Part One: Budget Conversations for Poverty Reduction – Key Issues, Challenges and Perspectives
The National Budget is, after the Constitution, the most important document in any modern state. The imminent tabling of the appropriation bill before the National Assembly during the first week of December is therefore a key milestone in the development of the nation.
Typically, the National Budgets tell us whether the allocation of public funds is in line with the commitments the Gambia Government made to its citizens in all its policy documents: sector policies and strategic plans (where they exist), the first and second generation Poverty Reduction Strategy Papers (PRSPs) implemented from 2003-2005 and 2007-2012 respectively; Vision 2020 and the Programme for Accelerated Growth and Employment (PAGE).
The national budget reflects the Gambia Government’s social and economic policy priorities. It translates political commitments, development objectives and decisions on where funds should be spent (the expenditure component) and how they should be collected (the revenue component).
In 2011 for instance, revenue as a percentage of Gross Domestic Product (GDP) dropped significantly from 17.5% in 2007 to 14%, thus constraining further the government’s development financing efforts. Typically, tax as a percentage of GDP in developed economies such as those of France, Germany, the United Kingdom and the United States hovers around 35%, reflecting the size of the economy.
Conversely in low income countries like The Gambia, tax as a percentage of GDP hardly exceeds 15%. That huge disparity in tax as a percentage of GDP between developed and developing countries betrays the urgent need for growth in the latter and builds a strong case for further expanding the tax base to include the business entities that are currently outside the tax net.
The need to stimulate the economy to enhance the growth potential of key productive sectors that are still under performing cannot be overemphasized.
The Programme for Accelerated Growth and Employment (PAGE) made a bet on the economy growing at about 11% (based on an optimistic scenario) to deliver the expected development results over the PAGE period.
It is crucial also that the tax collection system is improved by ensuring that the loopholes at all levels are tightened to boost revenue collection. That way, the government’s ability to fund poverty programmes will be greatly enhanced.
The 2012 Estimates of Revenue and Expenditure details the sources and quantum of revenue expected by the Ministry of Finance and Economic Affairs (MOFEA) based on the projected performance of the economy, the expectations of real sector performance, the policy objectives and targets for key macroeconomic indicators, the medium-term forecast of the resource envelope (deriving from tax and non-tax revenue, borrowings and grants).
It further outlined the broad allocation of national resources to development objectives and activities (via expenditure proposals) for the new fiscal year. The year 2012 represented another important milestone, being year one (1) of the implementation of the Programme for Accelerated Growth and Employment (PAGE) – the Gambia’s development strategy and investment programme for 2012 to 2015 and successor to the first and second generation PRSPs.
In addition, 2012 also witnessed the emergence of a new Ministry – the Ministry of Children’s Affairs – thus translating the governments’ desire to thrust children’s issues to the fore.
The Gambia Government allocates public resources on four broad functions namely - Economic services: agriculture, forestry, fishing and hunting; fuel and energy, mining and mineral resources, other economic affairs, transportation and communication; Social services: education, health, housing and community amenities, recreational, cultural and religious affairs, social security and welfare; General public services such as defense, general public services, public order and safety; and other functions such as debt Service.
As a development tool, the budget is good for: spurring economic growth, facilitating territorial regulation, stimulating socio-economic transformation, instrumentalising distributive justice, catalyzing the building of a world fit for children and for mainstreaming gender in development projects and programmes.
How effectively the decision makers and service providers do all this will determine the aggregate development results that will be achieved. Government spending in social services directly affects the poor, particularly the women and the children. And as Preg Govender rightly put it: ‘If you want to see which way a country is headed, look at the country’s budget and how it allocates resources to the poor, the women and the children’.
Implicit in this statement is the view that these social categories are the most vulnerable and that more often than not, they are absent in the decision making processes that affect their lives.
Women rights and child rights programming, youth empowerment and development programming should therefore be thrust centre-stage and be mainstreamed in development planning, taking due cognizance of their weight in the country’s population structure.
We know that the people below the age of 30 account for more that 50% of the country’s population. Without such an approach in development engineering, the future social costs to the nation could be very high. In our collective effort to invent a better tomorrow, it is crucial to adequately resource the sectors that deal with the protection, welfare and development of children particularly the girl child.
When leveraged effectively, budgets could also be powerful policy tools with profound implications for social equity outcomes. The collection of taxes for financing public service delivery for instance, should be done in ways that are socially equitable!
A progressive tax (considered to be a fair tax) will use a marginal tax rate that increases as the amount of taxable income increases. Tax on GDP is used to pay for all public services and that makes them very useful instruments for generating revenue. People will rather pay taxes than forgo public services all together. That was why Keynes once said that the only things that are certain are death and taxation!
