Asper constitutional requirement (1970) backed by the Finance and Audit Act 1966 (cap 70), annual estimates of revenue and expenditure are to be presented to the House- of-Representatives usually by the end of June. However, the calendar year has been adopted as the fiscal period with effect from January 1998 instead of the former fiscal year of July to June. The budget has two components: the recurrent budget and the development budget.
The ministry of Finance presides and oversees the preparation of the annual budgets.
The line ministries and departments submit to the ministry of finance their draft estimate of revenues and expenditure of the coming year plus the revised expenditure estimates of the current year.
The budgetary process starts when the ministry of Finance issues a call circular towards the end of November or earl y December of each year, requesting the submission of draft estimates. Thereafter, submissions of these draft estimates are made to the ministry of finance. This submission should follow the following deadlines: details of establishment and the nominal roll be submitted latest 15th January, while estimates of revenue and expenditure plus their revised estimates are expected by February 15. The budget committee of the ministry of Finance in conjunction with the line ministry and department representatives review and finalise the draft estimates of revenue and expenditure. The Cabinet copy of the draft estimate is then printed and sub~itted to the cabinet for approval. After the cabinet approves of it, the budget is finalised and a copy printed for The House-of -Representatives'
17 approval.
The ministry of Finance forecasts revenues and inescapable expenditures for the coming year that it can use as a benchmark for the proposed budget estimates. It should be noted that budget formulations have to take account of the emerging fiscal situation, and in general, economie realities facing the country.
The budget contains different components: the details of establishment and the nominal roll, the draft estimates of expenditure and finally the draft estimate of revenue. The details of establishment show the subhead an<!_ t~e _posts under each subhead that is serially numbered. It contains the designation of the post, the grade, the actual expenditure for the previous year, the approved estimates which shows the provisions made in the current year, the estimates for the coming year, variation and any explanation for such variations.
The nominal roll has the name, the grade, current salary, date of increment and hence the amount estimated to be payable in the future year to holders of each sanctioned posts.
Allowances are also shown separately in the details of establishment and the nominal roll.
The correct total for salaries and allowa.n.ces are entered in the draft estimate of expenditure.
The draft estimates of expenditure are prepared for each head of expenditure, which is then subdivided into subheads. The revised estimates of expenditure indicate the savings or excesses anticipated on each item and the reasons for it. Excesses of any expenditure item can only be spent by using virement warrants or supplementary appropriations.
The actual treasury figures for the last financial year and the expenditure trends during the current year, as revealed by the revised expenditure estimates, form the basis of the .expenditure proposais for the next year submitted by the spending ministries.
Revenue estimates are equally arrived at using similar methods as done in expenditure estimates. Estimates for the coming year are prepared on the basis of existing tax levels,
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while new revenue proposais are formulated separately. In particular, the forecasting of revenue should take into account the following relevant factors. Firstly it must consider past trends, state of arrears of revenue, quantitative data such as production figures of excisable commodities, number of motor vehicles registered etc which constitute the base for the taxes.
There is the need to know the estimated production of groundnuts and forecasts for world market priees of groundnuts and its derivatives. Trends relating to values and volumes of major import commodities, trends relating to taxable profits of business firms and general economie situation and outlook for the coming trade and tourist seasons are all essential guides to budgeting.
The development budget is submitted on the basis of submissions by line ministries for individual projects. The projects must meet certain requirements like an indication of investment priorities (on-going projects, rehabilitation) and specify the data requirement that project proposais should meet, including economie and financial rates of retum. Currently this task is left under the co-ordination of the economie wing of the ministry of Finance which, is confronted with lack of adequate technical staff.
In terms of funding, the recurrent expenditure is entirely funded by domestic revenue while the development component has the majority of its funds coming from extemalloans and grants.
For a more detailed analysis ofinvestment proposais and programs, projects should be classified into three categories to assist in its approval process. Firstly, there are projects to be included in the investment program. Secondly we have projects for possible delay due to lack of adequate documentation, implementation capacity or financing and thirdly there are questionable projects with weak justifications. The following criteria could be used to assess eligibility of projects. Firstly, it should be consistent with macroeconomie and sectoral
19 strategies and justification of the investment (using economie rates of retum or least-cost solutions or social objectives and the timing or uncertainty associated with the projected benefits). Secondly, consideration is to be given to the feasibility or the viability of the project in terms of implementation capacity of the executing ministry or agency and its capacity to realise the full benefits of the investment and the availability of financing on grant or concessional terms. Moreover, rigorous analysis and flexibility is needed in the allocation of expenditures to ensure an appropriate balance between investment and current expenditure and between sectors and activities. In addition, the trade-off between pursuing further rehabilitation efforts and providing adequate operation and maintenance of existing infrastructure should be carefully assessed, since the latter is likely to have a higher and faster economie and social rates ofretum.