“Public administration innovation: budget,

accounting and control systems. Europe and the Mediterranean: comparison and

avenues for interaction”

Arco Felice, 1-2 december 2004

Created and donated by Lello Esposito, an important

Neapolitan artist

Part II : The Mediterranean Case

http://www.caimed.org

INDEX

Abstract I-VIII INDEX…………………………………………………………………...1-2

Lebanon…………………………………………………………3 Le budget public au Liban Issam Sleiman Elaboration, exécution et contrôle de l’execution l’exécution…………… 4 1 Elaboration du budget de l’Etat………………....………………………. 4 2. Exécution du budget…………………...………………………............. 6 3. Le contrôle de l’exécution du budget…………....................................... 8 The public budget and accounting system in Lebanon, M. Marseglia 1. The Budget process…………………………........................................ 11 2. Operations of the Central Governement……………………................. 12 3. Tax Reform…………………………………………………………… 15 4. Control mechanism within the executive branch……………………... 19 5. Evaluations and considerations……………………………………….. 22 6. Budget and Accounting reform……………………………………….. 24 7. Overview on Lebanese decentralization………………………………. 26 8. Conclusions and reflections…………………………………………… 29 Republic of Macedonia (FYRM)……………………………. 34 Accounting, Auditing and Budgeting system, S. Maurano 1. The EU framework……………………………………………………. 35 2. Legal Framework ……………………………………………………. 36 3. Budgeting Process ……………………………………………………. 36 4. Accountinng and Audit System ……………………………………… 38 5. Combating Corrution ………………………………………………… 44 6. Deconcetration and Decentralization :………………………………... 44

Marocco…............................................................................... 46 Budget public, comptabilité et système de contrôle. Organisation budgétaire et reddition des comptes au Maroc : contraintes et perspectives, Prof. Mohamed Harakat ……………………………………………….... 47

Le systeme budgetaire au Maroc, M. Maggio 1. Introduction ………………………………...……………………..….. 50 2. La politique budgetaire ……………………………………………….. 51 3. La modernisation du systeme fiscal ……...…………………………... 55 4. Structure des budgets des collectives ……………………………........ 58

SERBIA.................................................................................. 67 Public finances in the Republic of Serbia, Biljana Blagojevic ……... 68

TUNISIA................................................................................ 71 Public Budget Accountancy and Financial Control System in Tunisia, Sami Mhadi…………………………….................................................... 72 1. Public Budget Description……..……………………………………... 73 2. Public Control System in Tunisia ……………………………………. 74 Le Cadre Budgetaire en Tunisie, M. Capossella ………………………… 78 1. Le systeme financier et le reformes structurelles ……………………... 79 2. Le developpement regional …………………………………………… 84 3. Le developpement municipal et urbain……...………………………… 90 4. Le Budget et l’emploi …………………………………………………. 93

TURKEY……………............................................................ 100

Public Budget, Accountancy and control Systems in Turkey, Prof. Ferhat Emil………................................................................................... 101

1. Introduction ……...………………………………………………...… 102 2. Existing Budget, accountancy and Control Systems............................. 102 3. The Weakness of the Current System ………………………………...110 Public Budget for results, I. R. S. Pacifico…………………………….. 115 1. Introduction about Turkish Economy ……………………………….. 115 2. An outlook about financial situation in Turkey ……………………... 118 3. Budget for results …………………………………………………… 119 4. Results on Foreign Direct Investments ……………………………… 122 5. Conclusions- Fiscal Labelling ……………………………………….. 123

I

Workshop report 1 – 2 December

Day 1, 1 December

Introduction to the theme and reference context

There are marked differences between Great Britain, Italy, Germany, Spain and France in terms of the relationships between internal institutions and the level of maturity in budget reform. The only country that currently operates an accruals basis method with wide cost control is Great Britain, while Spain and Germany still use a cash basis accounting method, while at a local level, France and Italy use a double entry accounting system. These differences include, and can partly explain, the two different conceptions of the State and the Public Administration that still coexist in Europe, a Rechtsstaat, where the interlocutor is the citizen as the holder of rights and a State based on the concept of Public Interest that relates to the citizen as a client.

Budget Dynamics in Italy

During its history as a republic, Italy has seen four reforms in the accounting and financial system, in the years 1964, 1978, 1988 and1997. The first reform was realised in the years of the first centre-left governments and was strongly influenced by the impetus of a country and politics that tried to respond to changes taking place, while the second was born in a climate of grave crisis in the old institutional systems, following important reforms such as the introduction of the Regions system into the Italian administration, and the foundation of the National Health Service. The reform of 1988 was launched in the climate of the five party system and lead above all to reform in the mechanisms of financial law, which were increasingly perceived by the ruling class as a bugbear. The response was to do away with the content of the financial laws, in favour of related measures in which control and taxation were extremely uncertain. This resulted in the paradox of manoeuvres that were planned, but never put into action. The whole debate in those years, and those immediately prior, came to prominence once more at the beginning to the ‘90s when, following the political crisis brought about by the wave of arrests for bribes charges, a new look at the question of accounting became necessary.

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In 1992 the Amato government set itself the ambitious aim of thoroughly reforming the state. The delegate law no. 421-92, known as the “Amato law”, was passed, which aimed to reform four vital nerve centres of the State:

• Public employment • Local Bodies • Social Security • The Health System

The great reform of local bodies was implemented by legislative decree 77-1995, social security reform concluded in 1995 with the “Dini” law, while reform of the National Health Service transformed the old local health units into companies known as local health agencies, which were to be run on the basis of management criteria. Public employment reform took place with legislative decree no. 29-1993. The aim of the decree was to put into act a radical division between public administration and politics, which up to that point had permeated every area of Public Administration. That law was based on the French administration model. The consequence of that law was the latest budget reform. The central idea of budget reform was to make a distinction between a budget that served political decision makers and a budget aimed at improving administrative management. The law that derived from this, the 24-1997, known as the “Ciampi law”, tried to simplify items and reduce parliament’s interference in the development of budgets. This is how the distinction between functions and basic forecast units was born. The final improvement should have been made by using the notion of a Cost Centre, based on that of private accounting. In 2005 there will be new and more thorough revision, which should then result in the instigation of further budget reform. Financial Reform in Local Administrations The OECD has identified four models of relationship between the state and local bodies: Centralised (Greece, Spain, Great Britain and Holland), Formalised Cooperation (Belgium, Denmark, Norway, Germany, Spain and Austria) an Absence of Coordination (Switzerland, the USA and Canada) and Central Regulation (France, Italy, Finland and Portugal). Although the organic budget law of 1997 has simplified the system by making it more efficient, accounting systems still have to harmonise between different levels of government and give them more flexibility.