However, taxation needs to be pitched at the right level: to generate enough revenue to balance the budget; to encourage investments and further enhance economic growth in a way that expands the tax base itself.
The issue today is not how we increase taxes but how we make the tax collection system more efficient, more equitable and more importantly how we expand the base by getting more business within the tax net. Inevitably, the following questions have to be asked: What level of taxation will result in faster economic growth to meet the objectives of the PAGE, knowing that there is a huge funding gap of about $460 million to finance the programme?
What level will balance the budget and at the same time stimulate growth without hurting the economy? Who bears or should bear the burden of taxation? Is the tax collection system efficient? What is its cumulative impact on living standards, bearing in mind the high cost of commodity prices?
There is evidence to show that beyond a certain level, a tax system could become counterproductive and can only yield diminishing returns – thus affecting investments, significantly eroding disposable income (and therefore affecting consumption) and having other negative macroeconomic growth effects.
Analytical framework for interrogating the national budget
It is important to examine the national budget through poverty, gender, child-friendly and geographic lenses and to realign the budget where necessary with social justice priorities. It is crucial that Ministries/Sectors are endowed with adequate budgetary allocations and that they use scarce public resources efficiently and in a manner that delivers value for money and are in line with best practice. To that end, the adequacy of the budget in terms of magnitude; the priority concerns that it addresses; the progress registered thus far; the equity goals it sets out to achieve; the effectiveness and the efficiency with which the budget is implemented inform the chances of success.
Adequacy:
Adequacy refers to the quantum budgeted for: According to the Estimates of Revenue and Expenditure for 2012, the total appropriation stood at 3,816,327,567. The question then becomes whether or not it is adequate for the purpose of poverty reduction and for the implementation of year one of the PAGE? In all fairness, budgets are never adequate. Resources are limited, especially for a poor country like The Gambia with serious development ambitions. Budgeting involves a delicate balancing act. Providing adequate resources to each sector for the purpose of implementing sectoral projects and programmes is a constant challenge and the arbitration process is never an easy one.
That brings us to the issue of priority and evident trade-off, informed by the relative share of each sector vis-à-vis all other sectors that must be catered for. The issue is: the definition of priority. How is priority defined? Who defines it? What assumptions underpin the budget etc? Value judgments concerning the services that are most important and whose interest should be given prominence are inevitable and that makes national budgets very political instruments.
Priority:
Priority looks at how the proposed allocation to education in the 2012 budget (19.45% for all education), Health (12.7%), Agriculture (2.9% of Gambia Local Funds - GLF), Infrastructure etc compare with resources earmarked for tourism (0.36%) as a percentage share of GLF; 11.15% for Foreign Affairs and 0.42% for the Environment? It enables us to interrogate the national budget to determine how much, for instance, the Government is spending on programmes that have particular importance to the poor, such as health, education, infrastructure, housing and sanitation and social development?
That provides the entry point to look at a raft of issues including - what is happening to early childhood development, adult education, basic education, essential clinical packages and drugs, access to health facilities and services, access to safe drinking water, provision of sanitation facilities, child and disability care, community skills improvement and women empowerment projects?.
Progress:
The Gambia has been implementing Poverty Reduction Strategies since the launching of the first Strategy for Poverty Alleviation (SPA 1) in 1994. Arguably, progress has been registered for certain indicators, but paradoxically, the overall poverty situation remained defiant until recently.
The 2010 MDG report suggests that poverty dropped from 58% (in 2000) to 55.5% (in 2009) – a mere 2.5 percentage points in 9 years! The Integrated Household Survey – Income and Expenditure Poverty Assessment – 2010 (December 2011) however, depicts a much rosier picture of the Gambia’s poverty situation by revising the headcount rate downwards to 36.7% (for the less than $1/day) and 48.4% (for the less than $1.25/day).
This inevitably raises the issue of the instruments used for the measurement of poverty and the challenge posed by the quality of the available data. Why was the poverty situation in The Gambia sticky downwards from 2000 to 2009 and suddenly dropped significantly (by over 20% for the less than a $1/day and by about 10% for the less than $1.25/day)? What are the experts (the poor people themselves) telling us about the evolution of their own poverty over the same period? To what extent has their quality of life changed?
Numerous interventions by both State and Non-State actors are taking place to alleviate poverty but the cost of living is also being constantly revised upwards. The 2010 MDG report tended to suggest that the pace of progress was slow, thus corroborating the view that the Gambia will not achieve the MDG goal of halving the poverty situation of the country by 2015.
Conversely, the Integrated Household Survey (IHS) indicates that the effort deployed by state and non-state actors over the past decade have now reached a tipping point and that there is a downward pressure on the poverty statistics. But, either way, further action is needed to stimulate inclusive growth (with significant trickle down effects) that is pro-poor and that has the potential of creating decent work.
