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Regional State Budget Brief

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Regional State Budget Brief Budget Brief Afar Regional State 2007/08 – 2015/16 The purpose of this regional budget briefing note is to analyse the budget and expenditures that are recorded on-budget for the Amhara regional state so that it is easily understood by stakeholders, and to put forth key messages to inform policy and financial decision-making processes. The detailed analysis of the level and composition of public expenditure of selected social service sectors (education, health and nutrition, and water supply) are also presented. Audited financial accounts are presented for the years up to 2013/2014 while preliminary financial accounts have been made available for the 2014/2015 and 2015/2016 fiscal years. Key Messages • Vulnerability to climate change: Afar is one of Ethiopia’s drought prone regions with recurring major shocks and hazards that disrupt the livelihood of the population, over 90 per cent of whom are pastoralists. • Regional resource envelope: The region managed to finance only 17 per cent of its budget from its own regional revenue sources, which is one of the lowest rates in the country. On average, during the period 2007/08 to 2015/16, tax revenue accounted for more than 89 per cent of revenue generated within Afar. The structure of tax revenue in the region is dominated by direct tax, and its contribution to the total tax revenue collected rose from 54.4 per cent in 2007/08 to 63.7 per cent in 2015/16. Most of the regional revenue from direct tax is generated from payroll tax and taxes on rental income and profits of enterprises and individuals. On the other hand, regional revenue collected from non- tax sources, mainly generated from government services fees and charges, contribute less than 3 per cent to the regional budget. • Regional expenditure: Regional spending has increased eight times from ETB 0.4 billion in 2007/08 to about ETB 3.1 billion in 2015/16. In per capita terms, spending has increased from ETB 286 to ETB 1,722 in the respective years. In terms of allocation of expenditure across the broad categories, the largest share of the regional expenditure was allocated to finance economic services (38.2 per cent), followed by general services (31.4 per cent) and finally social services (30.4 per cent) for the last nine years. Close to 57 per cent of the budget was being spent on financing recurrent expenses while the share of capital expenditure in total regional spending has remained at less than 43 per cent. • Expenditure aligned to pro-poor sectors: The regional government has leveraged huge resources to boost spending in pro-poor sectors. In the past nine years, the Afar region has spent on average nearly 59.4 per cent of its budgetary resources on pro-poor sectors, though that it is lower than the national average of 66.4 per cent. • Access to education service: The pastoral/nomadic lifestyle of the Afar people, limited infrastructure development and investment in education, and the absence of a curriculum in the Afar language, have resulted in the region having one of the lowest primary/secondary school enrolment rates in Ethiopia. However, regional spending on education has increased six times from ETB 76 million in 2007/08 to about ETB 460 million in 2015/16, which is about 14.7 per cent of total regional expenditure in 2015/16. • Access to health service: The Afar region has an extremely poor health status compared to other regions in Ethiopia. Child mortality rates in the region are among the highest in Ethiopia. Even though there have been positive developments in reducing the level of malnutrition, the region still has the highest stunting, wasting and underweight rates in the country. Only 11.1 per cent of total regional expenditure went to health care in 2015/16. • Access to safe water and improved sanitation remain key challenges in Afar region: According to the 2011 DHS, about 61 per cent and 93 per cent of households in Afar region did not have access to safe drinking water and improved sanitation facilities, respectively. Regional spending on water supply and sanitation services has fluctuated over the years and amounted to 6.3 per cent of total regional expenditure in 2015/16. 