Does the Ethiopian budget encourage participation?

A preliminary assessment
By Elizabeth Mekonnen1

Introduction

The word ‘budget’ used to turn off social activists and development practitioners. Debate
on the budget or public finance in general was traditionally the domain of economists,
academics and researchers. Public expenditure analysis was mainly the work of
government officials and academics. In recent years, however, a few pioneering NGOs
have demonstrated how policy advocacy can be strengthened by understanding, analysing
and debating budgetary issues.

As civil society organisations have begun to engage in budget analysis, the absence of
timely and accurate information and the closed process of budget planning and
implementation have presented major challenges. Many governments in Africa do not
make budget information accessible and they have not put in place legislation that
guarantees access or broader stakeholder participation. The budget is not a subject of
media analysis and debate as it is in Europe and North America.

This paper attempts to examine whether the Ethiopian budget is transparent and
encourages the participation of civil society in the government’s budget decision-making.

The analytical framework adapted by the Institute for Democracy in South Africa
(IDASA), in conjunction with the International Budget Project (IBP), is used to guide the
review. The IDASA framework is based on the International Code on Fiscal
Transparency developed by the International Monetary Fund (IMF) and the Best Practice
Guidelines of the Organisation for Economic Co-operation and Development (OECD).
However, the IDASA framework has introduced a new dimension of effective citizens’
engagement in budgetary processes and a sharper focus on budget transparency rather
than fiscal transparency. The review focuses on five areas of transparency. These are a)
the legal framework; b) clarity of roles and responsibilities at national and regional
levels; c) public availability of budget information; d) independent checks and balances
in budget execution and government data; and e) budget decision-making processes.

The preliminary assessment draws heavily on desk reviews although a few interviews
were carried out with officials of the Ministry of Finance and Economic Development.
This article was prepared as an input in an exchange programme on the budget. The
assessment is far from comprehensive and complete. To inform its programmatic work
on child rights and economic policies, the African Child Policy Forum intends to carry
out comprehensive research on the budget.

Background

1
Elizabeth Mekennon is Manager of Technical Programmes within The African Child Policy Forum (ACPF)
Ethiopia has a diverse ethnic and cultural composition with more than 80 ethno-linguistic
groups. The political system is made up of a two-tiered parliament, comprising the House
of People’s Representatives and the House of Federation. For administrative purposes,
the country has a federal system of government composed of nine regional states and two
city administrations. The administrative hierarchy within a state is composed of a
regional capital, zones, weredas (districts) and kebeles. Kebeles are the lowest
administrative units.

Since 1997, the United States Agency for International Development (USAID) has been
supporting public financial reform and fiscal decentralisation in Ethiopia through Harvard
University’s Decentralization Support Activities (DSA) project. Support for public
finance management reform in regional states has been piloted since 2000. Currently,
reform is being implemented in the remaining regional state.

The Kennedy School of Government’s technical assistance has been instrumental in

helping to enhance government transparency and accountability in Ethiopia. The DSA
project supports the Ethiopian government’s Expenditure Management and Control
(EMC) sub-programme within the civil service reform programme, which is managed by
the Ministry of Finance and Economic Development. The Budget Information System
(BIS) and the Budget Disbursement and Accounts (BDA) initiative implemented with the
Ministry of Finance and Economic Development produced the national budget in a timely
manner. In 2004, the budget was ready six weeks ahead of deadline. When implemented
nationally, the BIS/BDA system will enable speedy consolidation of the national budget
and accounts, efficient tracking of sector expenditure and improved fiscal transparency
nationwide.

The United States government through USAID; Development Co-operation Ireland

(DCI); and the Netherlands’ Minister for Development Co-operation have joined forces
with the government of Ethiopia to support fiscal decentralisation in the country.

Does the Ethiopian budget encourage participation?

Major Findings

Legal framework for transparency

• Ethiopia has a well-established legal framework governing its budget system that
derives from the 1995 Constitution. The Constitution clearly defines the structures
and division of powers and responsibilities among the state organs and state
members.

• Article 12 (1) of the Constitution states that ‘the conduct of affairs of government
shall be transparent’. Sub Article 2 states that any public official or elected
representative is accountable for any failure in official duties.

• Furthermore, Article 29 of the Constitution stipulates the ‘right of freedom to

seek, receive and impart information and ideas of all kinds, regardless of frontiers,

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 either orally, in writing, or in print, in the form of art or through any media of his
choice’. This also includes freedom of the press and access to information of
public interest. Therefore, this Article provides a legal basis for individuals, civil
society organisations and other stakeholders to access information on budgets and
budget processes.

• The Constitution provides the framework for people’s participation through

electoral representation. The House of People’s Representatives is composed of
550 members and has clear authority over the approval of budget estimates and
expenditure.