Without such an outcome, the number of working poor could further swell in the run up to meet the MDG and the Vision 2020 objectives. The available statistical sources suggest that the economy has been growing at an average of about 5% over the last few years.
In the view of the experts is anything to go by, the economy will have to grow by at least 7% per annum over a sustained period of time for the country to progressively alleviate poverty. For that to happen, the growth levers like agriculture and tourism will have to be prioritized and development plans adequately funded. That does not seem to be the case. For the magnitude of its contribution to GDP (12-16%), the tourism sector continues to get an abysmal share of the national budget (0.36%).
The traditional sources of tourists may be losing steam, compounded by the current financial and economic crisis in Europe. Asia is rapidly becoming the centre of gravity of the world and therefore a serious source of tourists looking for African destinations to visit. The promotion of intra-regional tourism with the ECOWAS sub-region (particularly from Nigeria) augurs well for the future of Gambian tourism.
Agriculture received a measly 3.26% of GLF and 7.28% for all funds (Budget Speech) for a contribution to GDP of about 30%. That is still inadequate in view of the ambitions that the government has in promoting food self-sufficiency for sustainable development. According to the Maputo Declaration, the Government pledged to allocate 10% of the national budget to agriculture sector.
The country is still far from that international benchmark. The country needs to graduate from exporting primary products and to start adding value to its agricultural produce through forward/backward linkages with other sub-sectors. That cannot happen without the launching of the agriculture policy and the development of a strategic plan as a matter of urgency.
It will be interesting to see how future budgets (particularly within an MTEF framework) will take on board the requirements of the sector with a view to graduating from its current over-dependence on rain-fed agriculture to promote water harvesting, drip irrigation and the building of the support infrastructure for value addition. Venture capital for the agricultural sector is a serious development issue. Agricultural Development Banks emerged in the 70s and 80s and after a short spell of time, collapsed.
A study should be commissioned to tell the development community why such entities could not take root so that the appropriate lessons are learnt. The current interest rates of 18-27% administered by the Commercial Banks will not encourage productive investment in the agricultural sector. There is therefore the need to revisit the country’s interest rates policy to create the enabling environment for growth and wider socio-economic transformation.
Furthermore, progress is uneven across the other sectors. In that respect, the education indicators have remarkably improved over the last ten years. The enrolment and completion rates in schools are impressive. The Education for All (EFA) Fast Track Initiative (FTI) benchmark requires that State parties like The Gambia allocate 20% of their national budget to the education sector.
It is worth noting that the budget allocation to the education sector has almost reached the 20% target in the 2012 budget: 17.18 % share for the Ministry of Basic and Secondary Education and 2.27% for the Ministry of Higher Education (2012 Budget Estimates). The two combined give a total for the education sector of 19.45%. Education is therefore, a government priority.
However, early childhood development (ECD) and adult education, important as they are, are still not getting the budgetary allocations that they deserve. Likewise, issues of quality are of paramount importance for the sector and hinge on the continued availability of resources for quality teaching and learning.
In that regard, the anticipated end of the current FTI financing agreement with the World Bank slated for December 2012 brings the issue of sustainability to the fore. What if FTI is not renewed - is there an alternative mechanism to sustain the gains of the project?
The country needs to give such a prospect a thought – not only for FTI - but for all other donor funded project. Could the country for instance tap from endogenous sources (GLF) and also explore the possibility of developing a legal framework for corporate social responsibility (CSR) and also harness the potentials in the Diaspora?
There is evidence to show that investment in social services from the domestic budget (GLF) is more predictable and more sustainable than donor funded interventions. Corporate organizations will contribute more to development financing if the amounts donated to the social service sector and to Civil Society Organization for their outreach programmes is exempted from taxes.
That way, more resources will be made available for supporting the social sector interventions by the public and the NGO sectors. For the purpose of financing development, we could equally review the acceptable deficit level. For 2012, the Ministry of Finance and Economic Affairs opted for a 2.95% deficit as a percentage of GDP. It could be argued that a slightly higher deficit of 3.1% for instance could provide more resources for education investments and for health service delivery.
The premise of the argument is that, every year of schooling received could add 10% to earning capacity and when there is a critical mass of people with decent education GDP could increase by 1% every year. When that happens, the tax base will gradually expand, giving the government more revenue for development financing. There is an obvious trade-off to be made!
According to the 2010 MDG report, the proportion of the population using improved drinking water sources, the proportion of pupils starting grade one who reach the last grade of primary have already been attained. Likewise, gender parity in primary and lower basic has been achieved and parity at senior secondary is within reach.