1 1. Introduction Apart from crop failure and food shortages, the drought often aggravates the vulnerability of Socioeconomic Profile household livelihood through the destruction of The Afar regional state is situated in the north- livestock resources. As a result, there is extensive eastern part of Ethiopia and is one of the least need for emergency relief. For example, according developed of the country’s nine regions. It is also to the 2014 Ethiopia Mini Demographic and a major pastoralist region in the country. It has an Health Survey (EMDHS), nearly 65.6 per cent of estimated population of about 1.8 million people, rural households were chronically food deficient making up only 1.9 per cent of the Ethiopian and covered by the Productive Safety Net population (Table 1). Apart from a small Program (PSNP) in 2014. percentage of the population engaged in commerce or civil service in urban areas, over 90 Poverty is pervasive in the Afar region and higher per cent of the region’s population is classified as than the national average. In 2011, the Afar region pastoralists or agro-pastoralists, dependent on had a child poverty rate of 42 per cent.1 Based on animal husbandry for their livelihood. Other the 2016 Household Income and Consumption income generating activities in the region include Expenditure Survey (HICES), about 23.6 per cent crops, cotton and honey production. In recent of the population in the region were below the times, the number of agro-pastoralists has been nationally defined poverty line compared to 23.5 increasing due to the development of irrigation per cent for the entire country (Figure 1).2 infrastructures in the region. Poverty in the rural areas of Afar is more prevalent (26.5 per cent) than in the urban areas Table 1: Socioeconomic profile of Afar Region (10.6 per cent). However, the level of poverty in Indicators National Afar the region has significantly declined from 36.1 Total population, in million (CSA, 94.1 1.8 per cent in 2010/11 to 23.6 per cent in 2016. The 2017 projection) food poverty situation in the region is also critical. Total population under-5 years, in 13.3 0.23 The region has the highest percentage of people million (CSA, 2017 projection) Population growth rate (Census, 2.6 2.2 living in food poverty in Ethiopia, 28.3 per cent in 2007), % 2016. According to the 2016 EDHS, childhood Total fertility rate (EDHS, 2016), % 4.6 5.5 malnutrition (stunting) in the region is among the Coverage of PSNP, rural household 10.8 65.6 highest in the country (41 per cent in Afar (EDMHS, 2014), % compared to 38 per cent in the country). Figure 1: People living below the national poverty line (%) Environmental hazards, degradation of natural 40 38.7 resources and loss of biodiversity are common 38 challenges in the Afar region. The region is 33.6 36.6 29.6 classified as an arid agro-climate zone 30 39.2 36.1 32.2 24.8 characterized by very high temperatures, low 23.5 28.3 precipitation and harsh weather conditions. 23.6 Rainfall patterns are unreliable and perceived to 20 have changed, particularly in terms of timing and duration. As a result, Afar is a drought prone 10 region with the major shocks and hazards 2004/05 2010/11 2015/16 associated with the recurrence of drought Poverty headcount (National) Poverty headcount (Afar) Food poverty headcount (National) Food poverty headcount (Afar) disrupting the livelihood of the population. Source: National Planning Commission. September 2017. Ethiopia’s Progress towards Eradicating Poverty፡ an Interim Report on 2015/16 Poverty Analysis Study. 1 CSA, UNICEF and OPM. 2015. Child Well-Being in Ethiopia: Analysis of 2National Planning Commission. September 2017. Ethiopia’s Progress Child Poverty using the HCES and WMS 2011 Datasets. towards Eradicating Poverty፡ an Interim Report on 2015/16 Poverty Analysis Study. 2 Institutional Context and Budgetary Process The fiscal planning process in Afar starts at the sectoral level in consultation with woreda and The Afar region is comprised of five zones and 29 other stakeholders. The draft report is woredas (district). There are three tiers of consolidated by the regional Bureau of Finance governments: regional, woreda and kebele and Economic Development (BoFEC) and (community level administration with an average submitted to the regional cabinet. The regional of 500 households), each with their respective cabinet after discussing the budget with the legislative, executive and judicial organs. The various stakeholders submits it to the regional region has a zonal administration serving as a council for approval. The same process is bridge between the region and woreda. It receives undertaken at the woreda level. non-earmarked block grants from the federal government as a major source of its revenue and 2. Regional Resource Envelope this is coupled with the revenue generated internally. The region then allocates block grants The Afar region aggregate resource envelope is to regional sector bureaus, woredas and urban comprised of the federal block grant, regional administration offices through an evaluation of revenue, foreign loans and grants, food security their budget demand requests by using the grant and PSNP transfers from the federal Government, formula. federal ministry support directly to their respective sectors in the region, off-budget Table 2: Timeline for the Afar region annual budget and resources from local and international NGOs, and finance process community contributions.
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