The programmes included must in the first place be financed and administrative steps for their execution must be taken • . This otage involves principp.lly the central adminstrations, at i t .is st_ill the prepara.tory phas_e of the execution process.
66
-Section I - Administrative problems linked to finance These can be classified under three main headings:
Which administrative body is responsible for financing the plan?
What relationships does it enjoy with other interested ad-ministrations?
What adminstrative procedures should be used for the inclusion in the annual budget of the pr~grammes covering several years of the plan period?
These three problems arise for the various types of finance, i.e.
capital or investment budge~, recurrent budget, extra-budgetary finance.
It is usual for the plan to determine the amount of publio
investment required for the achievement of the proposed tarcets. Rowever, governmental or parliamentary approval of these amounts does not in
itaelf imply the opening of the relevant credita. Consequently,
financing the plan is a stage in its execution and involves administrative problems.
(a) Capital or investment budgets
In a growing numbsr of countries, because of the spe~ial nature of the expenditure involved, separate investment budgets are now compiled in addition to the operational budget. This distinction makes it possible to separate the annual operational expenditure for the publio services from.the non-recurrent expenditure for publio economie and sooial investments. I t also makes possible the allocation of certain sources of inoome (foreign aid, taxes, export or import levies, etc.) for
investment purposes, a fact wrich ensures their being used for increasing the economie potential of the country, and not for compensating
budgetary deficits. Furthermore, an equipmertt budget is better euited to the execution of investment ~rogrammee covering several budgetary
periode. •
•
often meats with the resistance of various ministries &ttempting to retain part of their autonomy.
Frequently, severa! phases can be distinguished in the procedure of financing the plan. These include the authorization of progTammes, which enables the administration to undertake programmes covering
• several years; the oblit~ation of credits, by which the annual allrcations for authorized programmes is fixed; payment credits (including brought-forward credits) which set out the total sums to be paid by the State for a budgetary period (foreeast credits and credits actually utilized)~
This distinction is made more particularly in the French-speaking countries of Africa •.
The capital budget may be approved simultaneously with the operational budget or bef~re i t (as in India). It may also be voted on in several
parts, when prObTarnme-laws (dealing with undertakings covering severa!
years) are submitted to parliament for specifie operations.
Responsibility for decisions on financing the plan devolves on ministers of finance (most ~equentlj} or on the central planning organ
1
(Senegal). The organe of execution may make proposais, e.g. in the Sudan.
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68-However, the vital problem is to organize the relationship behreen the :Minis ter of Finance and the central planning organ.
In the first case, the planning organ must be given the possibility of ensuring that the capital budget corresponds to the plan's objectives.
In fact, the main èoncern of ministries of finance is to keep public expenditure within the limita of the available resources and it is far more difficult to repress State operational expenditure than. investment expenditure. Therefore, it is vital for the planning organ to be able to participate in the preparation of the capital budget in arder to safeguard the interests of the plan and if necessary to bring about arbitration at government leval.
In the second case, a procedure for possible political arbitration between the planning organ and the ministry of finance is necessary.
In France, the procedure for financing the plan was amended in 1962 for thé purpose of creating a closer link between preparation and execution.
Instead of being a mere frame of reference for the various ministries which negotiate singly with the rninistry of finance for the preparation of their annual equipment budgets, the plan is now divided up among operational instalments, in which the location, priorities, methode of finance and four-year distribution of payrnents due for the operations to be undertaken are defined f.or every bran ch of ac ti vi ty and each of the 21 programme regions.
These directives, drawn up jointly by the Planning Commission and the ministry of finance, have been circulated to every minister and every
regional authority, together with a request for detailèd operational
projects for their specifie sectors and regions and to undertake a regional synthesis of public (national, regional an.d local) and private investments, at the same time a·:sessing their influence on development and employment prospects. This step towards regionalization, still limited at the
execution stage of planning, brought out the difficulties of co-ordinating
69
-the activity of -the Planning Commission and -the ministry of finance with the technical rninistries on the one hand and with regional organe (regional prefects, co-ordinators, departmental ministerial delegates) on the ether.
The shortage of staff trained for the preparation of detailed projects and the laok of regional statistical inf:ormation have alao hindered the synohronization of these tasks.
