Contents

Contents......................................................................................................................................1

Introduction................................................................................................................................2

Purpose of Budget Call Circulars...............................................................................................3

Discussion of the guidance offered by the BCC Number 2 of 2014..........................................4

Issuing of Instructions/Call Circulars.....................................................................................4

Economic and fiscal outlook..................................................................................................5

A guideline amount which may not be exceeded/budget ceiling...........................................6

Form and content of budget estimates...................................................................................7

A general priority indication for expenditure by the various departments............................7

Conclusion..................................................................................................................................8

References................................................................................................................................10

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Introduction

Call circulars are the official notices that are issued by the Ministry of Finance or similar

agencies towards the commencement of each budget cycle. According to UNIFEM’s

guidance series (2007), the purpose of the circular is to instruct government agencies how

they must submit their demands for budgets for the coming year. In some countries the

circular may have another name, such as budget guidelines or Treasury guidelines, but the

purpose is basically the same. The call circular goes to all spending agencies (ministries,

departments, other government-funded institutions). It usually tells each agency what its

budget “ceiling” for the next year is i.e. how much the Ministry of Finance or Planning

Commission is planning to allocate to that agency. In some cases the call circular describes

government priorities that should be addressed in the coming year’s allocations.

The budget preparation call circular is triggered by the issuance of the Budget Call Circular

(BCC). According to the 2011 Guidelines for Chief Budget Managers in Rwanda, the BCC

provides the total indicative resource envelope derived from the macro-fiscal framework

consistent with the broad policy objectives. The indicative ceilings are issued at high level at

line ministries, provinces and other high level government institutions. This is to allow

coordination and prioritization of activities at the high level of Government programmes. The

parent institutions (Ministries and other high level institutions) that have been allocated

ceilings are required to proximately undertake consultative processes with all affiliated

agencies to agree on individual agency ceilings that shall be the basis for the detailed budget

estimates to be entered in the budget system.

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This paper will evaluate the content of the Treasury Budget Call Circular Number 2 of 2014

(BCC) issued by the Ministry of Finance and Economic Development in Zimbabwe. It will

discuss whether it offered sufficiently clear advice on how line ministries were to propose

their expenditures. A general framework for the purpose of BCCs will be utilised to analyse

the BCC number 2 of 2014.

Purpose of Budget Call Circulars

The Lagos State Budget Manual (2010) defines the purpose of BCCs as the provision, to

government Ministries, Departments and Agencies (MDAs), of guidelines for the preparation

of budgets, instructions for completion of requisite budget forms and a timetable for the

compilation and submission of the budget proposals. An appropriately developed BCC

includes various critical elements which ensure an effective budgetary process. A BCC

should provide an economic and fiscal outlook of the state for the planned budgetary period.

This will situate the budget in the broader economic context.

Furthermore, it should furnish MDAs with spending limits with explicit planning and

contingency reserves. This should include sector spending limits as well as input spending

boundary definitions. MDAs need to know the state’s priorities therefore this are articulated

in the budget call circular. For administrative ease, the BCC should provide directions on the

process for admitting projects and programmes into the medium-term sector strategies.

Moreover, the form and content of budget estimates.

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Discussion of the guidance offered by the BCC Number 2 of 2014

This section will discuss and offer an analysis of the BCC Number 2 of 2014 given the above

identified purpose and criteria of budget call circulars.

Issuing of Instructions/Call Circulars

A BCC should provide a timetable for submission of departmental draft budgets. Ekeocha

(2012) by citing Galston (2012) identifies the capacity to make timely and utilitarian fiscal

choices as one of the guarantees of sound governance. He again referred to Galston (2012)

who explained that timely budget interventions affect public trust and confidence in the

institutions and processes of self-government in democracies. Late budgetary submissions

have negative implications for the functioning of the economy as it interferes with the aspects

of the free market that runs enterprises. Ekeocha wrote that the budget process in Nigeria was

the cause for late submission and poor budget performance.