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ISTAT has produced an index capable of measuring the level of fiscal autonomy of local bodies. The formula of the index is FA= (FR+LR)/TR where FA equals fiscal autonomy, FR is financial revenue, LR is local revenue and TR is total revenue. Results have shown that municipalities’ level of local autonomy is equal to 66.2% while that of the provinces is equal to 48.6%. It is to be hoped that reform in the internal stability pact will improve planning, consultation and incentives and will allow the centralised model to become a model of formalised cooperation. Budget reform in Great Britain In the UK, the Treasury has administrative control over spending. Parliament has no power to add items of spending other than those presented by the executive, but can only stop measures. Budget reform in the UK has given increased responsibility to managers rather than to politicians. The whole responsibility for implementing budget policy lies with single departments. The department Accounting Officer is the manager responsible and can also be called to appear before parliament. The Officer is nominated by the Treasury Ministry and answers to it. Great Britain has concentrated on reform aimed at the concept of accruals basis method, which must be accompanied by a budget that gives results. The main problems posed by the system in Great Britain are:

• An excessive number of targets, which generates confusion. • Management is bound to indicators that only evaluate performance. • There is an excess of auditing

The example of Germany The budget reform, whose fundamental principles are contained in Charter 10 of the constitution, was realised in 1998. The German budget contains no indication of the political programmes of the executive, but has the sole function of controlling the use and investment of resources. Accounts are classified by functions and targets. The previous budget system was orientated towards input and cash based accounting. The aim of the reform is to invert this system, orienting the budget towards, efficiency, targets and results. The reform will take place in each Länder according to the timescale and particular characteristics of each one. Some Länder, such as Baviera, will be

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merely observers of the reform, without having decided yet whether to put it into action. There is a political audit and control system, with a Parliamentary Audit Committee and external financial control by the Supreme Audit Institution, together with internal control within Departments. The whole process of budget reform will be completely operative by 2015. Spain In Spanish accounting management, a fundamental element is that of consultation. There has long been a Fiscal Policy Council for this reason. The role of control is operated within the same Finance Ministry, by an organism that is similar to the Italian State Accountancy Board. An incentive system is important in order to promote collaboration between local bodies and internal innovation. Budget policy in Spain is based on a general law of budgetary stability (LGEP) and a supplementary organic law to the LGEP (LOC) of December 2001. The main principles of LGEP are budgetary stability, multi-annuality, transparency and efficiency. There is bilateral negotiation between central government and autonomous regional government. Public accounting has developed in three stages:

- Administrative accounting (1812-1977) - Implementation of a double entry system - Developing an IT system and managerial logic.

The reform is aimed at: - Modernisation through the two-party system

- Developing an integrated accounting system through SICO Information System on Budget and Accounting)

- A National Accounting Code - The CANOA project (Normalised Analytic Accounting in

Autonomous Bodies) for autonomous bodies Governance and budget reform in France Two great changes in the State occurred in the twenty years after the reform of 1982, with the introduction of the regions and in 2001 with the approval of LOLF, which will be operative from January 1, 2006.

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In 2003, the revision of the constitution recognised the regions at the same levels as other local bodies and sanctioned the financial autonomy of local bodies. The aim of this series of modifications was to radically change the state, putting the concept of ‘citizen’ side by side with that of ‘client’. There are two types of logic in the accounting system, that of management and that of politics. LOLF had the dual aim of increasing the power of Parliament and increasing the quality of management. LOLF has in fact increased Parliamentary power on the one hand, while offering public managers credits functionality. This is a movement away from cash accounting to company accounting. The Audit Court will be given the responsibility of certifying the State budget. The French administration is structured on four levels: State, Regions, Departments and Councils The regions were created with law 213 of 1982 and were recognised at a local level alongside other local communities with the constitutional reform of 2003. The main instrument that puts the subsidiarity principle into action in France is the Contract of State-Regions Plan, drawn up as part of a National Plan. The accounting instructions for local communities are M14 for the councils, M52 for departments and M71 for the regions (which come into force on 1 January, 2005, and 2006 for overseas regions). The instructions for accounting are founded on principles of sincerity, independence and prudence. Control a posteriori is the responsibility of the Prefect and of the Regional Court of Accounts. The main instrument for the regulation of transfers from the State to local bodies is the ”enveloppe normée”, reformed with the finance laws of 2004. Regional budgets for 2004 showed a rise of 7% compared to 2003.

VI

2nd Day 2 December Development, execution and control of the Lebanon budget The Lebanese public accounting system is based on the French model. The legislative sources are the Constitution, the internal Parliamentary regulations, the public accounting laws and the Audit Court laws. The budget programme is elaborated by the Ministry of Finance. The proposals are then submitted to the Council of Ministers. The Chamber cannot alter the credits proposed during the debating session, but can afterwards approve laws that may entail new expenditures. The Lebanese budget is implemented in accordance with the French model: there is a sharp distinction between the parties who determine the execution of revenues and expenditure, but cannot liquidate revenue and cannot allocate and liquidate expenditure, and those who control the disbursement of expenditure, maintain funds, and keep accounts. Control at administrative level is held by the Ministry of Finance and exercised by the Inspectorate General of Finances, which reports to the Ministry of Finance. The Audit Court exercises its traditional ex ante and ex post control functions Tax decentralisation in Lebanon The 1997 law of fiscal decentralisation increased spending efficiency, financial stability and made a contribution towards the alleviation of poverty. Administrative and financial control of the municipalities is exercised by the national government through a series of agencies. In order to improve relations between the tax authorities and the public, the CRO (Citizen Reception Offices) were created, numbering 29. An internet website was also created as part of the CRO programme, facilitating communication between the centre, the citizenry and the municipalities (www.moim.gov.lb). Budget reform in Tunisia The Budget organic law dates from May 2004, while the public accounting code dates from 1996, replacing the 1968 one. The principles are those of the French system, so there is a rigid distinction between managers and public accounting staff. As in France, a single party system operates.

