Budget Trailblazers: Magatte Diouf Cisse

Budget Trailblazers: Magatte Diouf Cisse

 

Magatte Diouf Cisse is the program coordinator at Urbasen, an organization that brings together professionals working in urban management in informal settlements in Senegal.Each month, we shine a spotlight on partners who are using budget advocacy to bring transformational change to their communities. This month we’re spotlighting Magatte Diouf Cisse, program coordinator at Urbasen, a Senegalese organization bringing together professionals working in urban management in informal settlements. Urbasen works in close collaboration with the Federation of Senegalese Inhabitants, an umbrella organization of women’s associations and community leaders in informal settlements.

 

Fighting for safe water and sanitation in Senegal

Magatte walks the busy, unpaved streets of an informal settlement in Pikine, Senegal with one thing on her mind: water. This urban planner-geographer knows well that people living in Senegalese informal settlements have little access to basic sanitation services such as toilets and clean water. Without a way to evacuate rainwater, flooding is a constant problem and makes living conditions unsafe. “The homes of informal settlement residents have been built in a way that puts them at constant risk of flooding,” Magatte said. “Moreover, there are no individual toilets or communal toilet blocks, not to mention running water. These basic sanitation services are missing entirely, resulting in public health problems and a lack of dignity.”

The government launched the Ten Cities Program to connect these households to the sewage system at a subsidized rate and build toilets in public areas. However, at the beginning of 2021, hundreds of thousands of residents had not benefitted from the program because only those households that pay a subscription to the water provision and management company were included and most informal settlement residents cannot afford the subscription fee even when it is subsidized.

We partnered with Urbasen and FSH to conduct a social audit of sanitation services in informal settlements. The aim was to collect data that would shine a light on how many residents were not benefiting from the Ten Cities Program and to advocate for increased budget allocations for these essential services. IBP assisted Urbasen in strategizing how to collect and utilize the data in their advocacy campaigns. “IBP has helped us build the capacity of grassroots movements to better understand the budget process [and advocate for] municipalities to provide services to informal settlements,” Magatte said.

As a result of the social audit and engagements with public sanitation officials, 880,000 informal settlement inhabitants are now benefiting from improved flood management and public sanitation infrastructure installed in May and June 2021. Also, 20 km of the 28-km public sanitation network was rehabilitated, cleaned and prepared to evacuate rainwater, making the informal settlements safer and more flood-resistant “Urbasen’s participatory and inclusive approach in informal settlements, which are often overlooked by public policies, was a big reason for my decision to join this organization,” Magatte said. “Seeing people access essential services such as sanitation, supporting them in the management of their neighborhoods, and knowing that they are now capable of influencing government decisions gives me the strength to get up every day and fight to claim their right to the city,” she said.

Urbasen is continuing to use social audits – community mapping and field visits to collect qualitative and quantitative data – to ensure it has robust information to present to government when it makes demands for the provision of sanitation services. Through data it is now able to “make visible” communities that have long been ignored and denied due access to services municipal officials are meant to deliver, such as clean water and sanitation.

Budget Trailblazers: Katia Lambis

Budget Trailblazers: Katia Lambis

 

Katia Lambis, budget expert and OBS consultant, from Fundación Solidaridad in the Dominican Republic.

Each month, we shine a spotlight on partners who are using budget advocacy to bring transformational change to their communities. This month we’re spotlighting Katia Lambis, budget expert and OBS consultant, from Fundación Solidaridad in the Dominican Republic.

This interview was translated to from Spanish.

 

Q: Tell us about Fundación Solidaridad’s mission?

A: Fundación Solidaridad, founded in 1990, is a non-profit institution based on the principles of solidarity, equity and participatory democracy. We support citizens to play an active role in their collective wellbeing. For 30 years, the organization has developed projects to strengthen the advocacy capacity of civil society organizations in promoting transparency, oversight and accountability, among other issues.

Fundación Solidaridad has been recognized nationally and internationally for being a pioneer in the implementation of the Municipal Participatory Budget in the Dominican Republic. Since 2008, we have carried out the independent review of IBP’s Open Budget Survey (OBS) in the Dominican Republic.

 

Q: How did the Dominican Republic fare in the OBS 2021?

A: The country made significant progress, ranking ninth in the list of countries that exhibit the greatest budget transparency globally and as one of the 17 countries that publish all eight national budget documents.