The BCC number 2 of 2014 had a timeline which is shown below. A critic writing in the

newspaper, The Independent argued that the 2015 budget statement announced by Finance

minister Patrick Chinamasa last week was disappointing. The budget reflects the lack of

engagement and consultation with key stakeholders as it failed to address some of the key

challenges facing the economy. The argument was that it failed to inspire confidence and

provide much-needed support to kick-start the economy.

This inadequate consultation may have been due to limited timeframe (one month) for

consultations. Given the current poor economic performance of Zimbabwe and poor

implementation of the 2014 budget, one would have thought that more time would be spend

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on consultations with the various stakeholders. While the timeframe is provided, it is not

sufficient to tackle the current challenges which require capital investments. The World Bank

in its Budgeting and Budgetary Institutions publication advises that in African developing

countries, seven or eight months is a more appropriate budget preparation period, from issue

of the budget circular to legislative approval.

Activity Due Date

1 Issuance of Call Circular 17 October 2014

2 Submission of Expenditure Proposal

by Line Ministries

31 October 2014

3 Budget Consultations with

stakeholders

20 October-21 November 2014

4 Budget Hearings with Line Ministries 3-19 November 2014

5 Presentation of the 2015 Budget to

Parliament

27 November 2014

Source: Treasury Budget Call Circular Number 2 of 2014

Economic and fiscal outlook

The BCC projected an economic growth of 3.2% with key drivers being agriculture (7%);

mining (3.5%) and construction (2.9%). This is a downgrade below the Zim Asset target of

6% and sub-Saharan Africa growth of 5.8%. An opinion writer in the Independent argued that

this is unsatisfactory especially when considering the potential for growth for Zimbabwe.

While it is debatable, given the macro-economic framework prevailing, that the 3.2% is

achievable the opinion writer thinks the government has to make the necessary policy

adjustments to realise even more growth. The BCC assumes policy clarity and a predictable

investment climate which are not supported by politicians. The Newsday, a daily newspaper

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in Zimbabwe, reported that one of the vice presidents was threatening the white community

with intensified land grabs in January 2015.

A guideline amount which may not be exceeded/budget ceiling

Section 5.17 gives a Capital Budget ceiling of US$340 million while Section 6.1 caps the

expenditure proposals for line ministries at US$5 770 000. There is no scope for redirecting

any amount from one expenditure head to another. Furthermore, priority was to be accorded

to programmes and projects for which contractual obligations already existed. While the BCC

provided a ceiling for the expenditure proposals for each of the line ministries, it is difficult

to follow on this from merely reading the budget. The budget was presented rather in cluster

format in line with the ZIMASSET which is the Zimbabwe Agenda for Sustainable Socio-

Economic Transformation.

While evaluating the proposed budget for 2015 in the National Assembly, chairperson for the

parliamentary committee on Health, Ruth Labode, challenged Chinamasa to defend why his

budget fell short of the Southern African Development Committee 15% specified

apportionment to the health sector, as it was only allocated 6,8% of the national budget. “The

budget falls short of the Abuja declaration which this state agreed to and as committee we

feel that the ministry of Health has been downgraded from being among the top three to

number five, we don’t know why, considering its importance,” The Zim Mail quotes her as

having said. This evidence results in inconsistencies between the spoken policy priorities of

the government and its policy implementation.

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Form and content of budget estimates

Accounting officers administering funds in terms of the Public Finance Management Act are

required to submit their budgets to Treasury for approval. Annex 1 of the BCC provides the

format of presentation for the expenditure proposals. It clearly stipulates that section A of the

expenditure proposals should summarise the Vote overview, key result areas and priorities in

alignment with ZIMASSET. It further advises that part B should encompass a summary of

revised estimates for 2014, proposed estimates for 2015 and indicative estimates for 2016-17,

the format for which is provided in schedule VI. For capital expenditure, a standardised

proposal submission form was given on Schedule III. This should suffice though this is a line

budgeting method.

