Regional States Call Subsidiary Budget Allocation Unfair

Addis Fortune (Addis Ababa)

Aderajew Asfaw

4 April 2011

The information put into the subsidy budget formula to determine the allocation of funds for regional governments was inaccurate, resulting in the unfair allocation of funds, regional state administrations and ministries complained.

The complaints were raised at a meeting on Thursday, March 31, 2011, by the House of Federations (HoF) to discuss the collection of data for the next three years, starting from 2012.

The discussions included the limitations of the subsidy formula that has been in use for the past two years and is set to be used again this year. The discussions were aimed at keeping the strong aspects of the formula and finding solutions for the weak points.

The latest parameter with which to calculate regional budgets was introduced after the HoF ratified it with 387 votes for and one abstention at the second extraordinary session of the House, in May 2009.

Like the previous formula, the new one will be based on revenues and expenditures, according to a media brief by the HoF.

A total of 80pc of a regional government’s budget is allocated by the federal government through the formula based on the expenditure needs and revenues raising the potential of regions.

By using the formula, developing regional states, such as Afar, Somali, Benishangul-Gumuz, and Gambella, have been guaranteed budget allocations in addition to their share of the total subsidy. The specific amount allocated to the subsidiary budget is around one per cent of the total annual federal budget.

Oromia, Amhara, and Southern regional states had in the past been granted 32.5pc, 23.3pc and 19.9pc, respectively; more than one third of the total of the budget subsidy.

The information that is used to apportion funds is based on census results, sample studies, and administrative information. A census is conducted every 10 years, while sample tax studies are done by the Central Statistics Authority (CSA) at intervals ranging from every month to every five years.

The formula does not rely on accurate information and this has made the budget allocations unfair, its critics said.

“The formula is good, but the information used to calculate the budget is not fair,” Moges Balcha, director of Revenues for Southern Regional State, told Fortune. “There is a huge use of root crops in the Southern region. Yet, these roots have not been valued, affecting the region’s share of revenues.”

Some of the regions have deliberately altered the information they submit to allow them a larger share than they need or deserve, according to Moges. Others have submitted information that will benefit them, but not deliberately, the director claimed.

“The information has to be very carefully handled,” he said.

Administrative information from ministries and regions is often different and contradictory to what the CSA collected, according to Samia Zekaria, general director of the CSA. The difference comes from ministries and other administrative bodies collecting the information from the supply side, while the CSA collects its from the demand side, she claimed.

In previous years, the information the CSA collected on education was the same as that of the Ministry of Education (MoE); however, this year it is contradicting and the CSA and MoE are dealing with it, Samia told the HoF.

“If we are speaking of the same thing, why is our information so different or even contradictory, irrespective of what sources or methodology are used?” Fuad Ibrahim, state minister of education, responded.

Problems also arise because of differences during regional budget closing periods, and stakeholders’ low understanding of their responsibility to obtain information in a timely manner, according to the media brief.

Representatives of the various regions have each been given the form they must fill out to provide information for the formula. The form was also a subject of debate at the meeting.

The form’s output will only show the actual revenues of each region, argued a representative of the revenues bureau for Tigray Regional State during the meeting. It will not show their potential and this does not encourage the regions to increase their revenues, he said.

The region is working to cover 38pc of its budget by itself, he claimed.

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