VII

The public control system, based on the one instituted in 1912, has only an ex ante control function. It was modified in 1989, extending its scope also to ex post control and rendering preliminary control more flexible. Concomitant control is exercised by the public service general control, the public property general control, the ministerial inspectorates, and the Higher Committee of the financial and administrative control. The latter body performs a coordinating role for the other control committees. The Audit Court, created in 1959, performs ex post control and is very similar to its French counterpart, even though some elements are based on the English model. It is certified to control the state of political party finances. Another reform is currently under way that will make the budget more results orientated and will introduce accruals based accounting. Regional development is a strategic choice even if little progress has so far been made. A development boost is anticipated in 2004 with the aim of strengthening local structures and at the same time improving efficiency. The Regional Development Programme is considered an instrument for strengthening local development through the consolidation of infrastructures, the creation of employment and the improvement of living conditions. Financial decentralisation has been promoted through the creation of the Fund for Loans and Support for Local Authorities. Budget reform in Morocco One of the foundations of the Moroccan accounting system is provided by the Declaration of The Rights of Man of 1789, and its concept of equality, which translates as equality in terms of taxes. The financial organic law dates from 1998. There are various forms of control: preliminary, safeguard controls, external controls exercised by the IGF and the IGAT, and a control exercised on the local entities by the Regional Audit Courts, based on the French model. All financial administration is based on the French model. The accounting system is characterised by flow and not assets, and by control and not valuation. One of the essential issues is the reduction of the overly extended powers of the Ministry of Finance and the increase of the parliament’s informative capacity.

VIII

The new approach to budget policy is based on the globalisation of credits, the consolidation of deconcentration and the fostering of dialogue between the state and local actors. The new approach in budget preparation is based on multi-year programming and on Integrated Expenditure Management (GID). A programme of tax simplification and harmonisation is also being prepared. It should culminate in the creation of the General Tax Code. Budget Reform in Serbia-Montenegro At the end of the 90s, the situation in Serbia was characterised by unreliability and poor transparency in the accounts system. More than 40% of revenues came through “special” measures brought into being for specific purposes at the government’s discretion, and not subject to any controls. A clear and comprehensive reform of the system was necessary to change the situation, and in the 2002 the new budget legislation was duly passed. The national budget comprises the budgets of the central government, the regions and the public bodies. There is a single system of accounting and classification of entries, and a system allowing communication between the various levels of budget was created. The biggest innovation was the creation of the Treasury. It unified public revenue collection in a single Treasury account, abolishing all other forms of collection. All budget transactions must now be recorded in the Treasury master book. The Treasury is also responsible for financial planning and authorisation for acquisitions. Financial control is delegated to each ministry’s service and the internal inspection service of the Ministry of Finance. The reform is recent and still in progress. The successive part should focus on the strengthening of the local authorities’ financial autonomy. Budget reform in Macedonia Macedonia is a young republic with a diverse range of problems. It is bringing its legislation into line with Europe with the eventual objective of association with Europe. The most serious problems involve corruption, incomplete decentralisation and economic frailty. The financial actors are the Ministry of Finance, the Sobranie and the State Audit Office (SAO).

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Macedonia’s reform processes have been supported by USAID from the UK Department for International Development and by the World Bank. The budget reform aspires to the standards established by the OECD, by the EU in the Association Treaty and Pact for Stability and Growth, by the IASC, INTOSAI and EUROSAI. The IASC standards have been in force since 1998. The State Audit Office (SAO) is the supreme external control institution. However the SAO does not have total independence in exercising this role due to staffing levels. The approach to budget is still top-down, links between the various levels of budget are still insufficient, and corruption is still too widespread. In 2003 the government launched a strategy to combat endemic corruption in the system. Elaboration, implementation and control of the budget in Turkey The current public budget system was developed from the 1927 version, and is based on the French model. It concentrates on strict control of the spending phase. The Ministry of Finance is the main actor in the elaboration phase. The responsibilities of the State Planning Organisation, created in 1971, includes the identification of macroeconomic goals. The Treasury absorbs 50% of the central budget for the payment of interest and for transfers Deputies cannot introduce modifications during the voting phase. There is an ex ante and an ex post control. The Revision and final reports are entrusted to the Ministry of Finance. The system is a mixture of cash and accruals based accounting. Ex ante control is exercised by the Ministry of Finance and the expenditure agencies. External controls are exercised by the Audit Court, which performs judicial and certifying controls. 2005 will herald the new law on resources management and control. The Audit Court’s control will be extended to bodies that were previously beyond its influence; this will pose a serious problem regarding the means at its disposal. The reform of the accounting system has been prompted both by internal and external pressures. In the latter case these came from the IMF, the World Bank and the European Union, following the 2001 economic crisis. Internally, the cue for change came from civil society, public officials and

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from entrepreneurs. The economic restructuring goals set out in the April 2001 economic reform programme were successfully realised in 2002. The 2003 budget reform law ought to be operational from 2005. This reform calls for, among other things, the introduction of a multi-year programme.

3

Lebanon

Le budget public au Liban.

Issam SLEIMAN

Professeur à la faculté de droit et de science politique de l’Université Libanaise.

Ex-conseiller du Premier Ministre.

Elaboration, exécution et contrôle de l’exécution.

L’Elaboration, l’exécution et le contrôle de l’exécution du budget de l’Etat libanais obéissent à des règles précises dictées par la Constitution, le règlement interne du Parlement ,la loi de la Comptabilité publique et la loi de la Cour des comptes.

1 –Elaboration du budget de l’Etat

1.1 Le rôle du ministre des finances

• Le ministre des finances rassemble les différents projets concernant les dépenses présentées par les différents ministres, et leur ajoute le projet des dépenses du ministère des finances.

• Le ministre des finances fait des prévisions sur les recettes de l’année suivante

• Le ministre des finances doit comparer les dépenses et les recettes prévues et élaborer le projet du budget après avoir établi l’équilibre entre les dépenses et les recettes.Si les crédits dépassent les recettes prévues, il doit proposer ce qu’il trouve convenable parmi les mesures suivantes.

• abaissement des charges, trouver de nouvelles resources Le projet du budget autorise la perception des ressources publiques, il prévoit le montant des recettes, fixe les plafonds de grandes catégories de dépenses et determine les données générales de l’équilibre.

1.2 Role du Conseil des ministres Le ministre des finances soumet au Conseil des ministres, avant le premier

septembre, le projet du budget avec un rapport concernant les crédits demandés et le décalage entre les chiffres de ce projet et le budget de l’année en cours.