The health indicators are also improving, albeit slowly. Maternal mortality, child and infant mortality continue to pose a daunting challenge. For more citizens to have access to quality health care, it will be necessary to increase the allocations to health to meet the pledge at Abuja to increase the health budget to the target figure of 15%. The 2012 budget projected the allocation to the sector at 12.71% (2012 Estimates), revised to 13.97% (Budget Speech).
Sanitation which is critical to good health still poses a lot of challenge, particularly in the rural areas of The Gambia and more efforts need to be directed in this area to improve the situation. The aggregate allocation to health, education and agriculture stand at about 40% of the budget. What is important to consider is how much of that is for recurrent expenditure (salaries, wages, allowances etc) as opposed to development expenditure that will have a direct impact on the lives of the poor.
Equity:
It is important that resources are allocated fairly across social categories such as gender, the youth etc and across the different regions of the Gambia (rural/urban), and so on. The difficulty is that the national budget is not designed to portray such a picture. It is not disaggregated to enable stakeholders to see what is actually going to the women and the girls as opposed to the men and the boys.
Gender, youth and children’s issues could be better mainstreamed and catered for in the national budget by looking at it from a child-friendly, gender responsive and youth empowerment perspectives. We acknowledge the emergence of a new Ministry for Children’s Affairs. Thus far, the allocations are insignificant (4 Million dalasis), but that needs to be put in its proper perspective. Children’s affairs are cross-cutting issues and are also catered for under various sectors: education, health and social welfare, justice, the interior, youths and sports etc.
It may have been necessary to put a figure against that Ministry to start it going. But as activists interested in child rights issues and programming, it would be interesting to see what the allocation levels will be like, when the Ministry is fully fleshed out and programmes are well thought through, tolled out and managed. It is expected that early childhood development issues will emerge strongly as one of the areas to be championed by the budding Ministry.
The absence of disaggregated data in the health sector makes it difficult to see what proportion of the national budget is going towards promoting child welfare. Budget line item for vaccines and drugs for instance are lumped together and cater for the needs of all social categories.
In addition, budget resources are still highly centralized at ministerial level, thus making it difficult to gauge the rural/urban distribution from the perspective of territorial justice. That notwithstanding, there are clear indications that basic social services (schools, hospitals, health centers, water and improved sanitation) have gradually been taken to the doorsteps of people in the rural areas. That way, distributive justice is at work without the equalizing effect, largely due the structural nature of some of the problems.
It will be difficult to accelerate growth and employment without looking at it from a women’s rights perspective. Women still perform the lowest paid activities, being concentrated in the low-return activities, mainly horticulture and other small informal occupations like petty trading.
Having access to productive resources is also a formidable challenge to the women-folk. Interventions are taking place to empower them to embrace all types of income generating activities. By so doing, their means of livelihood and support to their families isn greatly enhanced.
We reckon that the quantum of money available for distribution is very limited. That notwithstanding, good targeting will direct more of the assistance towards the poorest segments of society.
However, there are good reasons to question the equity in distribution of public expenditure and the need to revisit the strategy itself. There is evidence from the education sector that the richest quintiles benefit more from government expenditure decisions than the poorest quintiles.
When government provides for all schools, well-to-do parents offer enhanced educational services (private classes, IT gadgets etc) to their children. In a situation where some parents can buy the best education for their children, how do we leverage the national and Local Government Budgets to ensure that public schools deliver quality education to children from poorer families? That is another pertinent development issue.
Efficiency and effectiveness:
We expect the PAGE to be result-oriented, focusing on outcomes that benefit the poor. To know what the budget will be spent on, it will be necessary to do a budget input (money spent), output (schools, hospitals, roads, markets, capital items purchased), outcome (development change – increased access to schools, better health service delivery etc) and impact analysis (healthier and productive population; well educated citizens, enhanced GDP etc) with a view to determining whether the inputs, activities, projects and programmes undertaken, are the right ones for the desired development results to be achieved and whether or not the right things are done to achieve the desired PAGE, MDG and Vision 2020 outcomes.
High performing public services depend on sectors designing and implementing cost-effective policies with robust monitoring and evaluation components built-in. But a serious downside in the current dispensation is the lack of generalization of programme-based budgeting in the public sector. Budgeting is still incremental and largely project-based in the public sector.
This has made it so difficult to gauge the effectiveness and efficiency of public service delivery in line with Government’s policy objectives. We commend the Ministry of Basic and Secondary Education for being a pioneer in Programme-Based Budgeting and encourage all the other Ministries/sectors to follow suit to enhance their development results. We hope moreover that all the sectors that are without policies and strategic plans will do the needful to enhance the effectiveness of service delivery.