• In general, the meetings of the House of People’s Representatives are public. The
law specifies the conditions and the process for having closed sessions; the House
can have a closed session if requested by the executive or members and when
supported by a decision of more than half the members.

• The legal framework has made provision for the legislature to maintain oversight
over the executive in the budget process. However, the practice in Ethiopia
remains to be studied.

• The Office of the federal Auditor General was established by Proclamation No.
68/1997. The Auditor General, upon the recommendation of the Prime Minister,
is appointed by the House of People’s Representatives and his or her office is
responsible for inspecting the accounts of all government bodies. Its task is to
ensure that expenditure is in accordance with the approved allocations for the
fiscal year and to submit reports to the House.

• The Federal Ethics and Anti-Corruption Commission was established by

Proclamation No. 235/2001 as an independent federal government body2. Its
functions are combating corruption, investigating and prosecuting. The
commission is accountable to the Prime Minister and headed by a commissioner
supported by a deputy commissioner. Both are appointed by the House of
People’s Representatives upon nomination by the Prime Minister.

2
A revised Proclamation, No 433/2005 issued on 2 February 2005

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 Clarity of roles and responsibilities

• The roles and responsibilities of different players (the executive, the Council of
Ministers, the legislature) in the budget process are clearly defined and entrenched
in the Constitution.

• The financial management function of government is regulated by the Federal

Government of Ethiopia Financial Administration Proclamation No. 57/1996. The
proclamation clearly outlines the budgetary process and prescribes clear authority
and relationships. Accordingly, the Ministry of Finance and Economic
Development has issued directives and regulations required for proper
implementation.

• The financial calendar was introduced in 2001. It clearly defines the financial
planning and budgeting cycle; establishes time frames for development, approval
and implementation; and defines institutional responsibilities at each level of
government.

• The Ministry of Finance and Economic Development makes macro-economic and

fiscal plans (forecasts) available to line ministries. It issues a budget guideline and
indicative-spending ceilings. Each spending agency submits its proposal to the
ministry and the overall budget envelope, which is finalised after the budget
hearing process, is submitted to the Council of Ministers for approval. The budget
is then presented to parliament and published.

• The Ministry of Finance and Economic Development co-ordinates donor funding

and matches resources with relevant projects. All donor funds are subject to the
approval of the legislature and to normal budget reporting.

• The role and responsibility of the Auditor General are protected by a strong legal
mandate and clear powers to investigate and report on all public accounts.
Similarly, the roles of and relationship between the internal audit departments of
line ministries and the Ministry of Finance and Economic Development’s
inspection department have been clarified, thus avoiding an overlap of
responsibility.

Public availability of information

• The Constitution grants access to public information, which presumably includes

budget information. However, the implementation of this right is mixed.
Information held by public authorities is not easily accessed by the public and
comprehensive guidance on how to obtain such information is limited.

• Very little budget information is made available during the budget drafting phase.
No pre-budget statement is released to the legislature or to the public for scrutiny
and debate.

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 • The federal budget for each fiscal year3 is published in the Federal Negarit
Gazeta. It shows allocations for recurrent expenditure, capital expenditure and
subsidy appropriation for the 11 federal states. It also indicates the source of the
funds (domestic revenue, external assistance and loans, or domestic borrowing)
and allocations by expenditure code, budget holder, function, head and sub-head.
Progress has been made in the presentation of a comprehensive and consolidated
budget. A number of off-budget funds that previously operated outside the main
budget have now been incorporated.

• Budget reporting is strictly regulated and the computerised system introduced by

the DSA project has been very helpful in collating data, and promoting efficiency
and transparency in the budget system.

• The DSA project has reduced the backlog in closing accounts. However, account
reporting since the 1999/2000 fiscal year is not yet available, thereby failing to
meet the international standard of transparency and accountability.

Independent checks and balances

• The accounts of public enterprises are audited by independent accounting firms

for the Auditor General, who then submits a report to the House of People’s
Representatives. However, there is no evidence of systematic follow-up of issues
raised by the Auditor General4. Lack of resources and limited understanding of
accountability among some members of the Budget and Finance Affairs
Committee is considered to be a barrier to effective oversight of budget
implementation5. Some reports indicate that more stringent mechanisms are
needed to ensure that public offices comply with requests and queries from the
Auditor General and with recommendation made by the House of People’s
Representatives regarding audit reports.

• The Federal Ethics and Anti-Corruption Commission is tasked with combating

corruption, investigating and prosecuting. A Special Procedure and Rules of
Evidence Proclamation, No. 434/2005, has been put in place to amend and
regulate the definition of corruption, as well as the procedural and evidential
provisions related to investigation and prosecution of corruption in accordance
with the penal code. The activities of the commission are made public and are
regularly published.