L’article 83 de la Constitution dispose que “chaque année, au début de la session d’octobre, le Gouvernement soumet à la Chambre des députés, pour examen et approbation, le budget général des recettes et des dépenses de l’Etat pour l’année suivante. Le budget est voté article par article”.

L’article 32 de la Constitution dispose que” la session d’octobre s’ouvre le premier mardi qui suit le 15 octobre. Elle est consacrée avant tout aux traveaux, à

5

la discution et au vote du budget. Elle dure jusquà la fin de l’année.”Des explications relatives au projet du budget doivent être formulées dans un rapport présenté par le ministre des finances au Parlement avant le premier novembre. Ce rapport doit contenir des explications détaillées portant sur la situation économique et financière du pays, ainsi que sur les principes adoptés par le Gouvernement dans l’élaboration du budget( art. 18 de la loi de la comptabilité publique.)

1.3 La discution et le vote du budget au Parlement

Le projet de loi du budget est étudié tout d’abord par la commission parlementaire des finances et du budget. Chaque commission parlementaire peut envoyer un représentant pour assister aux reunions de la commission des finances et du budget à titre consultatif,dans le but d’exposer le point de vue de la commission à qui il appartient à propos du projet du budget. La commission des finances et du budget a le droit de modifier le projet du budget à l’exeption de l’accroissement des dépenses globales, comme elle a le droit de demander aux ministres de lui délivrer les informations et les statistiques nécessaries. Elle a le droit aussi de convoquer le ministre des finances et les autres ministres concernés pour participer à ses réunions. C’est pourquoi on peut dire que l’étude du projet du budget se fait en réalité dans la commission des finances et du budget et non pas dans l’Assemblée. La discussion du budget à l’Assemblée sera ouverte par le discours du ministre des finances expliquant la politique financière du gouvernement et les motifs qui ont conduit à l’adoption du projet du budget tel qu’il a été proposé par le gouvernement. A son tour le rapporteur de la commission des finances et du budget analyse le projet du budget et justifie les amendements adoptés par cette commission. Les députés discutent le projet du budget et profitent de l’occasion pour examiner les politiques du gouvernement dans différents domains. La chamber discute en détail les dépenses puis les recettes. D’après l’article 84 de la Constitution, la Chambre ne peut, au cours de la discussion du budget et des projets de loi portant ouverture de crédits supplémentaires ou extraordinaires, relever les crédits proposés dans le projet du budget ou dans les projets sus- indiqués ni par voie d’amendement, ni par voie de propositions indépendantes. Mais cette discussion, une fois terminée, l’Assemblée peut alors voter des lois comportant des dépenses nouvelles. Aucun crédit extraordinaire ne peut être ouvert que par une loi spéciale. Néanmoins losque des circonstances imprévues rendent nécessaries des dépenses urgentes, le président de la République peut, par décret pris sur l’avis conforme du Conseil des ministres, ouvrir des crédits extraordinaires qui ne dépassent pas une limite fixée dans le budget. Les mesures, ainsi édictées, doivent être soumises à La ratification de la Chambre, à la première session qui suit (art. 85 de la Constitution). Il est interdit au Parlement de supprimer une administration ou un poste, établis par une loi en vigueur, en supprimant des crédits dans le budget. La suppression d’une administration ou d’un poste ne peut se faire que par une loi

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spéciale (art. 119 du Réglement interne de la Chambre). Cela permet de freiner la tendance à recourir aux lois du budget pour introduire des dispositions dont l’objet n’a rien à voir avec le budget. Le budget est voté au Parlement article par article(art. 83 de la Constitution). Il doit être adopté avant l’expiration de la session d’octobre c’est-à-dire avant 31 décembre . Si la Chambre des députés n’a pas définitivement statué sur le projet du budget avant l’expiration de la session consacrée à l’examen du budget, le président de la République convoquera l’Assemblée à une session extraordinaire expirant fin janvier pour poursuivre la discussion du budget. Si à la fin de cette session extraordinaire l’Assemblée n’a pas définitivement statué sur le budget, le Conseil des ministres pourra prendre une décision permettant au président de la République, par décret, de rendre le projet du budget exécutoire dans la forme où il a été présenté à la Chambre. Le Conseil des ministres ne pourra exercer cette faculté que si le projet du budget a été présenté à la Chambre 15 jours au moins avant le commencement de la session d’octobre. Au cours de ladite session extraordinaire, les impots, contributions, taxes, droits et autres recettes ,continuent d’être perçus comme précédemment. Les dépenses du mois du janvier sont engagées sur la base du douzième provisoire de l’exercice precédent, majorées des crédits additionnels permanents et diminuées des crédits permanents retirés (art. 86 de la Constitution). D’après l’article 87 de la Constitution, le compte definitif de l’administration des finances pour l’exercice clos doit être soumis à la Chambre et approuvé avant la promulgation du budget du deuxième exercice après celui auquel le compte se réfère.

2 Exécution du budget L’exécution du budget constitue la mise en oeuvre pratique des autorisations continues dans la loi du budget. Elle repose au Liban sur un partage des tâches fondé sur le principe de la séparation des ordonnateurs et des comptables. Cette règle ne fait que traduire la répartition des missions nécessaries tant à l’exécution des dépenses qu’au recouvrement des recettes. Les operations d’exécution du budget sont ainsi divisées en deux phases distinctes, confiées à deux cadres d’agents publics indépendants l’un de l’autre, les ordonnateurs et les comptables. L’ordonnateur qui donne l’ordre de payer la dette est le ministre des finances, mais d’après l’article 79 de la loi de la comptabilité publique, le chef du service des dépenses au ministère des finances donne au nom du ministre des finances l’ordre de payement. L’ordonnateur de payement exerce dans le droit libanais un contrôle essentiel sur l’agent chargé de liquider les dépenses, pour s’assurer que l’opération de dépense est conforme aux lois et aux réglement en vigueur.

2.1 Les ordonnateurs

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Les ordonnateurs prescrivent l’exécution des recettes et des dépenses. Ils ont le droit de liquider les recettes et d’engager et liquider les dépenses.En matière de recettes, toute créance liquidée fait l’objet d’un ordre de recette constitué par un titre de perception émis par l’ordonnateur. Pour les dépenses, l’ordonnancement des dépenses est l’acte administratif donnant l’ordre de payer la dette.

