Upper Volta - Proposals for the improvement of development planning in Upper Volta : The creation and operation of a programming bureau in the Ministry of Finance

 FILE COPY Report No. EX-1 ., I P10POSALS FOR THE IMPROVEMENT OF DEVELOPMENT PLANNING IN UPPER VOLTA The Creation and Operation of a Programming Bureau in the Ministry of Finance by C. J. Martin Adviser on Planning Organization Development Services Department International Bank for ~econstruction and Development February 18, 1970 This report was prepared at the request of the Government of UPPER VOLTA. The views and recommendations contained in the report are those of the author rather than those of the Bank Group. The Government of UPPER VOLTA is responsible for the release and distribution of the report.  INTRODUCTION The National Budget sets out the government 1 s revenue and expenditure estimates for the year. 'l'".ne Budget does not, however, cover all recurrent or capital expenditures being made in the public sector since the financia:~. assistance given by foreign aid-giving agencies, such as FAC and FED, are noi.. recorded. Some regular governm&it activities are being financed by these foreign agencies with smaller contributions co:rr.ing from the Voltaic budget. Since there is a shortage of revenue in Upper Volta, operating funds for other important government activities (such as livestock service and the agricultural service) which are not financed from abroad are being reduced to such low figures as to make them practically ineffective. Unless atten- tion is given to the claims on future government revenue arising out of existing commitments, the government may find rev~.nues inadequate to meet these commitments, forcir.g it to reduce or eliminate contributions to foreign financed projects or to deny adequate operating funds for projects aftt3r completion. It rr.ight be that to meet such carnrnitments other important exp&iditures would have to be cut. Because of this dile.'mlla, I suggested, j_n my report on "Proposals for Improving Development Planning in Upper Volta, 11 the establishment of a Programming Bureau in the I1:inistry of Finance, since tr.is l1i.nistry is responsible for the collection of revenues, the preparation of expenditure estimates and the control of govermnent spending. Because recurrent budget revenues are subject to fluctuations, because the budget has only recently been brought into balance, and because recurr&it expen- ditures arising from new projects can lay heaVY burdens on existing sources of finance, it is important that the Ministry of Finance should be able to anticipate for periods greater than the year immediately ahead what revenues are likely to accrue and what the claims on these revenues are likely to be. For this purpose a Programming Bureau should be established in the Director- ate of the Budget of the ~1i.nistry of Finance with responsib~lity for fore- casting trends of future revenues and recurrent expenditures and for making adequate provision for recurr&it expenditures arising out of new capital projects, whether financed by foreign agencies or from taxation and other local revenues. Such a Bureau should work in close cooperation with the Ministry of Planning. In line with this suggestion, the Government of Upper Volta issued on October 23, 1969 a Presidential Decree (No. 69/234) sanctioning the establishment of a Programming Bureau (Le Bureau des Programmes) as a sub- unit within the Directorate of the Budget (La Dir~ction du Budget) in order to serve as 11 a liaison bet-v1een the Ministry of Fin!lllce and the Ministry in charge of Planni:;:J.g. 11 I have prepared this paper at the request of the Director of the Budget. It describes the types of activity which the Bureau should undertake, suggests the methods which could be adopted to make the necessary forecasts and estimates, and indicates the foreign technical assist,ance, as well as Voltaic, staff required to develop and maintain this service. It is conside~ed that some 18 months would be required to mru<e the Bureau fully operational.  - 2 - The Ft~ctions of the Programming Bure~u 1• The functions to be assumed by the PrograiTmling Bureau would cover a number of subjects, many of vJhich are not at present being handled by any organization 'tdthin the Government. They would refer mainly to: (a) government recurre11t expenditure in the Budget National (the ~~dget), defined as expenditure required annuai+y to purchase goods and maintain services; (b) on-going projects, defined as those projects to which the government has agreed to contribute and which have started but have not yet been completed; {c) new projects, defined as those in the financing of whjch the government is scheduled to participate but which have not yet started. The Bureau would attempt: (a) to estimate the future trend of governmental recurrent expenditure, analyzed by sectors; (b) to determine the B.J."'llount of recurrent expenditure, not at present recorded in the Budget National, uhi~h is nOli' being financed by foreign aid, but which may ultimately have to be defrayed from the budget (these amounts could be listed by sector and by type of expenditure); {c) to estimate the phasing, by years, of expenditures on on-going and ner;r project.s proposed for financing by the government or foreign aid agencies, showing separately the amounts to be borne by the national budget and foreign aid agencies; (d) to estimate the increased burden of recurrent expenditure as a result of on-gou1g projects becoming operational; (e) to estimate the projected increase in recurrent expenditure arising from the implementation of projects proposed for inclusion in the development plan; and • (f) to prepare detailed forecasts of revenue by type of tax and other income. 2. L11. attempting to make these estimates, it will be necessary to distinguish betvreen (a) the .