 

Q: In what ways has the Dominican government shown improvement compared to its previous OBS ranking from 2019?

A: The country’s transparency score improved from 75 to 77 due to progress that was made in the availability and comprehensiveness of information provided in national budget documents. Regarding budget oversight, we also observed an increase from 57 to 63 points thanks to actions carried out by Congress and the audit institution (the Chamber of Accounts). However, we should note that the public participation score decreased from 31 to 22 points because opportunities for citizen participation were not provided during the formulation and approval of the budget.

 

Q: The Dominican government established public consultations during budget implementation to strengthen public participation in the budget process. This is a great start but what else can it do to further bolster the public’s involvement in budget matters?

A: The Dominican government has expressed its commitment to public participation in budget matters and the relevant institutions have reiterated their commitment to prioritize, guarantee and expand spaces for public participation throughout the budget process. To this end, they have begun to set up mechanisms that allow citizens and civil society organizations to participate in activities related to the formulation of the budget and are working to create participation mechanisms during the approval of the budget.

 

Q: How does the Dominican Republic use the OBS findings to improve its open budget practices?

A: With each OBS publication, the results have allowed the Dominican Republic to identify areas for improvement in its budgetary practices and implement policies to address weaknesses.

A good example of an effort to promote more open budget practices was the publication of the Citizens Budget, which began in 2015. The Citizens Budget has contributed to a) progress in making information accessible to citizens; b) improving follow-up and citizen monitoring throughout the budget process; and c) contributing to improved transparency and accountability of the budget process.

The institutions responsible for the budget’s preparation have made available to the public several instruments to support the Citizens Budget, such as a guide to understanding the budget, explanatory videos and infographics with weekly, monthly and quarterly reports on budget execution that allow citizens to evaluate the performance of spending measures.

Thanks to Fundación Solidaridad’s advocacy, and the results of the OBS 2021, the government is motivated to continue working towards increased transparency and oversight, and to formalize channels for public participation in budget matters. We continue to organize dialogues with Congress and the Chamber of Accounts to promote greater detail in budget information and increased spaces for public participation. We will keep working towards progress.

Is it Time to Rationalize Tax Expenditures?

Is it Time to Rationalize Tax Expenditures?

 

As developing countries recover from the pandemic, they will need to bring their public finances to a more sustainable position, by streamlining public spending and strengthening the revenue base.

 

By Luisa Dressler, Sanjeev Gupta, Agustin Redonda and Paolo de Renzio

 

As developing countries recover from the pandemic, they will need to bring their public finances to a more sustainable position by streamlining public spending and strengthening the revenue base. The need to mobilize additional resources has been exacerbated by the recent economic turmoil triggered by the war in Ukraine, as disruptions from the war are likely to hit low-income countries significantly harder than high-income ones.

 

One area that holds potential for additional revenues is rationalization of tax expenditures—the many tax breaks, exemptions, and incentives that governments provide to various actors.

 

While tax expenditures can be an important tool for fiscal policy to pursue different policy goals such as creating employment, attracting foreign investment, or greening the economy, they are often opaque, costly, and ineffective as well as politically motivated.

 

Against this backdrop, reforming and rationalizing inefficient and obsolete tax expenditures can be highly beneficial for developing economies and could have a significant impact on countries’ capacity to mobilize domestic resources and finance governments’ development strategies. Tax expenditures represent a large revenue loss for governments across the world. During the 1990-2020 period covered by the Global Tax Expenditures Database (GTED), the average revenue forgone through tax expenditures for the 13 low-income countries in the database stood at around 2.8 percent of GDP and 27.1 percent of tax revenue, while for the 26 lower-middle-income countries in the database it stood at 2.6 percent of GDP and 18.2 percent of tax revenue. Identifying and reforming (or simply eliminating) those tax expenditures that do not provide value for money, or that trigger significant negative socioeconomic externalities, could help generate resources necessary to help countries in the post-pandemic recovery phase, and ultimately in the pursuit of long-term development objectives such as those included in the Sustainable Development Goals (SDGs).

 

Rationalization of tax expenditures, however, requires understanding the considerations that lie behind their governance, and the reforms that might be necessary for a more careful and rational approach towards proposing, adopting, and monitoring them. Unfortunately, these aspects of public policy have been mostly neglected, and there is limited evidence on how governments manage tax expenditures in practice.

 

Two recent papers shed some light on these issues, providing new evidence on how tax expenditures—and investment incentives in particular—are used and governed across developing countries.