2.2 Les comptables

Le principe de séparation des ordonnateurs et des comptables, et l’incompatibilité entre les deux fonctions qui en découle, conduisent à confier exclusivement aux comptables les opérations suivantes: recouvrement des recettes, contrôle de payement des dépenses, garde et conservation des fonds et valeurs appartenant ou confiés aux organismes publics, maniement des fonds, et mouvements des comptes de disponibilité, tenue de la comptabilité et conservatiopn des pièces justificatives des opérations et des documents de comptabilité.

2.3 – L’exécution des recettes L’exécution des recettes se fait par l’intermédiaire de deux opérations. La première est assurée par des ordonnateurs qui imposent les impôts en fonction des lois et établissent les ordonnances concernant ces impôts. La deuxième est assurée par les comptables et consiste à percevoir les impôts et les taxes et les enregistrer dans le registre des recettes en fonction des ordonnances relatives aux impôts et aux taxes.

2.4 – L’exécution des dépenses La disponibilité des crédits dans le budget ne conduit pas nécessairement à la dépense des sommes correspondantes. La dépense doit assurer les droits acquis des tiers ayant accompli un service en fonction d’un engagement de dépense. Cette opération d’exécution obeit à deux règles principales:

• Le ministre des finances, responsible directement de la bonne gestion des fonds publics, a le droit d’exercer un contrôle sur les différents ministres au cours des étapes concernant l’engagement, l’ordonnancement et le payement.

• La séparation absolue entre la fonction administrative des ordonnateurs et celle des comptables.

L’exécution des dépenses passe par une phase administrative et une phase comptable

2.4.1 – La phase administrative

Elle se divise en trois temps: l’engagement, la liquidation et l’ordonnancement

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• L’engagement: c’est l’acte ou le fait matériel par lequel une personne (l’Etat) peut créer à son encontre une obligation de laquelle resultera une charge budgétaire. Au Liban cet engagement est exercé par le ministre compétent dans chaque ministère, et précèdé d’un contrôle exercé par le contrôleur de l’engagement des dépenses

• La liquidation: C’est une opération postérieure à l’engagement ayant pour objet de vérifier la réalité de la dette et d’arrêter le montant de la dépense.

• L’ordonnancement: C’est l’autorisation ou l’ordre de payer donnée par l’autorité administrative compétente. Au Liban cette opération est de la compétence du directeur de l’ordonnancement au ministère des finances.

2.4.2 – La phase comptable Elle est dictée par l’article 89 de la loi de la comptabilité publique. Cette phase correspond au payement de la créance. C’est l’opération matérielle de payement qui est l’acte par lequel la personne publique, en l’occurrence l’Etat, se libère de sa dette. Elle est assurée par le comptable. Toutefois cette opération n’a lieu que si les trois opérations précédentes ont toutes été effectuées.

3– Le contrôle de l’exécution du budget

3.1 – Les contrôles administratifs Les contrôles administratifs sont exercés sur les recettes et les dépenses par des fonctionnaires specialisés. Il y a à coté des organes d’autocontrôle du ministère des finances des organs externes indépendants dudit ministère: l’Inspection générale des finances. 3.1.1 – Le contrôle du ministère des finances : Le contrôle sur l’exécution des recettes: Ce contrôle s’exerce au niveau des deux phases de la liquidation et de recouvrement de l’impôt. Deux organismes ont été créés à cet effet. Le premier est rattaché à la direction des recettes et vérifie tous les rôles établis par les contrôleurs d’impôts avant qu’ils ne soient mis en recouvrement, c’est le contrôle de constatation. Le deuxième est rattaché à la direction du Trésor et a pour tâche de contrôler l’activité des agents de recouvrement. Le contrôle sur l’exécution des dépenses : On a institué plusieurs séries de contrôle dont les uns sont à priori et les autres à postériori. Le plus important de ces contrôles est celui exercé par le contrôleur de l’engagement des dépenses. Le but de ce contrôle est de saisir l’acte de dépense avant qu’il ne soit accompli et de prévenir toute irrègularité. C’est donc un contôle préventif. Le contrôleur de l’engagement des dépenses vérifie d’une part l’existence d’un crédit disponible, et d’autre part la conformité de la formalité aux lois et règlements en vigueur.

3.1.2 - Le contrôle de l’Inspection générale des finances

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L’Inspection générale des finances fait partie de l’Inspection générale établie en 1959. La caractéristique essentielle de l’Inspection générale des finances est qu’elle est indépendante de tous les ministères. Elle relève de l’Inspection centrale rattachée directement à la présidence du Conseil des ministres. L’Inspection générale exerce son pouvoir sur toutes les administrations, sur tous les établissements publics et sur toutes les municipalités et sur leurs agents. Ce pouvoir s’étend à la magistrature, à l’armée, aux forces de sécurité et à l’Université libanaise en matière financière seulement. L’Inspection générale des finances vérifie les contrôles particulièrement la manière selon laquelle les lois et les règlements sont executes, la délimitation des impôts, taxes et autres recettes et leur perception, le paiement des dépenses et la gestion des fonds publics.

3.1.3 – Le contrôle administrative de la Cour des Comptes :

• Un contrôle à priori: sur les opérations de recettes et de dépenses qui dépassent certaines limites;

• Un contrôle à posteriori

3.2 – Le contrôle juridictionnel de la Cour des Comptes En plus du contrôle à priori et à postériori, la Cour des Comptes exerce un contrôle juridictionnel.La Cour exerce ses attributions juridictionnelles en sa qualité de tribunal composé d’un président et des conseillers. Ce contrôle comprend:

• Le contrôle des comptes présentées par les comptables publics • Le contrôle des fonctionnaires qui gèrent les fonds publics

3.3 – Le contrôle parlementaire:

Le pouvoir legislatif qui approuve le budget qui est, d’après la loi de la comptabilité publique, “un acte légistif dans lequel sont prévues et autorisées les dépenses et les recettes de l’Etat pour l’année à venir et par lequel sont autorisées les perceptions et les dépenses”, a le droit de contrôler son exécution.

En vertu de l’article 87 de la Constitution “ le compte definitif de l’administration des finances pour l’exercice clos doit être soumis à la Chambre et approuver avant la promulgation du budget du deuxième exercice après auquel le coimpte se réfère”.

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Le compte definitif constate les montants définitifs des recettes et des dépenses et etablit le montant du deficit ou de l’exédent qui en résulte .Les parlementaires peuvent ainsi verifier que l’exécution du budget était conforme à l’autorisation qu’ils avaient donnée au Gouvernement.La discution du projet de loi concernant le compte definitif doit être une occasion pour le Parlement d’apprécier la portée des autorisations budgétaires face aux réalisations, mais souvent le Parlement approuve le compte definitif sans discution.