~."ecurrent expenditure at present financed from Voltaic budgetary funds, which will continue in the future, (b) the budget- ary contribution which the government is committed to meet the development costs of projects financed largely from foreign aid, and (c) the possible  - 3 - burden on the budget of transfers of expenditure resulting from the decline or elimination of foreign aid. Item (c) will include recurrent e}.."Penditure at present financed by foreign aid agencies which may become a charge on the national budget in the absence of foreign aid and new recurrent expen- diture which may arise when the new projects schedu.led to be financed by aid-giving agencies become operational • .Analvsis of the Budget National 3. At present the published Budget of Upper Volta is divided generally into expenditure on personnel and materials, with the details of materials being given by each head of the budget. Some other details are also pre- sented on maintenance and similar expenses. Therefore, it should not be difficult to obtain the information required to analyze the Budget by a number of categories such as: (a) personal emoluments (b) materials (c) maintenance expenditures, and (d) other charges If possible it would be useful to have the information on personal emolumenta divided by types of employment, e.g., unskilled labor, skilled labor, profes- sional workers, etc., and materials should, l..rhere possible, be elivided by type, with a major distinction between local and iinported materials. In carrying out this analysis of the Budget, the Programming Bureau should alL~o ffi1sure that for each section separate records are maintained of recurrent expenditure financed by foreign aid. The sectors covered, together with th~~ types of activity financed, e.g., personal emoluments, materials, maintenancr:, of motor vehicles, etc.,should be designated. Forecasting Ipcreases in Recurrent Budget EXPendi~ Budget National 4. At present the revenue finances most recurr-ent expenditure. The Government of Upper Volta has made great efforts to control recurrent expen- diture and has reduced the size of the recurrent budget compared with the totals for earlier years. This austerity has also provided a small surplus to assist in the financing of new development projects. l~atever the Government's intention w-ith regard to financing new projects, there may well be, in the future, certain additions to the budget due to normal increases in personal emoluments and r.hanges in the prices of materials purchased for government consumption. It is important that the Government be aware of that growth in recurrent expenditure which may result from these changes, even ldthout any new activities being contemplated. To make estimates of" these likely changes, the Programming Bureau should divide budgetary  - 4- expenditure into bm categories: (a) increases in the e:x:i.sting budget arising from price changes, and (b) increases in future budget expenditure arising from new activities. To cover increases under (a), the Programming Bureau should examine the trends which have taken place in wages and salarj_bs and prices of materials, both local and imported. For possible increases under (b) the Programming Bureau, in consultation with the Directorate of Planning of the }'Iinistry of Planning and particularly td.th its Projects Bureau, should list the projects expected to be implemented and evaluate the expenditures likely to arise (see pro formas). Recurrent EXPenditure Outside the Budget 5. Some government activities are financed by foreign aid agencies and cover recurrent costs of running organizations such as ORD's as well as capital expenditure. At present the capital and recurrent expenditures are not distinguished and this analysis should be made. Some of the infor- mation required to carry out this analysis may only be available from the resident offices of the FAC and FED missions. Revenue Forecasts 6. The Programming Bureau should also prepare revenue forecasts. The projections of government revenues should take into account the extent and the rate at Hhich revenues (a) may increase as the result of projected increases in production resulting from development expenditures and other factors, and (b) may decrease as the result of the completion of any import- substitution projects (which may entail losses in import revenues greater than increases in revenue from taxes on domestic production), or falls in export prices. After these estimates have been made, they could be revised, where necessary, taking into account possible changes in tax rates. Estimates for On-going and Ne'tv Projects 7. Assisted by the Ministry of Planning, the Bureau should prepare a timetable showing when on-going and ne1..r projects might become operational and would require finance from the Budget or from external sources to meet recurrent expenditure. For many on-going projects detailed estimates of .future recurrent expenditures have not been made and the Programming Bureau should make these estimates, using the indices prepared for the analysis of the existing budget. Since projects do not become fully operational imme- diately, recurrent expenditure should be phased. In those cases where projects may earn revenue, estimates of such revenue, should also be made. B. Similar forecasts should be made for new projects as they are proposed. The Ifuistry of Planning should provide the Programming Bureau 1dth a time- table of commencement and completion of these net..r projects. The Programmins Bureau should then estimate the future recurrent expenditures, giving the year vrhen the projects would require recurrent finance to meet such expenditt'..re. Some of these new projects might have their recurrent expenditures financ(;;)d l:y foreign aid agencies and this distinction should be made, wherever possible. Draft pro formas are given as a...'"l. annex.  - 5- 9. In this task of estimation of revenue and expenditure, the Progra.mmir.g Bureau will need to work closely with the Plan.."'ling Directorate of the Minis-~ey of Plarurl.ng. Through the operations of the proposed Projects Bureau whicn. ld.ll estimate the development and recurrent demands on the Budget by identi- fying and helping to develop projects, the Ministry or Plar.ning will be able to provide the Programming Bureau with basic information on recurrent costs arising from new projects. The Programming Bureau will be able to be of assistance to the Projects Burea.u of the }linistry of l'lanning by ad-v-ising on the availability of finance to help in the implementation of prujects. Although the two bureaus vnll be situated in different ministries, there should be coordination of activities by regular meetL~gs of the Director of the Plan and the Director of the Budget and of their respective staffs. Summary of Proposals 10. The Programming Bureau should attempt to undertake the following: 1. Analyze the existing budget into personal emoluments, material~ maintenance expenditure and other expenditure. 2. Analyze expenditures made by aid-giving agencies bet>tveen expenditure on capital equipment and expenditure to maintain existing organizations. The amounts devoted by aid-giving agencies to recurrent costs should also be analyzed into personal emolumE>nts, materials, maintenance expenditure and other expenditure. 3. Bring together the information under 1 and 2. The addition of these two sets of information will provide the Bureau with all estimate of the total recurrent expenditure on government activities. 4. Ha.l'i:e projections of existing recurrent expenditures. The Bureau should make estirr..ates of expected changes in tvages and salaries and materials, the material.s being divided into local and foreign. Indices of changes for the next five years should be prepared. 5. Calculate the capital cost of on-going and nelv projects. Estimates giving ar.nual disbursements should be provided, together tdth an indication of sources of finance. This should be linked with those estimates to be made under #6. 6. Make estimates of future recurrent expenditure arising from on-going and net<r projects. In conjunction with the 11i.nistry of Planning, calculations should be made of the likely future recurrent costs to be incurred when on-going and new projects become operational. To make these calculations the Bureau should first obtain from the Hinistry of Planning and the technical ministries forecasts of future recurrent expenditures  - 6- e-nd discover whether the:;r have been made on similar assumptions. As this is rar;s.ly done, the indices prepared under #2 could be used to recalculate the recurrent expenditures expected to ari~f, from these new projects becoming operational. 7. Collate the informat:.on and reanalyze annually at the time of the preparation of the Budget. This should be done in order that the Government can be in a position to calculate the relationship between f'u ture revenue and future expenditure and be able, when deciding on the implementation of new projects, to assess the burden of taxation which might arise as a result of these nev1 activities being undertake."l. 8. Make projections of expected changes in revenue. Forecasts should be made for each major item of taxation. staff 11. In order that this e::~ercise should be undertaken quickly and efficiently, it is suggested that a technical assistance e.."<:Pert be recruit~.::6. for a period of 18 months to help 1..rith the establishment of the Bureau. To act as counterparts and to be trained in the vrork of the Bureau, a staff of three Voltaics might be required. But in the beginning, more staff might be needed and any firm establishment (les effectifs prevues) would depend on the views of the techn:i.cal assistance expert. Conclusions 12. The Programming Bureau will ensure that the Ministry of Finance and the I1inistry of Planning are both aware of the possible future burden on the budget of existing commitments and of new commitments, arising from the completion of on-going and new projects. It is important that valuable existing activities should not be starved of funds merely to support new projects and netv activities. The Progra.mming Bureau should present projec-· tions which uould then allow the government to decide on the optimum allo- cation of resources between existing and projected operations. Draft pro forma.s are provided as an annex to explain the proposals in tabular form.  ( 1) ANNUAL TOTAL GOVERNMENT EXPENDITURE BY SERVICES AND CATEGORIES Year - - - - - - CFAF (million) Expenditure on Person81 ! Other Services Emoluments Materials Maintenance - Total President's Office Interior & security Justice J?oreign Affairs Defense iinance & Commerce Public Narks Planning Veterans Public Health etc. Total  (2) TOTAL GOVERNMENT EXPENDITURE BY CATEGORIES Current Year plus Projections E:xpendi ture. on CFAF (million) • Personal Year Emoluments Materials Maintenance Other Total Current Year (X) X+ X + 2 X+ 3 X+ 4 X+ 5 Total  • • (3) ON-GNT·-.TQ AJJD NF:'~v PRO,TECTS Current t:l.!'ld Pro-iected r..Qni_ t"!.l Expenditure Project Title: Date of Commencement: Date of Completion: _ _ _ _ __ Expenditure on f r ~~·~- Project Personal Number Year Emoluments Materials Maintenance Others Total. (1) t First Second Third Fourth Fifth (2) (3) etc.  , . .. ~ (4) -- ON-GOIUG .!\.ND N11vl PROJECTS Forecasts of J.lecurrent E?g?endi ture and Revenue Project Title: Date of Commencement: Date of Completion: _________________ Expenditure on . . Personal Emoluments ! l1aterials ! Maiiitenance ! Others ! ! Revenue Project! ! Govt. !Foreign! ! Govt. !Foreign! ! Govt. !Foreign! ! Govt. !Foreign! 1 TOTAL ! ! No. ! Year ! Finance! Aid !Total!Finance! Aid !Total!Finance! Aid !Total!Finance! Aid !Total! II :..:. - . . . . ! I! !! I! !! !I !! !! I! I! !! !I !! !! !! !1 !! !! !! !! !! !! !! !! !!  II . • ~ (5) GOVEH.NHE)Yf d.EVENUES (Past, Current and Projected) CFAF (million) 1 ! ! · --- ~-·cu.rrent Year Sources !X - 1 ! X - 2 ! X - 3 ! X X + 1 X + 2 X+ 3 I A. Ressources Propres Ressources fiscales Revenue d:u domaine Exploitations et services Contributions, sub- ventions, Ristournes -! Rem.boursement ! B. Ressources Exterieurt "! Emprunts et avances Aide exterieure Total