THE parliamentary portfolio committee on the Economic and Development cluster has called on the government to stop employing a template approach to the budget process to avoid repeating ineffectual policies.
In its review of the budget titled “Consolidated Report on the Annual Budget and Estimates of revenues and Expenditure for the Financial Year 2016/17”, the portfolio committee calls on the government to be “more creative” by moving away from the well-worn themes of poverty reduction, reducing unemployment, promoting democracy among others.
Finance Minister Dr ‘Mamphono Khaketla presented the M17.423 billion budget on 19 February 2016, amid dwindling Southern African Customs Union (SACU) revenue and a slowdown in the South African economy.
The minister proposed a recurrent expenditure component of M12.359 billion and capital budget component of M5.064.7 billion. The projected revenue collection was estimated to be M 15.473.8 billion, resulting in a deficit of about 9.9 percent of the GDP to be financed by drawing down on the reserves and domestic borrowing.
While approving the budget with a number of amendments, the committee says the expenditure plan was the “same old story” as yesteryear versions.
“The 2016/17 budget reflects the same old story of (a) laissez-faire attitude to budgeting. One of the economic experts consulted by the committee said ‘it lacks creativity’ and ‘employed a template approach to the budget processes,” states the committee.
“They are all the same . . . (and) about the declining SACU revenues, the need to mobilise domestic revenues, an increasing and ballooning wage bill, a highly politicised public service, low absorptive capacity with regard to the capital budget, the need to strengthen democracy; the story continues.
“The 2016/17 budget is the same. The committee feels this is the time to make a significant departure from the past.”
The legislators recommend the government to reduce recurrent expenditure and develop a revenue collection strategy to maintain fiscal balance.
“The budget deficit of 9.9 percent of GDP (gross domestic product) is not sustainable. It is way outside the recommended three percent of GDP. This means the country is living beyond its means and will soon be a failed state,” the committee said.
On the issue of travel and transport, the committee recommends all government departments to limit international trips, “except for those that Lesotho has international obligation to attend”.
It also urges government to defer all new purchases of non-financial assets and furniture as well as curbing the use of cell phones “which are increasingly becoming a significant driver of costs”.
The Lesotho Revenue Authority’s purview, the portfolio committee says, should be extended to include the collection of non-tax revenue; the payment of services and fees.
“It is important for the government to focus on improving the collection of non-tax revenue, especially at the point of collection. The inefficiencies associated with these revenues at present have a serious negative impact on the private sector and its operations,” it notes.
“The limited focus and reliance on VAT (Value Added Tax), income tax and company tax have limits, and with time may be regressive taxes. The government must strike a balance lest it kills the goose that lays golden eggs.
“Almost all the ministries are far short of reaching the targets because the figures have no basis and that, in turn, misinforms the budget.”
On public sector reform, the committee says the government should press on “swiftly and purposefully” with fixed time frames for completion.
“The public financial management, the upgrading of payrolls and human resources information systems and the public sector modernisation projects must all be pursued with earnest this financial year,” it says.
“It is further proposed that the government considers outsourcing some of its services in order to reduce the wage bill.”
To foster the development of the private sector, the Members of Parliament tell the government: “Put your money where your mouth is.
“It (private sector) is the only solution and option available to Lesotho (for) generating employment and relieving the government of its huge wage bill, (as well as) guaranteeing a reliable and definite revenue base.”
The committee adds: “It is proposed that the government considers establishing a Development Bank, a Property/Housing Bank and attracting more banks into the country to offset the existing monopoly by predominantly foreign banks in the financial sector.
“It is (also) proposed that the Public Financial Management and Accountability Act be amended to accommodate Parliament to participate in the budget process at an early stage. Ideally, that could be at the point of Budget Framework paper discussions.”
Among the proposals Dr Khaketla made in her budget speech was to introduce personalised vehicle number plates, increase fees on drivers’ licences, registration of vehicles and ring-fencing part of the royalties from mining and water for capital development.
In their review, the committee notes: “It is doubtful whether the Ministry of Public Works and Transport, which is responsible for vehicle number plates, issuance of drivers’ licenses and vehicle registration is ready to implement the proposal by the minister given the amount of backlogs and shortfalls that exist in the ministry at this point in time.
“Ring fencing part of the royalties from mining and water revenues in the strict sense of mobilising revenue does not fit the definition but it is rather earmarking the already existing resources for a particular purpose.”