Archive
There are three parts to
this document.
·
Budget Guidance – this is additional technical information that
supplements the advice received from the Ministry of Finance on 24 July 2003.
·
Budget Spending Allocation – this outlines how much funding each
ministry can expect to receive in the 2004 Budget. Ministries will be expected
to frame their spending priorities around this amount, but there is no
guarantee that these funds will be allocated to that ministry.
·
Outline of the key dates in the 2004 Budget process – this includes a
description of the operation of Expenditure Review hearings.
The upcoming Budget and
expenditure review process will concentrate on funding allocations for 2004.
However, Ministries must also provide spending and revenue estimates for 2005
and 2006.
Submissions should be
completed using traditional Iraqi expenditure categories, with the following
columns:
|
Full year 2002 |
2003 Budget (half year) |
Proposed savings |
2004 Spending |
Total expenditures
requested |
Submissions should include
actual expenses incurred in 2002.
Budget Submissions should be expressed in Iraqi dinar when submitted to the Ministry of Finance. An exchange rate of 1500ID to $1US should be used in preparing budget estimates. Submissions should be prepared on the basis of zero inflation.
It is also important for
ministries to be able to produce measurable characteristics of the programs
they intend to fund. For example, “this spending will result in a 10% increase
in the number of people receiving potable drinking water” – this will be
important in helping in the prioritization process.
Ministries will assume
responsibility for all salary payments in 2004. The ‘four tier’ salary system will be terminated on 31 December
2003.
Ministries should also
prepare a list of savings measures (eg, low priority programs) and options for
revenue raising – in particular, user charges for services provided by the
Ministry.
Ministries must be able to
provide information on where in the country the budget funds will be spent, to
get an overall sense of how the Budget will be allocated regionally (at least
at the governate level). Ministries are
expected to seek input from their offices in the Governorates, to develop
regional spending priorities for the country.
As in 2003, the Kurdish
regions of Iraq should not be incorporated into budget submissions.
All SOEs should complete the
company information questionnaire.
SOE budgets should be
prepared on the basis that the salaries of employees of SOEs will not be funded
from 1 January 2004.
State companies will be able
to seek loans to provide them working capital. However, this does not mean that
some companies will not be subsidised.
Where subsidies are proposed
for an SOE, they should be treated as an expense for the Ministry in the 2004
Budget. If they are not identified, they will not be funded. Where subsidies
are requested, they need to be thoroughly quantified, and justified in detail,
including an explanation of why a loan on commercial terms would not be an
adequate substitute.
The 2004 Budget will identify all subsidies to companies, both direct (eg payments from the Ministry to the company) and indirect (eg where the company receives goods or services cheaper than their market price or received a preferential exchange rate).
As a starting point,
Ministries - in consultation with their SOEs - should identify all of the
subsidy arrangements made to their SOEs in 2003. Identify all goods or services
that the company received at no cost, at a discount (eg goods, rents), or
received cheaper because a lower exchange rate was used.
Companies should also
provide information on all of those goods they sell at a discount, or using a
lower exchange rate than the official rate.
Companies may trade off all
cost categories, but must identify to the Ministry of Finance when
restructuring results in a change of more than 5 per cent of the number of
employees.
The 2004 Budget aims to maintain funding to Ministries for their core operations. In this regard, 2002 and 2003 will provide the basis for allocating spending in 2004 to 2006. Where proposed spending deviates significantly from 2002, Ministries will need to explain why this is the case.
Most capital projects will
also have ongoing costs associated with them – for example the cost of
additional workers, or ongoing maintenance. These effects on operating expenses
must be identified and quantified.
Ministries will not be
allowed to reallocate funds between operating expenditure categories without
written approval from the Ministry of Finance. It is therefore very important
that each expenditure category is considered separately, and adequately funded.
The Budget allocation process will again use the familiar categories from previous Budgets. Guidance on specific issues within these categories is provided below.
Salaries
and Employment estimates - provide estimates of the total number of
employees employed (by grade) by the Ministry in 2004 (not including SOEs), and
how this has changed from 2003 and the total salary cost. Do not include those
Iraqis that are employed in the State Owned Companies (see above).
Capital
–
Priority must be given to repairing existing equipment rather than seeking new
capital items. Ministries should use
what they have wherever possible.
Goods – In particular,
provide estimates of the quantity of gasoline and the quantity of electricity
that is expected to be consumed in 2004, using 2002 as a base.
Capital spending will
continue the priorities established in the 2003 Budget: security, oil industry
production, infrastructure and the social safety net.
Projects should be
identified as either continuing from 2003, new, or reconstruction, and should
be identified in priority order. This should be irrespective of where funding
might be sourced from (eg Budget, USAID funding, donor funds). Ministries
should also advise on donor interest in the project.
Ministries must clearly
articulate why a project should be undertaken, and why it is a high priority
compared to other projects. Ministries
should therefore estimate how many Iraqis the project will employ, and for what
duration – and Ministries should consider whether the proposed investment can
be done labour intensively.
Ministries should break
capital projects into discrete sections where possible. This will enable parts
of a project to be commenced, where there is not sufficient funding to complete
the project entirely.
It is important that Ministry consider known World Bank/UN Needs assessment data.
The entire cost of projects
should be identified - even spending required beyond 2006. Project completion
dates are also required, including key project milestones.
Ministries should also identify any revenues that may be generated by the investment.
Expenditure Review Hearings
will be held with individual Ministries, the Ministry of Finance and the
Ministry of Planning.
At these hearings the
Interim Iraqi Minister for that Ministry (with officials) will argue their
Submission to the Interim Iraqi Ministers for Finance and Planning (and their
officials). Also attending will be CPA Senior Advisers.
More than one hearing may be
required for each Ministry, as required.
The following are key dates in the 2004 Budget process.
|
Key
Date |
Event |
|
31 July |
Budget guidance to
ministries, including indicative spending envelope |
|
31 July to 14 August |
Ministries prepare budget
submissions |
|
No later than 15 August |
Draft budget Submissions
provided to Ministry of Finance. |
|
15 Aug – 5 Sept |
Expenditure review hearings with Ministries
(UN/World
Bank Budget officials in Baghdad 20 Aug to 30 Aug) |
|
Early
September |
UN/WB/IMF
needs assessment delivered |
|
22 September to 29
September |
Deliberations and final
decision making including the Governing Council |
|
1 October |
Budget delivered |
|
15 October |
Donor’s conference |