How transparent is budget making process?

M S Siddiqui

The budget reflects the vision and mission of incumbent government. The government leaders usually try to fulfil election pledges through the budget. The budget incorporates the government's plan to collect resources and use the same to meet the public's needs.

The people have every right to know about the income and expenditure of the government. The openness and transparency of a budget help them to judge whether the taxpayers money is being used properly.

While providing the public with comprehensive and timely information about the government's budget and financial activities and opportunities to participate in the decision making can strengthen oversight and improve policy choices. Keeping such processes closed would leave on opposite effect. Restricting access to information creates opportunities for governments to hide unpopular, wasteful, and corrupt spending, ultimately reducing the resources available to fight poverty.

It is the responsibility of a government to provide comprehensive and timely information about the budgetary and financial activities. The creation of a congenial atmosphere for all stakeholders to participate in decision making is a demand of the time.

The preparation of our national budget is a highly centralised. Participatory budgeting through which citizens deliberate and negotiate over distribution of resources is almost absent. The participatory budgeting includes a process where local governments have a say in the matters of regional income and expenditure. The finance minister during presentation of budget for the fiscal 2009-10 also mentioned about it. Such involvement also strengthens accountability, transparency of the government.

Usually, the national budget every year triggers strong and widespread debates and speculations because of the opaque budget preparation process. Besides, the implementation of the budget does not fulfil the expectation of the people.

National Board of Revenue (NBR) holds a number of interactive meetings with different stakesholders. But the officials at these meetings talk more than listening. The trade bodies and civil society members extend various proposals but, unfortunately, most of those are ignored. However, of late, there has been a small shift in policy and the government do accept some suggestions.

There is a compulsion on the part of the government to reduce the tariff rates as agreed under WTO and this is very much known to people concerned. But apart from this information the final decision on other issues is taken in closed-door meetings of the NBR. The stakeholders come to know about fiscal and other matters only when the budget is presented in the parliament.

The stakeholders start lobbying and negotiations with the finance ministry after presentation of the budget and also put forward demands through advertisements in newspapers and press statements. It is interesting to note that the ministers also demand higher allocation of fund or change of rule during discussion in the parliament. This indicates the lack of participation of the ministers in the process of preparation of budget.

The major concern of the citizens is transparency of the budget since very often people face lots of conflicting and contradictory interpretations and discriminatory taxation due to lack of transparency in the budget. For example, the government decided to expand the VAT net in the budget for the fiscal 2009-2010. They have imposed VAT on different services like diagnostic laboratories, Internet service providers and indenting agents. The High Court imposed ban on the collection of VAT on diagnostic services on the ground that medical service is a basic human and constitutional right. Unfortunately, the issue still has not been clarified by the NBR and consumers and service providers are in a state of confusion over this issue. A citizen has already filed a contempt petition against a hospital for charging VAT on its services. NBR can clarify the issue in the light of the decision of the High Court for convenience of all concerned.

Similarly, VAT on internet service provided to educational institutions has been exempted from VAT but, unfortunately, there is no way of differentiating the service rendered to educational institutions and other customers. The indentors are agents of overseas suppliers and they do not have any consumers. VAT is truly a consumption tax on consumers and VAT is not applicable on them. Sometimes, NBR issue Statutory Regulatory Orders (SROs) to amend existing taxes. But there is always some confusion. It is observed that the confusion arises out of process of preparation and transparency of contents of the budget.

The Open Budget Initiative, a global research and advocacy programme to promote public access to budget information and the adoption of accountable budget systems, undertakes open budget surveys for a comprehensive analysis and survey that evaluates whether governments give the public access to budget information and opportunities to participate in the budgetary process at the national level. They work with civil society partners in 85 countries to collect the data for the surveys.

The first open budget survey was done in 2006 and the biennial survey was conducted in 2008. The Open Budget Index 2008 (OBI) has duly evaluated the Bangladesh budget alongwith other countries. Bangladesh ranked 42. Bangladesh's performance was better than some countries, including Thailand (40), Pakistan (38), Malaysia (35) and China (14). India did have better transparency (60) and, more surprisingly, Nepal had better transparency rating (43).

