ETB 4 billion requested in supplementary budget: An incomprehensible lust for more inflation

18 Apr


It has been ten months now since Ethiopia’s parliament ‘approved’ a $7 billion budget for 2011/12. Without even the nation having the opportunity to know what use was made of their money, the dear Leader has come back to parliament to ‘request’ supplementary appropriation of $4 billion for the current fiscal year.

The Reporter indicated that 75 percent of this new money is required for completion of ongoing road construction project. The rest has not been specified.

Who in his right mind stands against infrastructures starved Ethiopia? The point is that at this juncture, not only that it is a hefty sum. But also it ends up further fuelling the killer double-digit inflation.

The news on The Reporter explained that the main reasons for this additional budgetary allocation have been: (a) inadequacy of the initial appropriations and (b) program managers’ adoption of better implementation of projects requiring more resources.

I am not sure I got the gist of the latter justification. It is also indicated that there were no possibilities for internal redeployments, because of which fresh appropriation from the treasury is required.

Here is how The Reporter flashed the justification:

    ተጨማሪ በጀት ያስፈለገበት ዋና ዋና ምክንያቶች ለፕሮጀክቶቹ ለበጀት ዓመቱ የተያዘው በጀት አነስተኛ መሆኑ፣ የፕሮጀክቶቹ የፊዚካል ሥራዎች አፈጻጸም እየተሻሻለ መምጣቱ፣ የሌሎች ፕሮጀክቶች የፊዚካል ሥራዎች እየተሻሻለ በመመጣቱ የበጀት እጥረት ለታየባቸው ፕሮጀክቶች በበጀት ሽግሽግ ወጪውን መሸፈን ባለመቻሉና እስካሁን ለተሠሩ ሥራዎች ክፍያ ለመፈጸምና እስከ በጀት ዓመቱ መጨረሻ ለሚሠሩ ሥራዎች የሚውል ገንዘብ በማስፈለጉ ነው፡፡

On the surface of it, there is nothing anomalous about such a request. Also, the explanations are standard, usually employed by governments, federal or local, national or international organizations, whenever they experience shortage in their budget. Because of that they either seek authority for redeployment within existing resources or turn to higher-ups for political support for supplementary budget appropriation.

As a matter of fact, that is why in Ethiopia’s Financial Administration Proclamation No. 648-2009 provides:

    Supplementary Budget” means a budget approved in situations where the revenue budget appropriated for activities of the Government to be carried out in a fiscal year is not sufficient or where a budget is required for an activity of the Government to which budget is not appropriated or where the expenditure budget appropriated for an activity is not sufficient.

Nevertheless, I am constrained by two factors regarding this request for supplementary appropriation.

The first is for good reasons that experts on budgets and state behavior often say they get goose pimples, whenever requests for more funds having anything to do with construction pass their way.

It is not uniquely Ethiopian problem, but most of the corruption in the economies of countries takes place around construction of schools, roads, and residences for low-income peoples, terminals or ports.

Not surprisingly, although I do not mean to use it here to justify what I am trying to say on this case, a movement that calls itself Engineers Against Poverty (EAP – CoST Initiative) in 2011 openly indicted its profession claiming:

    The construction sector plays a vital role in supporting social and economic development. Yet it is consistently ranked – in both the developed and developing world – as one of the most corrupt areas of economic activity.

It is, therefore, for a reason that I underlined above the sentence. In the news report I read in the newspaper, the explanation that is given by Roads Authority is either unclear or is lacking something why the 2011-2012 appropriation became inadequate.

If they spent more money on improved methodology of project implementation, as the news seems to suggest, why should a country pay premium on ‘improved ways of project implementation’, when efficiency is supposed to make things cheaper? If not that, what then is the reason, why that improved implementation is selected?

My primary concern, however, is the convenience of the Meles regime in charging its way with more budgetary expenditures, under conditions where:

        •         Double-digit inflation has been flogging the country badly, one of the causes being unrestrained government expenditures;

        •         For a while the productive capacities of the Ethiopian economy has not been supportive of such expenditures, with the country earning $3.6 billion from transfer from citizens, exports bringing only half of that and Ethiopia spending that in importing wheat to soften the blow on ordinary citizens of double-digit food inflation;

        •         In Ethiopia, the government lives beyond its means — with a habit of more borrowing, more spending and constantly feeding more inflation with measures of the above sort.

These are characteristics of a government lacking in prudence and discipline to be able to lead the country along the path of sensible and stable macroeconomic policies.

Looking only on the surface, Ato Meles Zenawi’s unrestrained push in either building or expanding roads in Addis Abeba or in the country may increase the nation’s stock of capital. It also makes a good reputation for him in the eyes of foreign observes, as the developmental prime minister.

Yet, the blow of inflation from which Ethiopians suffer has become inordinately too much.

On this one, I think the prime minister ought to listen to the plea of his National Bank Governor Teklewold Atnafu. Last March, he opened up to parliamentarians as never before. From his vantage point, he testified that at this very moment our country finds itself in an “insurmountable problem.”

He recommended that the solution for inflation is not spending whatever is earned on importing wheat, but improving the country’s agricultural productivity. After all, since the prime minster himself opened the gate by his admission, all officials of course, including those who used to put percentage improvements on agricultural productivity do now speak with more openness about Ethiopia’s failed agriculture of the past two decades.

With $1.6 billion in export earnings in 2011 and $6 billion in import costs, it was very clear for Teklewold Atnafu that he could no longer make the country’s trade balance livable.

That is why on 22 March he said before parliament our country’s economic and financial problems have become “insurmountable.”

I do not believe our country is pursuing the right policies!

Read alos:

NBE Governor Seriously concerned by challenges inflation has posed and unsustainability of Ethiopia’s worsening trade imbalance

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