Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Oil Revenue Management Workshop Quasi-Fiscal Expenditures and Compensation Mechanisms By Francisco Carneiro, The World Bank Luanda, 16-19 de Maio de 2006 Objectives of the Presentation Brief description of the public finance management system in Angola. Highlight what has been done and what remains to be done to strengthen it. Methodology Based on the PEMFAR of 2004-05 1. Assessment of the legal, institutional, and regulatory frameworks and comparison with actual practices. 2. Diagnosis and possible solutions based on existing discrepancies in the legalinstitutional frameworks and in the practical implementation of the legislation, rules and procedures. 3. Prioritization of the role of the Government in the reforms already adopted (e.g., PMFP, EMTA). Main Topics Covered in the PEMFAR Main Themes: 1. Fiscal Performance 2. Public Expenditure Management 3. Financial Accountability 4. Relation between Planning, Policies, and Budget 5. Credibility and Transparency in the Management of Public Funds Fiduciary Aspects: 1. Legal and institutional frameworks 2. Budget preparation 3. Budget execution and monitoring 4. Public Accounting 5. Internal control 6. External fiscal control 7. Legislative monitoring Institutional Weaknesses and Fiscal Position INSUFFICENT BUDGETARY FUNDING FISCAL INDISCIPLINE EXTRA-BUDGETARY EXPENDITURES; QUASIFISCAL DEFICITS; DISCREPANCIES In 2002, quasi-fiscal deficit of 6% of GDP and extrabudgetary expenditures of 14,7% of GDP. Two Systems of Public Dois Sistemas de Gastos Públicos Spending Conventional System Led by DNT. Transactions registered in the SIGFE. Non-Conventional System Compensation Mechanisms Tax Retentions, Profit Oil Treasury Operations Led by Sonangol. Transactions outside of SIGFE Oil-backed debts Other quasi-fiscal expenditures Responsible for some 11% of total expenditures in 2002. Negative Implications Informal mechanisms of compensation (MINFIN e Sonangol) Blurs transparency and accountability channels Weakens the budgetary process Creates uncertainty about the actual fiscal stance Impairs planning A Transitional Strategy Situation in 2004 · Co-existence of conventional and unconventional public spending system. · Compensation mechanism between Sonangol and MINFIN. · Growing fiduciary risk and weak supervision. · BNA not acting as monetary authority in control of foreign exchange · Ongoing reforms in Sonangol, MINFIN, and BNA. Transition Period · Identify expedient mechanisms. · Eliminate fuel price subsidies. · Identify Sonangol’s quasi-fiscal activities and transfer them to appropriate institutions. · Implement a debt management strategy, reduce the need for oil-backed loans. · Capacity building in MINFIN, MINPET, BNA. Arrival Point · Respect fully the Lei Quadro do Orçamento. · Respect fully the Lei Quadro do Banco Central. · Transfer Sonangol’s concessionaire functions to MINPET. The PEMFAR Recommendations to Restore “Normality” Pilar I • Strengthen the conventional system • Expand and strengthen the credibility and the effectiveness of the budget • Respect the Lei Quadro do Orçamento Pilar II • Gradual elimination of the non-conventional system • Reduce Sonangol’s treasury-like operations • Transfer these activities to MINFIN • Strengthen the monitoring role of the Tribunal of Accounts A Gradual Strategy Towards Normality Establish clear reporting mechanisms among Sonangol, MINFIN and BNA Strengthen internal control mechanisms (MINFIN e Sonangol) to ensure that treasury-like operations respect fiscal policy objectives and acceptal public finance practices Improve accounting procedures to allow DNC to receive the necessary information to prepare quarterly budget execution reports Government Actions in the Domain of: •Budget Preparation •Budget Execution •Public Accounting and Monitoring Government Actions to Strengthen the Budget Process Budget Preparation Improve capacity to make projections Adoption of AUPEC’s financial model Increased coordination between MINFINMAPESS to improve the capacity to estimate with more precision the government’s wage bill Government Actions to Strengthen the Budget Process Budget Execution Guarantee the consolidation of the CUT (Treasury’s Single Account) Follow the correct procedures to execute public expenditures (cabimentação, liquidação, pagamento) Train staff to operate SIGFE Government Actions to Strengthen the Budget Process Public Accounting and Monitoring Adoption of a double entries system (SIGFE) Training staff of the budgetary units Establish appropriate accounting mechanisms to administer the government’s non-financial assets Adoption of an accounting manual and a new Plan of Accounts There Are Still Important Steps To Be Taken Elimination of Quasi-Fiscal Expenditures Careful assessment of the racionality for the different categories of such expenditures. Eliminate those with weak justification. Elaborate an action plan to transfer those which are justifiable to the appropriate organizations in the Government. An Appropriate Fiscal Strategy Fiscal Policy and Debt Strategy: Adopt a sustainable and forward-looking fiscal policy (MTEF). Design a clear debt management strategy in which the need for oil-backed loans should be gradually reduced in a realistic timeframe. Improve Governance and Transparency Deal with Conflicts of Interest • The effectivness of Sonangol could be strengthened if there was a clear separation of its roles as (a) regulator; (b) commercial enterprise; and (c) social contributor. • Define a clear strategy to ring-fence and separate these functions and transfer them to the appropriate agencies/ministries within a reasonable timeframe. Phase Out Subsidies (World Bank – UK Study) Gradual, through periodic price adjustments. Generate substantial fiscal savings. Plan and implement parallel social safety net programs. Complicating Factors Sonangol Commercial Sonangol Concessionaire • • • • Regulatory functions Conflicts of interest Decisions about acquisitions (“Local Content”) Ring-fencing? Transfer to Ministry of Petroleum? • • • • • Commercial orientation Clarify functions as a state enterprise Focus on core activities Internal control and financial accountability External audits Issues to Address • • • Significant flows of public funds It is essential that these be integrated in the formal expenditure and revenue circuits of the Government Activities performed by Sonangol are clearly important, but it is necessary to increase the degree of oversight and control of the Government… A Reform Agenda A Scorecard to Assess Governance and Transparency in the Oil Sector Criteria What Has Been Done Required So Far Further Action Resolve conflict of interest potential (Sonangol as concessionaire) Sonangol is ring-fencing concessionaire activities Reconcile/include Sonangol financial flows with budget Sonangol ring-fencing and auditing quasi-fiscal activities. Own expenditures are still outside budget. Quasi-fiscal expenditures comply with budget procedures with a 90-day lag/ Annual industry cost and fiscal audits by experienced international auditors. Auditor reconciles tax filings with revised tax assessments and with payments made, and identifies discrepancies. Perform qualified, independent audit of payments made and revenues received Publication of audit results in accessible form Engage civil society in revenue management and transparency process Introduce clarity on legal, contractual and fiscal framework/procedures Develop time-bound, funded, action plan for implementation of transparency agenda Current detailed publication of company payments on MOF website. Audit results not yet published. No current engagement Legal drafts and texts difficult to access. DNI preparing tax manual No current plan, although individual components have been scheduled Subject to credible institutional capacity, transfer concessionaire role to Ministry of Petroleum Bring Sonangol quasi-fiscal and own expenditures into budget and comply with budget procedures without delays. Take notice and act according with the auditors’ recommendations. This will allow a comparison of payments made by industry and revenues received by the federal and provincial governments. Audit revenues received by MOF, Cabinda and Zaire; include Sonangol, and clear arrears. Add audit results. Improve accessibility of website. Consider broader media publication. Topical workshops to include civil society. Establish independent public information center Compile and publish legal texts, procedures. tax manual. Prepare and publish explicit plan