In ~~orocoo, the plan is not sub-divided into anrtual investment programmes. Public investrnents are fixed annually by the Capital Budget Division. In principle, the planning organ etudies every project before the insertion in the budget but, in fact, it possesses too few rneans of assessment and too many pr.;jects are submitted to it, in relation to the limited tirne available and the lack of trained staff. Moreover, many projects do not seem to have any clear connexion with the plan, while the projects prepared by the ministries are insufficiently studied from the angle of their economie implications.
Finally, the credits included in the capital budget are not always used in practice, as sorne projects are not carried out. However, this is a problem of execution rather than finance.
(b) Recurrent budgets
In sorne oountries, there are not special capital budgets, and the procedure that has to be followed is to insert the anticipated expenditure for the plan into the recurrent budget in the form of annual instalments.
The
UAR
provides an example of the relationship existing between the financial authorities and the plan in such cases. In view of the role assigned to _the public sector in the execution of the plan, the annual budget is prepared in the light of the forecasts and projections inciuded in the annual plans. These plans must be approved in preliminary form before the preparation of the budget. If necessary, miner details of the planare amended, so as to cornply with the financial provisions of the budget.
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70-The procedure used for this is in the forrn of negotiatio~s betwe~n the Ministry of the Treasury, which ·compiles the national budget, and the
planning comrnittee, which prepares the five-year plan and the annual investment programme • . In arder to facilitate this administrative co-ordi;n.ation, planning and finance were entrusted to the same Minister as a result of the ministerial reforrn of 30 September 1962o .
r
o) The relationship bet\\een capi tal._:;;;:an=d_,;:;.o.._p.;::.e.=,r.;;a;..::t..=i;..::o;::n:.::a:.::l~l;.:::X:.P;.::B::.:n:.:::d:.::i:..:t:.:::U:.::r~e In all cases, investment expenditure has an effect on operatio~al·budgets:
(i) In the sphere of social planning, the building of a school or hospital involves new operational expenditure, which ia rarely provided for in the plan.
In sorne cases, large-scale investments are included in the plan becauae they are to be financed through foreign aid. However, addi tional o:;;m:·3.~~-"';,al expendi ture, to be niet by the State, has often rise::1 1d thin t~; :- or three budgetary periods to an amount equal to the original investment.
(ii) Even in the case of economie planning, recurrent expendi-ture is not always estimated in advanceo This is the case more particularly for road building, which involves annual maintenance costs, and of harbour construction, which in-volves not bnly maintenance costs but also a(!..ditional.
investment (hoisting equipmeat, otc.)o
Foreign aid in the form of equipment received by the .!!EEer Vol ta also .raised considerable problems: the supply of public works and transport
equipment raised the national budget by·l2 percent, because of the consequent expenditure for fuel, staff, spare parts, maintenance, etc •• ·
•
•
71
-The special case of the African States, in vrhich the plans provide for lar:_ce-scale investments, al though only a limi ted amount of finan.ce ia available, brings out the importance of 1D1owing as accurately as possible the effects of investment on public finance.
Cprrently, there is concern in Cameroon on the extent of the re-current expenditure involved in the large-scale programme of social
l.
investment (health, education) to be undertaken. It is proposed to
calculate the average ratio between social investment expenditure and the op:rational costs involved, and to study ways and means of reducing such costs to a minimum.
;J:n l.ndia, the rel a tionshi
. .
p bet1·men investmen t expendi ture and addi t-iona.l ,operational costs is systematically studied throùgh a unifiedfinanc~~-_procedure, i.e. cu.rrent expenditure for all investment operations is included:in the capital budget for the first five years of execution and it is only at the beginning of the sixth ye• ar that these operational expenses are irtcluded in the ordinary budget •
. (d) Extra-budgetary finance
For sorne specifie programmes included in the plan, extra-budgetary finance is provided for .. ei ther public, private, foreign or a cornbination of several of these .• .