D’autre part, le Parlement peut contrôler l’exécution du budget par l’intermédiaire des questions posées au Gouvernement ou par la formation des commissions parlementaires d’enquête portant sur les questions financières.

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THE PUBLIC BUDGET AND ACCOUNTING SYSTEM IN LEBANON

1 The Budget Process The budget preparation and adoption process is governed by relevant

provisions of the Constitution and the Law on Public Accounting1. The laws governing the budget preparation provide that the proposed budget for each year is prepared by the Ministry of Finance (after review of the estimates prepared by the various Ministries) and submitted to the Council of Ministers by September 1 of the preceding year. The proposed budget, after review by the Council of Ministers, must then be forwarded to Parliament by October 15 for review and approval.

The budget is then approved by Parliament, through specific voting for each article in the budget, after review and debate during a general session to be held between October 15 and December 31.

If Parliament fails to approve a budget, the President of the Republic, with the approval of the Prime Minister, must convene a special session of Parliament to be held no later than January 31 of the relevant year. If no budget is approved during the special session, the President of the Republic has the power, after approval of the Council of Ministers, to adopt the budget submitted to Parliament by the Council of Ministers (Articles 86 of the Lebanese Constitution and 120 of Parliament's internal regulations).

Article 86. - (As modified by the constitutional law of 17 October 1927, - article 48)

If the Chamber of Deputies has not definitively dealt with the draft project before the expiry of the session devoted to the examination of the budget, the President of the Republic shall summon the Assembly to an extraordinary session expiring at the end of January to proceed with the budget debate; if at the end of that extraordinary session the budget has not been finalised, the President of the Republic may, by decree passed on the favourable advice of the Council of Ministers, make the draft budget executory in the form in which it was tabled before the Chamber.

The President may not exercise this power except if the draft budget has been tabled before the Chamber at least fifteen days before the beginning of the session.

In the course of that extraordinary session, taxes, contributions, duties, fees and other revenue continue to be levied as before.

1 Implemented by Decree No. 14969 dated December 30, 1963, as amended.

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The expenditures of the month of January are initiated on the basis of the provisional twelfth of the preceding financial year, increased by permanent additional credits and reduced by the permanent credits withdrawn.

Once the budget law is enacted, the Ministry of Finance becomes responsible for its execution.

2 Operations of the Central Government Prior to the conflict, Lebanon seldom ran budget deficits. The conflict,

especially from the early 1980s, led to widespread tax evasion and non-payment of public utility bills. Revenues dropped to very low levels and at one time were not sufficient to cover interest payments on the Republic's internal debt. The Republic resorted to increasing its borrowings from Banque du Liban, leading to monetary expansion.

Analysis of central Government finances must take account of the following: • The CDR, Council of Development and Reconstruction, is a public

institution which is distinct from any ministry within the central Government. Its financial situation is not wholly consolidated in the public accounts. CDR expenditures on reconstruction programme s are financed partly by grants and borrowings from international development agencies and other overseas entities and partly by appropriations from the budget. These appropriations are included as capital expenditures in the public accounts, but expenditures financed by borrowings as described above are not included in the public accounts (but are included in foreign debt figures). However, interest and principal in respect of these borrowings are included in the national budget for the year in which it is scheduled to be repaid. The borrowings are obligations of the Republic. Foreign indebtedness incurred by the CDR is approved by the Government and by Parliament.

• The budget consists of the general budget and of three annex budgets, relating to Post and Telecommunications, National Lottery and the Grain & Sugar Beet Office. Information included in this report relates only to the general budget. Projected deficits or surpluses in the annex budgets are accounted for in the general budget. Actual results for each year also reflect the deficit or surplus of each annex budget.

• Beginning with the 1997 budget, a new classification, which is substantially in accordance with the guidelines and definitions set forth in the IMF's manual of "Government Finance Statistics", was adopted. The Government believes that this classification makes it easier to conduct a proper analysis of the policy, administration and monitoring phases of the budget. The classification used for prior years did not provide a sufficient basis for proper revenue and expenditure management and did not appropriately identify line item expenditures. Therefore, a detailed breakdown of revenues and expenditures is not provided for those years.

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• Beginning with the 1998 Budget, presentation of fiscal data distinguishes between budget and treasury operations. Treasury revenues consist primarily of tax and other revenues collected by the Central Government for the account of municipalities and security and other guarantee-type deposits with the Ministry of Finance. Treasury expenditures consist primarily of transfers to municipalities, payments on account of previous years budgets and financial support to EDL (Electricité du Liban). The 1999 Budget and subsequent Budgets also provide for a different breakdown of current and capital expenditures to permit line-by-line comparison of actual results to budget and estimated treasury operations. The following table shows a summary of central Government operations for

the period from 1999 to 2003:

Revenues (in billion of Lebanese Pounds) 1999 2000 2001 2002 2003

I. Tax revenues ......... 3,350 2,936 2,961 3,995 4,502 II. Non-tax

revenues........................... 1,116 1,252 1,302 1,390 1,717 III. Budget

revenues (I+II) ................ 4,466 4,188 4,263 5,385 6,219 IV. Treasury

revenues........................... 407 561 386 445 436 V. Total revenues

(III+IV)............................ 4,873 4,749 4,649 5,830 6,654 Expenditures I. Current

expenditures.................... 7,093 7,968 7,930 8,321 8,820 Personnel cost(1) .... 2,760 2,908 2,992 3,008 3,078 Debt service .......... 3,624 4,197 4,312 4,622 4,874 Other current ......... 709 863 626 691 868

II. Capital expenditures(2) ................ 1,097 900 325 610 713

III. Other treasury expenditures.................... 265 1,754 624 1,208 1,058

IV. Total expenditures (3) (4) ............ 8,454 10,622 8,879 10,139 10,592

Total Deficit .............. 3,582 5,873 4,230 4,308 3,938

Budget balance...... (2,734) (4,199) (3,459) (3,101) (2,591) Budgetary

revenues....................... 4,466 4,188 4,289 5,385 6,219

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Budgetary expenditures................. 7,200 (8,387) (7,748) 8,487 8,810

Net treasury operations .................... (849) (1,673) (771) (1,207) (1,347)

Treasury receipts... 407 561 359 445 436 Treasury outlays.... 1,254 (2,234) (1,130) 1,652 1,783

% of GDP

Total deficit (5) ...... 14.36% 23.76% 16.84% 16.53% 14.52%Total revenues (5) ... 19.53% 19.21% 18.51% 22.36% 24.53%Total

expenditures(5).............. 33.89% 42.97% 35.35% 38.89% 39.05%Nominal GDP (in

billions of Lebanese Pounds)(6) ..................... 24,945 24,721 25,115 26,068 27,121 _________

Source: Ministry of Finance/Banque du Liban. Notes:

(1) Including wage and salary related payments, e.g. pensions to civil servants and end of service indemnities to government employees

(2) Expenditure does not include capital expenditures of CDR financed with foreign funds. This expenditure LL 456 billion in 1999, LL 310 billion in 2000, LL 292 billion in 2001, LL 195 million in 2002 and LL 201 million in 2003.