• Article 55 (17) of the Constitution gives the House of People’s Representatives

the power to call and question the Prime Minister and other federal officials and
investigate the executive’s conduct and the discharge of its responsibilities. The
Prime Minister and the Council of Ministers are responsible to the House of
3
The Ethiopian fiscal year runs from July 8 to July 7 of the following year
4
World Bank, 2003. p.26
5
Ibid. P. 33

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 People’s Representatives. The Prime Minister submits periodic reports on work
done as well as on plans and proposals. These reports are made public through the
media.

• Lack of adequate capacity in the legislature to research and analyse budget

information, particularly audit reports, seems apparent. Likewise civil society
organisations generally do not have the skills or the knowledge to engage
purposefully with the budget debate6, limiting the capacity of civil society to hold
the government accountable.

Budget decision-making processes

• According to Article 55 (10) of the Constitution, the House of People’s

Representatives can approve general economic, social and development policies
and strategies, and fiscal and monetary policy. It has the authority to levy taxes
and duties on revenue sources and to ratify the federal budget. Furthermore, it
approves the appointments of the Auditor General and other officials whose
appointments require approval by law (Article 55 (13)).

• The role of parliament in general, and the Budget and Finance Affairs Committee
in particular, is limited to ‘approving’ the budget prepared by the Ministry of
Finance and Economic Development and the Council of Ministers. The House of
People’s Representatives opens the budget to the public through the media.

• Recently, efforts have been made to open parliamentary debates to the public by
inviting civil society organisations to take part in parliamentary discussion
programmes when new legislation is being drafted. Apart from these measures,
however, efforts on the part of government agencies to engage the media and civil
society seem limited.

• Civil society in Ethiopia is not strong and only a few international non-
governmental organisations are engaged in budget work. Their participation
during budget hearings is limited to giving feedback or raising issues which may
not necessarily be incorporated. The degree and nature of participation by civil
society, as well as the impact of its participation, needs to be researched.

• On ‘budget day’, the government releases information on its economic policy,

fiscal framework and policy priorities for the upcoming year, estimated revenues
and expenditures, as well as information on the surplus/deficit.

• In general, budget planning is a closed process with no participation. The media

have limited access to information about upcoming budget discussions but civil
society or other external stakeholders have no information or access to

6
World Bank, 2003

6
 information until it has been adopted and published in the Federal Negarit
Gazeta.

Conclusion

• In general, the legislature is sound and the legal framework, comprising the
Constitution and other financial proclamations, clearly states the nature of the
budget system and the level of transparency.

• The introduction of the fiscal calendar has clarified the process of financial
planning and budgeting as well as the responsibilities of the various public
institutions at each level of government.

• The drafting of the budget is neither transparent nor open to the public. However,
the publication of the outcome (federal budget) is a step towards openness and
transparency.

• The legal provisions for access to budget information provide an opportunity for
civil society organisations to realise the right to engage in budget-related work
and understand the dynamics involved.

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 References

Federal Negarit Gazeta. 1995. The Federal Democratic Republic of Ethiopia. The
Constitution of the Federal Democratic Republic of Ethiopia, Proclamation No. 1/1995.

Federal Negarit Gazeta. 1996. The Federal Democratic Republic of Ethiopia. Federal
Government of Ethiopia Financial Administration, Proclamation No. 57/1996.

Federal Negarit Gazeta. 1997. The Federal Democratic Republic of Ethiopia. Council of
Ministers Regulations No. 17/1997.

Federal Negarit Gazeta. 1997. The Federal Democratic Republic of Ethiopia.

Establishment of the Office of the Federal Auditor General, Proclamation No. 68/1997.

Federal Negarit Gazeta. 2004. The Federal Democratic Republic of Ethiopia. The Federal
Government Budget, Proclamation No. 419/2004.

Federal Negarit Gazeta. 2005. The Federal Democratic Republic of Ethiopia.

Establishment of the Federal Ethics and Anti-Corruption Commission, Proclamation No.
433/2005.

Federal Negarit Gazeta. 2005. The Federal Democratic Republic of Ethiopia. Revised
Anti-Corruption Special Procedures and Rules of Evidence Proclamation, No 434/2005.

Peterson, S. 2000. ‘Financial Reform in a Devolved African Country: Lessons from

Ethiopia’. Development Discussion Paper No.766, June.

World Bank. 2003. Ethiopia Country Financial Accountability Assessment, Vol. 1: Main
Report. June 17.
http://www-
wds.worldbank.org/servlet/WDSContentServer.WDSP/IB/2003/09/30/000160