Ministry of Finance
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MINISTRY OF FINANCE ANNUAL PERFORMANCE REPORT 2012/2013 FINANCIAL YEAR 1 TABLE OF CONTENTS VISION ................................................................................................................................3 MISSION STATEMENT ....................................................................................................3 VALUE STATEMENT .......................................................................................................3 GOALS AND OBJECTIVES ..............................................................................................3 FOREWORD……………………………………………………………………………...4 BUDGET & MONETARY AFFAIRS……….………………………...............................5 FISCAL & MONETARY AFFAIRS SECTION .................................................................7 CORPORATE SERVICES AND SUPPLY CHAIN MANAGEMENT …. ……………..13 PUBLIC ENTERPRISES UNIT ........................................................................................16 TREASURY AND STORES .............................................................................................23 INTERNAL AUDIT……………………………………………………………………..24 RECURRENT EXPENDITURE .......................................................................................27 Head 34 – Headquarters .....................................................................................................27 Head 35 – Treasury Department ........................................................................................28 Head 38 – Internal Audit....................................................................................................29 OFFICE OF THE AUDITOR GENERAL………………………………………………30 2 VISION To be a highly efficient and effective ministry that proactively addresses the needs of its stakeholders. MISSION STATEMENT To ensure macroeconomic stability in Swaziland by formulating and implementing fiscal and financial policies that optimize economic growth and improves the welfare of its citizens. VALUE STATEMENT The Ministry is guided by the following values: • Excellence (punctuality, good customer service and quality service delivery) • Professionalism (adherence to office etiquette and confidentiality) • Integrity (honesty and transparency) GOALS AND OBJECTIVES • To improve revenue collection through efficiency and diversification • To control public expenditure management through improved budgeting, internal control and monitoring • To facilitate privatization and improve supervision of public enterprises • To enhance service delivery and improve internal operations • To improve the regulatory framework for the financial sector including the non- bank financial sector • To regulate and control supply chain management practices (procurement, stores management and contract and supplier performance) • To facilitate timely payment of government financial obligations 3 1. FOREWORD After negotiating the worst of a severe liquidity crisis in 2010/11 and 2011/12, the Government has been offered a lifeline through higher Southern African Customs Union (SACU) receipts. Revenues from SACU increased by nearly 150% from E2.9 billion in 2011/12 to E7.1 billion in 2012/13. This has enabled the Government to declare a small surplus of less than 1% of Gross Domestic Product (GDP) while clearing arrears and replenishing reserves that were heavily depleted during the financial crisis. Passing a prudent and credible Budget for 2012/13 has allowed the Government to pay over E1 billion in arrears, clear the E660 million line of credit from the Central Bank and to increase reserves from 2.1 months of import cover in March 2012 to around 3.5 months at the end of January 2013. Revenues are broadly on track, despite slow collections on corporate and income taxes, thanks to the introduction of the Value Added Tax (VAT) in April 2012. This has increased collections by around E300 million compared to Sales Tax. Spending is broadly on target, with an expected savings forecast at around E500 million. Most will come from loan financed capital spending, which has been disbursed slowly and will not impact on the cash position. Around E100 million will come from recurrent, despite overspending on the Central Transport Administration (CTA) charges. The wage and hiring freeze was extended into 2012/13 to keep the wage bill under control. After a nominal decrease in 2011/12, the wage bill is expected to grow by E200 million in 2012/13. There have been other benefits too. Lower relative wages and depreciation in the Rand/Lilangeni have helped boost exports, which are up by 20% year on year based on preliminary figures from the Swaziland Revenue Authority (SRA). Despite the strong fiscal performance in 2012/13, challenges remain. Decisions to delay spending cuts in 2009/10 forced Government to increase domestic debt. As a result, domestic interest payments have increased from E37 million to nearly E142 million since 2010/11. The economy continues to under perform, with real growth forecast by the Central Bank at 0.7% in 2011 and 0.2% in 2012. We are also over-dependent on SACU to sustain high levels of spending, with the non-SACU deficit forecast at E6 billion (19% of GDP) in 2012/13 and E8 billion (24% of GDP) in 2013/14. These challenges highlight the improvements that are needed to make the economy more competitive, improve public finance management systems and policy, and to remain prudent during SACU windfalls. 4 2. BUDGET AND ECONOMIC AFFAIRS SECTION 2.1 Budget execution and reporting 2.1.1 The Ministry issued the fourth quarter warrant for the recurrent budget according to the Commitment Plan introduced at the beginning of the year. This tool helped in aligning quarterly releases to available resources to avoid the mismatch between cash and commitments. The section continues to monitor the cash-flow situation by reviewing all planned commitments before orders are generated by the Treasury Department. As a result, projections for the 2012/13 financial year showed an improvement during the course of the year. However, there was some pressure exerted by arrears within some ministries, especially on utilities, that resulted in front-loaded spending. 2.1.2 The Ministry was able to present the Mid-Year Budget Statement in November 2012. It demonstrated that the 2012/13 Budget was highly credible. Overall, revenue projections are on target. On the spending side, the Ministry is forecasting savings of around E500 million, mostly due to under spending on (mostly loan financed) capital projects whilst goods and services are anticipated to under spend by less than E100 million. Overspending was recorded on interest payments emanating from higher domestic debt obligations that were incurred in previous years. 2.1.3 In order to correct for arrears and higher interest payments, the Ministry of Finance presented a Supplementary Budget to Parliament. This supplementary budget redistributes the existing allocations in the 2012/13 Budget and will not increase overall spending. It is projected that by the end of the year, the stock of arrears would have been reduced to around E400 million. 2.1.4. The section also prepared the 2013/14 budget between October 2012 and February 2013. A budget of over E13 billion was presented to Parliament on the third week of February and is due for deliberations. 2.2 Strengthening of the Public Finance Management 2.2.1 The section was able to complete the drafting of the Public Finance Management (PFM) Bill within the fiscal year. This Bill is scheduled for presentation to Cabinet before the end of the financial year. During the course of the year, we were also able to consult Principal Secretaries and Parliament’s Finance Committee on the contents of the Bill. 2.2.2. The section has also partnered with the Treasury Department to review the Government’s chart of accounts in order to improve the basis for monitoring and reporting expenditure, to prepare for a new integrated financial management system, and to set a platform for moving to international accounting standards. 5 2.2.3 The section was also represented in the Payroll Audit Committee, led by the Ministry of Public Service. To date, the preparatory committee has finalized the payroll framework and concluded on the budget of the exercise. 2.3 International Co-operation 2.3.1 The Ministry of Finance has hosted missions from a number of donors during the course of 2012/13, including the World Bank (WB), International Monetary Fund (IMF), African Development Bank (AfDB) and European Investment Bank (EIB). 2.3.2 Two government projects are receiving financing from the World Bank: one on local government strengthening and one on the HIV/AIDS and TB interventions. Recent missions focused on the implementation of these two projects that have started receiving funding from the Bank. The Bank also delivered a final report on delivering better social safety nets, a programme led by the Deputy Prime Minister’s Office. 2.3.3 Two missions were received from the African Development Bank: one to conduct debt reconciliation and the other to participate in the LUSIP II donor’s conference. The first mission worked with both the Ministry of Finance and the Central Bank to reconcile existing loans from the African development Bank. The second mission followed-up on implementation of ongoing projects financed by the Bank, including the recruitment of a resident Public Finance Management Specialist, the Economic Diversification Study and the development of a Transport Master Plan. 2.3.4 The European Investment Bank visited Swaziland in January