Bangladesh Index shows that the government provides the public with some information on budget and financial activities during the course of the budget preparation. This makes it difficult for citizens to hold government accountable for its management of the taxpayers' money. The government provides the public with some, albeit incomplete, information on the national budget and financial activities during the course of budget preparation.

It is also interesting that many governments specially least developed countries (LDCs) like Bangladesh provide more information to donors than the people. Only five countries -- France, New Zealand, South Africa, the United Kingdom and the United States out of 85 surveyed by open budget initiative provide extensive information to their citizens as required under good public financial management practices. The least transparent countries are mostly located in the Middle East and North Africa (with an average OBI score of 24 out of 100), and in sub-Saharan Africa (average OBI score of 25). The worst performers tend to be low-income countries and often depend heavily on revenues from foreign aid or oil and gas exports. There is another common feature is that poor performers have weak democratic institutions or are governed by autocratic regimes.

Almost all countries publish the annual budget after it is approved by the legislature. However, in China, Equatorial Guinea, Saudi Arabia, and Sudan, the approved budget is not published, completely preventing the public from monitoring its implementation.

Most countries including Bangladesh, provide much less information during the drafting, execution, and auditing stages of the budgetary process. This prevents the public from having input on overarching policies and priorities, improving value for money and curbing corruption.

Moreover, it is somewhat difficult to track spending, revenue collection and borrowing during the year. There had been no mid-year review. The incumbent government has decided to make such review. The audit reports are not available to public. No information is given whether the audit report's recommendations are successfully implemented.

There is another process of revising the budget in the last month of a financial year. This is done just to get approval of the changes made in the budget allocations.

In the majority of countries surveyed under the OBI mentioned earlier legislatures have very limited powers, time, and capacity to review the executive's budget proposal and monitor its implementation. Likewise, in many countries the supreme audit institutions do not have sufficient independence or funding to fulfil their mandate, and often there are no mechanism in place to track whether the executive follows up on audit recommendations.

In Bangladesh, a parliamentary committee on estimates, is responsible for going over the budgets of all ministries. But it does not have the capacity or expertise to estimate or evaluate a budget for all departments / ministries. The parliamentary standing committees of the current parliament appear to be active and they can scrutinise the budgets of their respective ministries and place their recommendations. The budget should have more details of the ministry-wise allocation. The standing committee on the ministry of finance should be entrusted with the responsibility of holding a public hearing on budget preparation and allow stakeholders access to key budget documents.

The finance minister hinted at preparation of district-wise budgets in the next fiscal for making the budget more transparent.

There is hardly any opportunity for all lawmakers to discuss the budget which is actually prepared by bureaucrats. It is observed that the average time devoted to budget discussions in parliament during 1999-2006 was 35.1 hours only and 4.16 hours for discussions on supplementary budgets. In the recent times some experts have recommended changes to section 111 (2) of Rules of Procedure (ROP), which clearly stipulates that the budget shall not be referred to any standing committee.

A public budget hearing by the Parliament Standing Committee every year should also start with a review of recommendations of the previous year, which will create moral pressure on the government. It would ensure effectiveness to discuss budgetary policies with various stakeholders such as academicians, chambers of commerce, media and civil society members.

The global think tank, Open Budget Partnership, observed that to achieve immediate improvements in budget transparency, governments should make the budget information to their citizens.

International financial institutions and donors should encourage aid-recipient governments to make available the budget information to the peoples. Civil society should publicise and demand explanations from governments for not making available to the people necessary budgetary information.

The amendments to budget by NBR through Statutory Regulatory Order (SRO) is not a good practice for any democratic country. The bureaucratic process should not have supremacy over legislatures. Any changes through SRO should be subjected to approval of the parliament standing committee on finance.

It will take time to get the Right To Information Act implemented properly to bring about changes in the mentality of the bureaucrats.

But there should be more open dialogues between government and other stakeholders prior to preparation of budget.

The writer is a part-time teacher of Leading University. e-mail: shah@banglachemical.com