 

The OECD recently published a paper that presents initial insights from an investment tax incentives database covering 36 developing countries across Eurasia, the Middle East, North Africa, Southeast Asia, and Sub-Saharan Africa. The paper shows that the design of tax incentives is often specific to a certain sector, region, or investor within a country. Lack of transparency through complex targeting may inhibit the analysis of tax incentives, including whether they reach their stated objectives and at what costs, and can provide opportunities for abuse. The study also provides detailed insights on the governance of investment tax incentives, which it finds to be overly complex in most cases. Many countries scatter incentive provisions across several laws and only 40 percent of countries provide investment tax incentives through one legislative piece. Similarly, multiple authorities share responsibility to govern tax incentives in the majority of countries. Such complexities and overlapping responsibilities can further limit transparency and accountability of governments, which risks reducing the effectiveness of the policy and can increase discretionary behavior.

 

The International Budget Partnership published a study based on research in nine Latin American countries, assessing current arrangements to manage tax expenditures against some good practice principles that have been promoted by the IMF, OECD, World Bank, and UN. The study documents a clear legislative and regulatory gap, as no country has a comprehensive, organic law that regulates how tax expenditures should be created, managed, and evaluated. Instead, as found in the OECD study, tax expenditure provisions are usually scattered among numerous laws of different types, with clear limitations in the provisions included. Moreover, and again echoing the OECD study, the role that different actors play in the introduction and implementation of tax expenditures generates dysfunctional systems where nobody holds overall responsibility for the effective management of tax expenditures as fiscal policy instruments, and where governments are not held accountable for the impact of tax expenditures.

 

The evidence from these two recent publications provides useful insights to guide tax expenditure reform and help turn tax expenditures into more effective fiscal policy instruments that can contribute to increasing—instead of limiting—revenue collection. Some of the main takeaways include:

 

• There’s a need to improve the legislative and regulatory framework surrounding the management of tax expenditures, ideally introducing legislation that sets the basic rules for tax expenditure governance, or ensuring that all tax expenditures are captured in the relevant tax laws and not in secondary legislation.

 

• Governments should address the fragmentation of responsibilities for the management of tax expenditures, and concentrate the key powers of appraisal, approval, and monitoring within the ministry responsible for overall fiscal policy. Encouragingly, the Addis Tax Initiative (ATI) has included a similar provision in its post-2020 monitoring framework.

 

• It is important to improve the scope and quality of tax expenditure information provided by governments. According to the recently published GTED Progress Report 2022, among the 82 low- and low-middle income economies covered, 43 have never released any official information on the revenue forgone due to tax expenditures. Equally worrisome, the quality of existing reports is often strikingly poor, with 31 out of 39 reporting countries not providing data disaggregated at the provision level and 36 not disclosing the policy goal that each tax expenditure provision is supposed to pursue.

 

• Governments should also improve the evaluation framework for tax expenditures. Cost-benefit analyses and impact evaluations are vital to drive evidence-based reforms, and are strikingly rare. Even in the rare cases where these evaluations do exist, their results are often ignored, and ineffective measures are kept in place.

 

• Finally, overall accountability arrangements around tax expenditures should be enhanced by improving performance monitoring, introducing mandatory sunset clauses, publishing information on beneficiaries and promoting a broader and more inclusive debate for all tax expenditures.

 

Luisa Dressler* is an Economist at the Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development

Sanjeev Gupta is a Senior Policy Fellow at the Center for Global Development

Agustin Redonda is a Senior Fellow at the Council on Economic Policies

Paolo de Renzio is the 2021/22 Policy Fellow at the Center for Advanced Study in the Behavioral Sciences, Stanford University

*The opinions and arguments expressed herein are those of the authors and do not necessarily reflect the official views of the OECD or its member countries.

 

Join us for a virtual event on 20 April 2022 at 12 noon EST to discuss steps to better manage tax expenditures. Click here for more information and to register.

Budget Trailblazers: Nomfundiso Joseph

Budget Trailblazers: Nomfundiso Joseph

 

Nomfundiso Joseph, coordinator of Small Projects Foundation, in South Africa

Each month, we shine a spotlight on partners who are using budget advocacy to bring transformational change to their communities. This month, we talked with Nomfundiso Joseph, coordinator of Small Projects Foundation, in South Africa.

 

Q: Describe your organization’s role in Asivikelane Health project.