(3) On May 27, 1999, Parliament ratified a law regarding the settlement of arrears. This law allows the Government to issue debt (in local and/or foreign currency up to a ceiling of LL 1,242 billion in principal amount to settle arrears incurred during previous years. These arrears are not included in this table which reflects expenditures on a cash basis.

(4) Prior to 2002, the breakdown of expenditures was based on estimates derived from the reconciliation of payment order data and cash payment data. Beginning 2002, the breakdown of expenditures has been based exclusively on cash payment data. Certain treasury expenditures are classified as current or capital expenditures and the balance of treasury expenditures appear under other treasury expenditures.

(5) Not including CDR capital expenditures financed externally (referred to in note (2) above).

(6) Estimates.

The main sources of budget revenues are income taxes (including, from February 2003, tax on interest income), capital gains taxes, taxes on property, domestic taxes on goods and services (including, from February 2002, VAT

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revenues), taxes on international trade and transactions and other tax revenues. Non-tax revenues consist principally of entrepreneurial and property income, such as surplus transfers from the Post and Telecommunications and other annex budgets and distributions and remittances, on account of profits or otherwise, from Banque du Liban and in respect of the Republic's ownership of various assets. Additionally, non-tax revenues include administrative fees and charges, fines and confiscated assets.

2.1 Total revenues The total revenues (including revenues from treasury operations) declined

between 1999 and 2001, from LL 4,873 billion in 1999 to LL 4,649 billion in 2001, but increased to LL 5,830 billion in 2002 and to LL 6,654 billion in 2003. As a percentage of GDP, total revenues decreased from 19.53 per cent. in 1999, 18.51 per cent. in 2001 but increased to 22.36 per cent. in 2002 and again in 2003 to 24.53 per cent.

2.2 Budget expenditures The Budget expenditures are divided into current expenditures and capital

expenditures. Current expenditures consist primarily of debt service in respect of public debt and personnel costs, including salaries, wages and end of service indemnities and other retirement benefits, while the capital expenditures consist in acquisitions of land, buildings, for reconstruction of roads, ports, airports. Moreover they include also construction in progress, maintenance and other expenditure related to fixed capital Assets.

Total expenditures (including revenues from treasury operations but excluding foreign financed CDR expenditures) increased from LL 8,454 billion in 1999 to LL 10,622 billion in 2000, decreased in 2001 to LL 8,879 billion and increased in 2002 to LL 10,139 billion and again in 2003 to LL 10,592 billion. Debt servicing expenditures rose significantly between 1999 and 2003, increasing from LL 3,624 billion in 1999 to LL 4,874 billion in 2003. Personnel costs also rose, although more moderately, over the period, from LL 2,760 billion in 1999 to LL 3,078 billion in 2003.

3 Tax Reform The tax system in the Republic has been subject to sweeping reforms. During

the period of conflict, the record of revenue collection was extremely poor, with widespread tax evasion and weak administration. A new Income Tax Law was promulgated on December 30, 1993 (Law No. 282 published in the Official Gazette No. 1 dated January 6, 1994) and became effective as of the beginning of fiscal year 1994. This law amended the old income tax law and introduced new provisions aimed at reducing tax rates, improving tax implementation and receipts and stimulating private investment. This law was modified in certain respects in the

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1999 Budget, which increased income tax rates and dividend tax rates. Currently, the maximum income tax rate for individuals is 21 per cent. (excluding certain categories of professionals) and for corporations is 15 per cent. The 2000 Budget reduced tax on dividends to 5 per cent. (from 10 per cent.) for companies listed on the Beirut Stock Exchange. Capital gains on disposal of shares for individuals and for marketable securities are currently generally exempt from tax.

In December 2001, Parliament adopted the VAT law, which became effective on February 1, 2002. VAT is levied at a single rate of 10 per cent. on all goods and services, subject to certain exemptions, such as medical and educational services. In addition to its direct impact on revenues, implementation of the VAT is expected to result in enhanced collection of income tax.

In January 2003, Parliament adopted the 2003 Budget Law, pursuant to which, among other things, interest paid in respect of bonds issued by the Lebanese Republic after January 31, 2003 is subject to withholding tax at the rate of five per cent.

As regards more detailed the Value added Tax, The MOF has succeeded in launching the process of modernizing the tax system and has been working on widening the tax base since 1997. Within the framework of implementing international and regional trade obligations (WTO, EU, Arab Trade Union, etc.), the Government introduced the Value Added Tax (VAT) as an alternative broad base tax on consumption. Since its inception, the VAT has become an important measure in generating additional revenues. Following its approval by the Council of Ministers on June 7, 2001, the VAT law was ratified by Parliament on December 5, 2001 and was implemented on February 1, 2002. The VAT has the following characteristics:

1. Single rate of 10% 2. Minimum mandatory registration threshold is L.L. 225 million for 20042,

with no lower limit on optional registration 3. Exports are zero-rated. 4. Exemption categories are: health, Education, books, magazines and

newspapers, Raw agricultural products, Essential foods, including wheat and sugar, Activities of not-for-profit organizations, Collective transport, Banking and financial services, Insurance, Sale and letting of

built properties, except commercial letting of built properties, Bets, lotteries and other forms of gambling.

5. Special refund schemes are applicable to: Tourists, Foreign businesses, diplomats and international organizations, newly registered persons on their previous investments (still under study), Some of the exempt sectors (i.e.: health, education, public transportation etc.), used goods jewellery

6. The administration of the VAT is located at the MOF new premises, and by law, the VAT is a Directorate reporting to the Director General of Finance.