A general priority indication for expenditure by the various departments

Furthermore, priority was to be accorded to programmes and projects for which contractual

obligations already existed. Efficiency is called for in the collection and retention of income

and its subsequent deployment. An estimated 81% (poised to reach 92%) of the US$4,1bn

budget is allocated to recurrent expenditure meaning very little for capital expenditure. In

fact, the budget was revised downwards to US$3.5 bn. This is very worrying since it is

inconsistent with the four cluster of ZIMASSET which rely on growth. Sustainable growth

can only come through long-term capital investments.

Government needs to drastically curtail consumptive expenditure such as wages and divert

funds to capital development. There have been reports of ‘ghost workers’ and duplication of

duties within the civil service. Capital expenditure will boost economic activity and create

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more jobs. It is sad noting that capital spending to the end of October 2014 was US$268

million against a budget of US$401m as reported by The Source website.

Conclusion

Call circulars are official notices issued by Ministry of Finance near beginning of each budget

cycle. They are meant to instruct government ministries, departments and agencies on how to

submit demands for the coming financial year. BCCs typically specify to each agency a

budget ‘ceiling’ and provide other instructions for the construct and format the draft budget.

In addition, BCCs advise on how to present motivations for the expenditure proposals.

This inadequate consultation may have been due to limited timeframe (one month) for

consultations. Given the current poor economic performance of Zimbabwe and poor

implementation of the 2014 budget, one would have thought that more time would be spend

on consultations with the various stakeholders. While the timeframe is provided, it is not

sufficient to tackle the current challenges which require capital investments. This evidence

results in inconsistencies between the spoken policy priorities of the government and its

policy implementation.

Government needs to drastically curtail consumptive expenditure such as wages and divert

funds to capital development. There have been reports of ‘ghost workers’ and duplication of

duties within the civil service. Capital expenditure will boost economic activity and create

more jobs. The absence of a firm expenditure restraint at the start of the budget process,

which forces early decisions, will invariably result in dysfunctional practices in budgeting.

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This restrictive stance to line ministries from the start of budget preparation favours a shift

from a “wishes” mentality to an “availability” mentality. This is what Mr Biti, the former

Finance minister referred to when he said that the government should ‘eat what it kills’.

Moreover, to translate strategic choices and policies into programs, line ministries require

clear indications of available resources. Forecasting of revenues therefore has to be realistic.

It saps confidence away when a budget has to be revised downwards a few weeks after its

presentation as happened in this case. Finally, a budget ceiling increases the de facto

authority and autonomy of the line ministries, weakening the prerogative of the ministry of

finance to a role in defining the internal configuration of the line ministries’ budgets.

Overall, the Budget Call Circular Number 2 of 2014 gave a very tight timeline which

rendered consultation ineffective, the expenditure ceilings it offered were not in congruency

with the stated priorities of development while the revenue forecasts were too ambitious and

erroneous requiring a downwards variation. It is only the administrative guidelines which are

not really of material consequence to policy success that are commendable in this BCC. The

budgetary process in Zimbabwe should focus less on political bargaining and more on

economic effectiveness.

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References

Ekeocha, Patterson Chukwuemeka (2012) An Analysis of the Federal Budgeting Process in

Nigeria: Implications for Institutional Reforms for Achieving Timeliness. Developing

Country Studies, Vol 2, No.6, 2012

Gender Responsive Budgeting Program: Guidance sheet series - No. 1 January 2007

http://www.theindependent.co.zw/2014/12/05/zimbabwe-stuck-holding-pattern/ Accessed 02

March 2015

http://www.thezimmail.co.zw/2014/12/17/parly-tears-into-2015-national-budget/ Accessed

02 March 2015

https://www.newsday.co.zw/2015/01/19/land-grab-intensify-mnangagwa/ Accessed 02

March 2015

Lagos State Government Budget Manual, 2010. Ministry of Economic Planning and Budget

Ministry of Finance and Economic Planning (MINECOFIN), Government of Rwanda

Simplified Public Financial guidelines for Chief Budget Managers July 2011

Shar A. (2007). (Editor) Budgeting and Budgetary Institutions: Public Sector Governance and

Accountability Series. The International Bank for Reconstruction and Development /

The World Bank

www.source.co.zw/2014/11/2015-budget-highlights/ Accessed 02 March 2015

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