A: My organization, Small Projects Foundation (SPF), is an NGO operating nationally throughout South Africa, particularly in the Eastern Cape province. We monitor the availability and delivery of basic health services to residents in informal settlements and rural areas. We collect anonymous feedback from 10 patients each month about the quality of services they received, after which the answers are analyzed and the results shared with each clinic.

 

Q: What are the main challenges faced by residents of the informal settlements you reach out to?

A: Rural areas often suffer from a lack of access to healthcare, and the healthcare needs of individuals living in rural informal settlements are different from those living in urban areas. Informal settlements are densely populated and have inadequate access to clean water and sanitation. Individuals have to walk long distances to reach health services, and a clinic often serves 6-7 villages, resulting in long queues and sometimes a shortage of medications. Rural areas have critical shortages of all health care providers and professionals, particularly primary care professionals.

 

Q: Describe how your partnership with IBP is yielding results in providing access to healthcare for excluded informal communities.

A: SPF’s partnership with IBP gives us access to a wider range of strategic connections and facilitates meetings with the Department of Health, key government stakeholders, and community members. We use these meetings to emphasize the importance of data accuracy and analysis. Giving feedback to health facilities is the most crucial step because it helps improve the delivery of health services.

 

Q: Is there a specific focus or consideration for women and girls in these communities as a target for government intervention?

A: Discrimination against women and girls occurs in many forms through gender-based violence, economic discrimination, reproductive health inequities, and harmful traditional practices such as child marriage, to name just a few. Women and girls of all ages have a right to live with dignity, free of cultural oppression. Empowered women generally choose to have smaller families, which benefits the health and productivity of whole communities and improves the prospects for both people and the environment. Asivikelane Health assists communities to learn more about the health services available to them like family planning and the prevention of HIV/AIDS. It is important to target women with these educational interventions.

 

Q: What are the key strategies that you employ in galvanizing these communities to advocate for inclusion in government spending?

A: We give feedback to health facilities and work with stakeholders to improve access to health services. We also draw on community engagement strategies to share knowledge directly with communities so they are better equipped to manage their health and to evaluate the quality of the health services they receive. We also emphasize that measures to achieve inclusive health services must include training of health care professionals on the rights of persons with disabilities and marginalized groups.

 

Q: What does the future look like for these communities?

A: The future looks bright if communities are included in health service delivery and are educated about the benefits and facilities available to them. The future looks positive if communities are mobilized and empowered to take control of their health. It goes a long way when clinic committees take part in community meetings and listen to what communities need.

The Covid-19 Pandemic Laid Bare Nigeria’s Budget Challenges

The Covid-19 Pandemic Laid Bare Nigeria’s Budget Challenges

 

His Excellency Muhammadu Buhari presenting the 2021 budget to the National Assembly. Wikimedia Commons
His Excellency Muhammadu Buhari presenting the 2021 budget to the National Assembly. Wikimedia Commons

 

By Abel Akeni, Vahyala Kwaga, and Iniobong Usen, BudgIT, Nigeria

 

Every year, anticipation accompanies the Federal Government’s annual budget presentation to Nigeria’s National Assembly. The budget outlines the government’s promises and spending plans to improve citizens’ quality of life. There is much to be done. With a Human Development Index score of 0.539 in 2019, Nigeria is positioned in the low human development category, ranking 161 out of 189 countries. According to Nigeria’s National Development Plan (2021-2025), universal health coverage is only 5%, life expectancy is 53.4 years, about 10.5m children do not attend school, and 61% of Nigerians do not have access to basic sanitation services. In addition, an estimated 88.4m people live in extreme poverty.

 

In the 2021 budget, proposed as the country began to recover from economic shocks related to the COVID-19 pandemic, the Federal Government promised to invest N13.6trn in the “Budget of Economic Recovery”. This built on the N10.8trn investment promised in 2020 in the “Budget of Economic Resilience”, which included a N500bn spending plan for COVID-19 interventions.

 

The budget preparation and presentation is an annual ritual required by Nigeria’s constitution. However, to what extent do the appropriated funds positively impact the life of the average Nigerian? Have the successive annual budgets improved service delivery in critical social sectors like health, education, and WASH (water, sanitation, and hygiene)?

