Linking the National Budget to the Poverty Reduction Strategy (PRS)

By Andre Pope

The Perspective
Atlanta, Georgia
June 2008

Introduction

The President recently presented the Draft National Budget of US$276.8 million to the National Legislature and urged that August Body to carefully review it. The Legislature now has to begin the process of analyzing the draft budget to start the debate with the Executive. We believe that the draft budget should be released to the public to encourage the public participation in this debate.

Now is the time for the Legislature to have the budget process extend beyond policy makers, entertaining analyses from professors and those with the technical skills, and the general public. Because, the central issue that needs to be answered is whether or not the Draft National Budget reflects the right policy preferences at a time when public expenditure is key component to the reduction of poverty as specified in government’s Poverty Reduction Strategy (PRS). The PRS document MUST be seen as the “rosetta stone” for deliberation and the basis for influencing priority setting and resource allocations

Why Have a Budget Debate

The National Budget is the most important economic policy tool that provides a comprehensive statement of the government’s priorities for Liberia. The National Legislature, as the representative of the Liberian people, must ensure that the Budget best matches the nation’s needs with available resources. This is especially true now that we have a national strategy for poverty reduction on the one hand and a national reconstruction effort on the other hand. Also, the current fiscal squeeze places the additional burden on the National Legislature to exercise detailed engagement with the budget. This process can not be largely a symbolic exercise, rather a crucial opportunity to check the budget against citizen’s preferences.

According to the Budget Director, Hon. Augustine Ngafuan, the budget was driven by the PRS. The National Legislature now must ascertain that it is in fact the case. This is important because the PRS represents in many ways the economic thrust of this government and the pathway to reducing poverty.

The PRS document is also very clear as to what it would costs over three fiscal years, how much government would financed and a gap amount that must be financed either by donor funds or reduction in some programs to better align programs with available funds. What the Government isn’t clear about is, the net financing gap amount, and that is because there isn’t a firm commitment on donor funds to cover the gap.

This is precisely why the National Legislature must engage the Executive to understand how the budget is linked to the PRS, and whether all the programs as identified in the PRS would be financed. If you pay attention to the numbers, in fiscal year 2008/09, supporting all the PRS programs would costs about $550 Millions, but government has committed 55% of its revenue base to support PRS programs which translates to about $132 Million or 24% of the PRS costs for this fiscal year. This is understandable since the cost of funding all programs in PRS during this period exceeds government revenue base for the same period. But, the fact is, we still have a gap of about $418 Million for the year. And so, the Executive had to prioritize the limited resources among the competing PRS programs. How did the Government decide which programs to fund in the draft budget and why? Would all PRS programs for the fiscal year be funded? If so how, and if not what would the impact be on the PRS.

Concluding Comments

The National Legislature and civil society have a vital task to ensure that the PRS is translated into budget priorities, across the different institutions of the Government. In this respect, the budget needs to support the various pro- poor programs and where they fall short or a gap exist, government and the legislature must have an honest debate as to how the gap will be financed. In cases where donor funds are not available to cover the gap, a realistic assessment be made to determine the best course of action. Government must be commended for demonstrating the will to reduce poverty in the country by committing about 55% of it revenue base to the PRS initiatives.

We hope to complete a more thorough analysis of the budget through the lens of the PRS once the Draft Budget become available to the public. We have however developed, a spreadsheet that would be used to perform a cursory comparison of the various pillars costs as forecasted by the PRS and the actual amount from the draft budget to determine the amount of 2008/09 budget that would be spent on PRS activities, the size of the gap between what government will finance versus the total costs of PRS for 2008/09 and whether or not the gap would be financed during the fiscal year. But as you can see, we don’t have the Draft Budget to complete this analysis.

Finally, we are very cognizant of the complications that face this government in its stride to reduce poverty, promote good governance and democracy. The fact remains, Government alone can not do this; Liberians from all persuasions must get on board to help make this country work again. This is our thing and we must not leave it to just the policy makers to decide the direction of the country. We must add our voices to the fight to reduce poverty; improve operational excellence of public corporations; promote good governance and democracy.

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About the Author: Andre Pope works as a Finance Manager with Datapath, Inc.; a defense contractor. He lives with his family near Atlanta, Georgia. He can be reached at: andrepopep@yahoo.com.