FINANCIAL MATTERS: Harmonising the 2011 appropriations bill

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Anyone wanting to
understand the interest generated by the harmonised version of the 2011
appropriation bill recently passed by both houses of the National
Assembly will do well not to look too hard at the numbers.

Until we
comprehensively reform the framework for managing public expenditure in
the country, budget numbers would not be worth the fancy paper on which
they are written. Notwithstanding, the numbers in question tell quite a
story.

The executive bill
for this year’s appropriations, which went to the National Assembly,
was for N4.2tn. At N4.9tn, the National Assembly’s appropriation bill
thus represents a 17 per cent increase on the version sent in by the
executive.

In addition, the
N1.3tn deficit included in the National Assembly’s bill is equivalent
to 4.3 per cent of the economy’s total output. Against this, the fiscal
responsibility act recommends a 3 per cent limit on the annual budget
deficit as a share of GDP.

Consider, however,
that in the period between when the executive sent the appropriations
bill to the National Assembly, and when the latter agreed on the
harmonised version, the price of the major financial driver of our
national budget, hydrocarbon exports, had moved from around US$85 per
barrel (pb) to a little under US$120pb.

With the crisis in
the Middle East and North African region expected to dominate the oil
price outlook all through this year, crude oil prices should remain
elevated well into the first quarter of 2012. Therefore, there is
enough on the revenue side to support higher public spending figures.

Running on this
argument, the harmonised version of the 2011 appropriations bill pushed
the oil price benchmark for the budget up from the US$65pb with which
the executive made its calculations to a more robust US$75pb.

Then, there is the
huge public infrastructure problem with which a country that has the
development rhetoric spot-on must contend with. I do not believe that
the new consensus around the public-private partnership (PPP), being
the new route to plugging the nation’s infrastructure hole, absolves
government of further spending in this regard.

Even if one
concedes that the burden of national provision of physical
infrastructure is now private, that still leaves us with the need to
meet the generally accepted indicative ratios for public spending on
health and education, if the millennium development goals are to make
any sense. Even the much talked about transition in the role of the
public sector from service provider to regulator has to be funded.

Then there are the
gaps in social infrastructure with which we have had to contend. The
rot here is no less severe than with our roads, railways, etc. Except
of course the intent ultimately is to add the police and the judiciary
to the PPP framework, the spending needed over the medium-term to bring
the criminal justice system up to scratch is large, and would come
entirely from the public budget. We could do with a police force with
fewer officers, but a lot more technology. The judiciary too would
benefit from having at least a functioning and networked personal
computer in every courtroom in the country.

On this reasoning,
if we are to spend money on these as part of our development
aspirations, why does the finance minister think the harmonised version
of the 2011 appropriations bill “un-implementable”? Certainly, not
solely because a budget on this basis is likely to be expansionary or
inflationary.

To begin with, the
original bill sent by the president to the National Assembly also
included its own deficit: equivalent to 3.6 per cent of GDP. So, it is
not just the fact of a deficit that flaws the National Assembly’s
spending argument.

Admittedly, the one
deficit is larger than the other, but at what point is a deficit
expansionary, or capable of driving inflation pressures? At 3.0 per
cent, 3.6 per cent or 4.3 per cent of GDP?

Evidently, in
cavilling at the budget numbers that have come out of the National
Assembly, government’s number crunchers are splitting hairs.

More so, this is a
government whose budget figures for last year represented a 50 per
cent-plus increase on the 2009 appropriations, notwithstanding the fact
that the deficit for last year was anywhere between 5 per cent and 6
per cent of GDP.

It is obvious that
we must look for more sophisticated reasons to object to the National
Assembly’s version of the appropriation bill.


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