 

It isn’t all gloomy. The Nigerian government has made attempts in recent times to improve transparency and accountability of public resources. At the federal level, it launched a Financial Transparency Policy to improve governance and equip citizens with tools to track federal government expenditure and report financial wrongdoing. At the subnational level, it launched the States Fiscal Transparency Accountability and Sustainability Program for Results. Despite these laudable initiatives, conspicuous challenges remain.

 

For example, what happened to the N56.6bn budgetary allocations for the government’s famous “Jobs and Food for All” program launched in 2020? What about the N75bn Survival Fund for micro, small, and medium-scale enterprises launched in the same year to help entrepreneurs survive the COVID-19 crisis?

 

Nigeria federal budget breakdown

Source: BudgIT, 2022

 

Many Nigerians assume that the funds allocated in the annual budget will be spent; but this is not necessarily true. There is often a sizable gap between what the government’s annual budget promises on paper and the actual funds made available for spending; larger gaps mean weaker credibility and reliability of the budget.

 

Figure 1: Five-year budget expenditure trend

Figure 1: Five-year budget expenditure trend Nigeria

Source: BudgIT, 2022

 

The public discussion about government budgets in Nigeria focuses on corruption, for example the risks of embezzlement of public funds by civil and public servants, unscrupulous contractors, and other vested interests. These are valid concerns, and yet, weak budget credibility can also undermine service delivery. Underspending or overestimating budgets starves critical projects of much-needed funds, resulting in abandoned public projects, poor service delivery, and inadequate social infrastructure.

 

Why does a budget credibility chasm exist in Nigeria? When these challenges persist year after year, does this risk turning the annual budget into an empty promise on paper? Some of the reasons for why we see continued weak credibility can be found in what happens between the time the budget is approved, and funds are made available for project implementation. Prior to starting any project, the implementing ministries, departments, and agencies (MDAs) make requests for cash to be released in line with the budget approval. After approving the “cash release” for each project, the government provides funds in cash or an authority to incur expenditure (AIE) to embark on the project. Once an implementing agency has either the cash or AIE for a project, this starts the procurement process and, eventually, results in “utilization” or actual disbursed cash. Administrative, political, and technical bottlenecks during the stages of cash release and utilization can reduce the amount of funding that projects receive and, ultimately, lead to service delivery failures.

 

Budget data from 2021 for six sectors affected by the COVID-19 pandemic (see figure 2 below) shows that halfway through the year, the government was already falling behind on cash release and utilization.

 

Figure 2: Q2 2021 capital budget implementation, as a percentage of total capital budget allocation for 2021

Q2 2021 capital budget implementation, as a percentage of total capital budget allocation for 2021 Nigeria

Source: Page 39, Q2 2021 Budget Implementation Report

 

A well-researched cause for low cash releases to MDAs is that the government does not collect enough revenue each year to finance planned expenditures. Revenue targets are regularly missed because of over-ambitious and unrealistic revenue projections. Low revenues lead to low cash releases, undermining project and program implementation. As with previous years, the Federal Government is projecting to raise N10.7trn in revenues in 2022, despite never collecting more than N6trn in years past.

 

Figure 3: Five-year budget revenue trend

Five-year budget revenue trend Nigeria

Source: BudgIT, 2022

 

Even when funds are available, government agencies, including subnational governments, still cannot fully implement their budgets. For example, despite exceeding its 2020 revenue target by 0.07%, Anambra State underspent its budget to the tune of N4.64bn (4% of the budget) in the same year. Less is known about the causes of these bottlenecks at the federal and sub-national levels, and more work needs to be done to identify and address the causes of these deviations.

 

One step the Federal Government can take is to improve budget data availability and explain the low utilization of released public funds. Disaggregated information on the spending from the N500bn COVID-19 Intervention Fund is neither available on the Budget Office’s website nor in reports from the Office of the Accountant General or Open Treasury websites. Furthermore, the Open Treasury portal, which houses data on government expenditures, has experienced persistent downtime since November 2020 to date.

 

Audit institutions can also investigate and report on budget credibility issues. However, the COVID-19 Audit Report, promised as a condition for the $3.4bn loan from the IMF, has not been made public. An interim report on COVID-19 expenditure presented to the National Assembly in January 2021 has not been made public. Available information suggests that N288bn, representing 57.6% of the N500bn COVID-19 Intervention fund, was released.

 

To ensure value for money, the government needs to enforce existing laws on fiscal responsibility and discipline. Likewise, accountability actors, including citizens, civil society, and the media must continue to demand improved transparency and accountability from the government on the deployment of scarce public resources.