Kabul, Afghanistan, Sunday (December 23rd 2018)- Integrity Watch published its research report on draft budget for the fiscal year 2019 in a press conference. Budget execution in the fiscal year 2018 has significantly increased and the collection of revenues has almost doubled under the National Unity Government. According to this research, corruption, lack of public participation in the budget process and the influence of political figures have caused the national budget of 2018 to fail in decreasing poverty and boosting Afghanistan’s economic growth.
Budget spending for the current year has reached 91 percent. However, one of the reasons for the hike in spending was a thirteen-percent decrease in the development budget of 2018 compared to 1396. Development budget in the fiscal year 2017 stood at 152 billion Afghanis while development budget for the fiscal year 1397 with in-year adjustments has reached AFN 132 billion. AFN 101 billion accounting for 67 percent of the total development budget for the year 2017 and AFN 124 billion accounting for 91 percent of the total budget for the year 2018 were spent. Despite increase in the budget spending, this research shows that less than 10 percent of the development budget allocated for 228 projects had been spent until the end of the third quarter of the fiscal year 2018. Sayed Ikram Afzali, Executive Director at Integrity Watch stated, “The increase in budget spending was not effective enough to reduce poverty and to boost economic growth due to corruption, lack of public participation and political influence in the budget process.” Fundamental reforms for the effectiveness of national budget is the dire need given the withdrawal of foreign forces and the likelihood of a cut in developing and military aids.
Revenues collection has doubled under the National Unity Government. The total revenues for the fiscal year 2014 reached AFN 99 billion while the revenues for the current year will stand at AFN 188 billion showing an 89% increase of revenues under the National Unity Government. This research shows that the imposition of new taxes such as value added tax, raising oil taxes, exemptions of tax-related fines, telecom services, and finally depreciation of Afghan currency are among the reasons for the increase in revenues. Naser Timory, Head of Advocacy and Communications at Integrity Watch said,” If the government seriously fights corruption in collecting taxes and customs revenues, national revenues can be doubled.
Despite improvement in spending of budget and increase of revenues, there are still serious problems in national budget- low credibility of the budget, ineffective public participation and political abuse of the budget are among the main problems.
The national budget has undergone big changes throughout the current fiscal year. The budget for the current year (2018) approved by the national assembly reached AFN 377 billion (USD 5 billion) but later increased to AFN 425 billion (USD 5.6 billion). Afghan government has yet to elucidate the reasons for this change. Ibrahim Khan Jabarkhail, PFM Advocacy Officer at Integrity Watch said,” Changing the amount of budget during the course of the year without the approval of the National assembly, will give the government an opportunity for unbalanced distribution among different ministries as well as provinces even though the role of the national assembly in a balanced budget has not been effective.”
The most serious problem of national budget lies in a weak and ineffective public participation in preparing this national document. Formal methods of including developing projects in the national budget are: development projects by ministries, provincial development plans, citizen’s charter and town hall meetings; but informal methods such as the projects of members of the parliament, as well as other influential political groups. The political leadership of the government has totally undermined the formal and popular methods of selecting projects. Mr. Timory added that the national budget is used by the political and influential figures for their own interests rather than national interests. Ms. Roshan Serran member of the Advocacy group for national budget told media that the government of Afghanistan has not effectively considered the needs of women in the budget. She added that enough budget for the action plan 1325 has not been taken into account, so we urge that the national budget should be drafted and approved based on gender needs. However, Ms. Sheila Qayumi, Program coordinator at Equality for Peace and Democracy (EPD) said that the government has made some efforts to involve women in the national budget but these efforts have not been put in practice yet. She added that the government had drafted a policy on Gender Responsive Budgeting (GRB) to gender needs but it is yet to be approved. Ali Dost Shahab, member of Advocacy group for the national budget, said,” Adding developing budgets without an economic, and feasibility study and by considering only political demands will not help reduce poverty and boost economy.”
During the fiscal year, the office of the president started involvement itself in budgetary, executive, and procurement affairs. It seems like it has initiated a parallel budget process to that of the Ministry of Finance. High-ranking officials of the office of the president have visited some provinces recently and have promised people the projects which do not exist in the national budget or which will not go through the procurement process at all. Mr. Afzali said that promising projects which are not listed in the national budget, and sectoral ministries without considering the procurement procedures is against the public financial management and expenditure law as well as procurement laws paving the way for political abuse that may relate to election campaigns. It is likely that such projects are funded through contingency codes. In the fiscal year 1397, contingency code includes 15% of the total budget while according to World Bank standards, this amount should account for only 3%. The contingency code has decreased to 4 percent in the national budget draft of 1398.
- Public participation in the national budget: The Afghan government should explore a three-year project selection, budgeting, procurement, and implementation framework with a participatory budgeting component by introducing new legislations, and should not allow the political groups and individuals to unfairly influence the budgetary process.
- Credibility of national budget: There are major deviations and variations in the budget figures and allocation of the budget during the course of the fiscal year. This issue should be resolved by improving planning, intra-governemntal coordination, and long term commitment by the international community.
- Increasing revenues through fighting corruption: Estimates show that the government can double its USD 2.2 billion revenues if it transform its tax collection regime with rigorous oversight from public representatives, disclosure of information, engaging people at local and national level, and a real-time and transparent collection of taxes and fees such as telecom service fee.
- Turning illegal economy into a source of income: A great part of Afghanistan’s agriculture sector is covered with illegal cultivation of opium and narcotics trade. The possibility of legalizing it can be seriously considered by the government. The experience of India, Myanmar and Colombia can be replicated in Afghanistan.
For interviews and more information on this press releases, please contact: