability to exploit and distribute resources equitably and efficiently, and the weakness of government negotiation in the Kurdistan Region file. As well as the weakness of parliamentary oversight and the end of the role of the House of Representatives legislating the federal budget.

* Researcher at the Al Furat Center for Development and Strategic Studies / 2004-2021
http://www.fcdrs.com

2021 draft budget between the Financial Management Law and the government program