In many countries; public and semi-public bodies have been established for the financing of su ch programmes, e. g. developmen t banks for general or specifie purposes (at,Ticultural, industrial, crafts, etc.), development corporations, boards, etc ••
In all such cases, the methods of financing these institutions must
be ·provided for and the 1-r~y in which the financial methods insti tuted are
applied in practice must be co~tl;'olled •
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72-In Morocco, two separate institutions have been established:
~. an industrial holdings and survey bureau, wi th State capital, responsible for examining industrial projects and financing them on a long-term basis, with the co-operation of private . capital;
- ·a national economie development bank, 60 per cent of the
capital of which is.Moroccan and 40 percent foreign (banks and . ins~rance companie,s), 1ihich supplies medium or long-term
. . . . . . . .
credits beyonci the .scope of private banks to public or private enterprises working for the achievement of the planning tarèet9.
In Senegal, . the S.enegalese Development Bank is controlled by the Prime .Ninister, w~o is: a member of its Board of Directors. Apart from
. .
supp1ying co-opera~ive credits, i ts main functions are to mobilize all financial .resources for external and internal
in~: e~.tme~t· (th~
PlanningMihistry. _acts through i ts agency) • I t is therefore the financing tool for the plan execution.
In former British East Africa, the African Development Fund, which ob,tains i ts capital mainly from certain marketing b'èiards, was èstablished in 1952 to finance public projects Ù1 the Federation of :;jast Africa (Uganda
included). Its resources stem entirèly from expert levies. In ether countries wi th marketing boards (Nigeria, Ghana, etc.), a large part of' their· ~esoUrceà are devoted to public investments •
. . The main problem arising at this stage is to reconcile the desire for
a unified 3tate financial policy (the principle of budget universality) with the financing of specifie programmes •
. • . The. all~cation of certain financial rescurces to the plan is· a
guarantee that it will be implemented. However, it also eritails the risk of dissipa ting the State' s financi.al means. The minis tries of financ·e, traditionally responsible for safeguarding such unity, must be associated
•
•
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73
-' . '
wi th the decisions and management of such bodies and of th~ ,!)lanning organ.
This procedure contribut~s to overcoming the disadvantages res~lting from the existence of a large number of auton.~mous uni ta by providing permanent execution must·be·defined and oo-ordination established between the central planning organ and the administrative divisions charged with execution&
by making use of the existing administrative structure.· • In. this case, the.responsibilities of programme management .~re
entrusted to the various ministries, in the light .of. their
establish as close liaison as possible between the preparation and execution of the plan •
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74-by establishing new administrative machinery, where the tasks involved in execution cannat be performed by existing services.
This procedure has the advantage of facilitating the implement-ation of the plan, but the numerical expansion of new units also raises difficult problems of co-ordination.
In countries where planning is based on projects by the various ministries, the former of the apove solutions is generally adopted.
In the Sudan, no capital budget or development plan existed before 1946 •. In those circumstances, development projects were undèrtaken by publio enterprises or ministries with the use of loans contracted in London. or from budgetary revenue.
The establishment of development organs and the appearance of a capital expenditure. budget have not altered the execution procedure; for development programmes, which continue to be carried out by the ministerial departments, the provincial authorities or the public boards which initibte them and succeed in having them incorporated in the developcent budget.
However, the Development Division of the Hinistry of Finance may assist the execution bodies in thé~r budgetary task and the officiais responsible for the achievement of programmes by transmitting to them the government directives on project execution. The form of execution is flexible since the organs responsible for progTamme execution are:
either the ministries.and their local representatives, with the provincial council acting as co.;..ordinator.· (Th~re is sorne degTee of decentralizationin the case of primary and secondary education and for certain heal th matt ers.)
or committees or·public boards responsible for.the.execution of indi.Vidual projects. Sorne of these have their
OWn
operat-ional budgets, but the funds for capital expènditure are specifically allocated by the government.•
•
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75-On the other hand, there is a notioeable tendenoy to establish new autonomous bodies when the plan provj.des for new activi ties or structural reforma, e.go regional development boards, trade developJilent boards,
oommunity or rural development divisions, co-operative orga;niza.tio!ls, agricultural reform and irrigation boards, land development service, etc ••
. In auch cases, the co-ordination of such organe with the planning organ and with the existing miriistries must be reoonciled with the autonomy of management that governs their efficienoy. The State administrative machine
is a whole and the addition of new services necessitates reviewing the mutual relations of all its component parts.