There are a lot OBJECTIVES concerning introduction of this tax, they are: a. Registration

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As a result of continuously lowering the threshold, a total of 3,444 new registrants were added to the VAT database. As of the 31st of March, 2004, the number of taxpayers stood at 15,119 (12,146 mandatory registrations, & 2,973 optional registrations).

b. Communication In order to help taxpayers and consumers understand VAT characteristics and

mechanisms, multiple means of communication are used: An information centre, including hotlines, is continuously answering inquiries

of taxpayers. The VAT website is constantly being updated to provide taxpayers with the latest developments on the VAT front. In addition, a quarterly bulletin is being issued every quarter and sent to registered taxpayers with the quarterly returns, in order to provide them with information such as the latest amendments and introductions to the law, and updates on tax policies. Also, presentations are still being organized, based on individual demand, and are mainly targeted to the business sectors as well as universities and NGOs.

c. VAT administration The VAT directorate is divided into 4 departments and 12 sections, employing

197 public servants, and 20 support staff members. In addition, a team of consultants, and a senior Canadian expert, are providing support to the VAT administration.

d. Training In addition to the 140 days training sessions on various topics ranging from

VAT laws to computer software applications, during May of 2003, all VAT employees participated in a two week training program presented by a Canadian expert on areas such as risk analysis, selection criteria, and audit techniques. Also, seven VAT employees were sent to France for training sessions covering areas including VAT audit, collection, and communication.

The VAT Directorate is constantly recruiting new, junior employees. These new employees are undergoing a training program that covers various MOF general and VAT specific subjects, extending over a period of 8 weeks, before beginning work.

e. Automation Below is a summary of the automated functionalities that were added to

SIGTAS (Development and installation of a computerized tax administration system) in order to support VAT requirements:

Maintenance of registration requests Maintenance of deregistration requests Maintenance of non-residents and agents requests Maintenance of special schemes Issuing of periodic declarations Issuing of payment vouchers Maintenance of declarations Maintenance of payment vouchers Reconciliation

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Maintenance of refund requests Processing of refunds Audit Handling of delinquency / non-compliance Collection Electronic data processing with cashiering and accounting department in MoF

Time sheet by function / task / unit type for each employee Build up of a database of taxpayers' profile based on audit, compliance, status,

etc. Archiving (scanning, on-line image viewing) Reports / Statistics As regards ACHIEVEMENTS TO DATE a. VAT Revenue Collection (Feb 2002-Dec 2003) Taxpayers have the option of submitting their VAT declaration by mail or in

person to the VAT directorate. During the last quarter of year 2003, the percentage of mail/personal submissions of returns were as follows:

23.6% of taxpayers remitted their declaration by post 76.4% of taxpayers preferred remitting it by hand to prevent loss or delay The declaration compliance rate stood at 98.5%. Revenues from February 2002 till December 2003 were distributed as follows: b. Tourist Refunds Based on MOF request, Global Refund (GR), the company contracted by the

MOF to manage the tourist refund scheme, extended the tourist refund mechanism to the Beirut port and the Masnaa border. However, for control purposes, GR does not allow for cash refund at the Masnaa border. In addition, GR is also extending refund for tourists on shipped goods provided they comply with the set rules and regulations- except for the Masnaa border.

The 2004 budget proposal was drafted on the basis of not introducing any additional taxes or amending any existing taxes, with the exception of temporarily cancelling and only for 2004, tuition fees due to the Treasury from pupils and university students.

It must be noted here that the Ministry of Finance has indicated, on more than one occasion, the necessity of increasing the VAT rate from 10% to 12% in 2004. However, current conditions do not seem to allow for the introduction or an increase of any new tax, despite the Treasury’s dire need for new financial resources.

Also, it is inappropriate to add or modify any existing tax or tariff unless it is accompanied by a reduction in total expenditure and an improvement of its cost-effectiveness for citizens to feel an improvement in their relationship with public administrations and institutions.

The approach of the 2004 draft budget law, based on not modifying or increasing taxes, does not reflect a lack of desire or need to pursue financial and economic reform operations, be it on the level of the national economy or public administrations or institutions. On the contrary, it underscores the increased

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importance and need of achieving these reforms in a way that consolidates macroeconomic stability and supports the country’s social situation in the medium and long-term.

In light of the implementation of VAT, the implementation process adopted by Lebanon greatly weakened its regressive impact because a major portion of the goods and services (representing a majority of the goods and services consumed by middle and low income people) are exempted from this tax to start with.

4 Control mechanisms within the executive branch The system of public service control and accountability in Lebanon evolved in

a gradual and pragmatic way over a long period of time -1926 to 1965- during which it underwent a number of changes and refinements in the light of previous lessons, experiences, and the expanding role and functions of the public administration. This system, which is to a great extent, patterned after continental French procedures and practices, relies on an elaborate and diversified network of financial and legal checks which aim at ensuring the legality of executive actions and their strict adherence to existing laws and regulations.

At present, the main instruments of compliance accountability in Lebanon are the Ministry of Finance, the Court of Accounts, the Civil Service Council, Central Inspection, and the General Disciplinary Council, all of which are located within the executive branch of government. In addition to these central control agencies, a recently empowered and strengthened parliament is just beginning to assert its oversight role over the public service, adding a new and potentially important dimension to existing control mechanisms.

4.1 The role of Ministry of Finance The Ministry of Finance is one of the most important ministries in Lebanon in

view of its key role in collecting revenues to finance public needs as well as its central role in the preparation of the budget and the monitoring of all public expenditures. All decrees by the Council of Ministers that involve financial obligations have to be countersigned by the Minister of Finance in addition to the signature of the President and the Prime Minister. As such, the Ministry of Finance, despite its status as one of the line agencies of the executive branch, constitutes an important staff and management tool for the Prime Minister in directing, coordinating, and checking the operations of all other government ministries and agencies. This is why the Ministry of Finance is one of the most coveted portfolios and is usually the subject of intense competition among different political groups in the process of forming a cabinet.

4.2 Role and Functions The main role of the Ministry as defined in decree no. 2868 is to "manage and

keep public funds and to be responsible for the budget, treasury, customs, real

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estate and cadastral affairs and national lottery, as well as any other matters that might be entrusted to it by existing laws and regulations". At present, the Ministry of Finance is organized into five main units whose heads report directly to the Minister:

The Directorate General of Finance, which is the most important unit for the purpose of this study, is responsible for all the basic financial activities, including the preparation of the budget, the control of expenditures, the preparation of the personnel payroll for all existing and retired civil servants, the collection of direct and indirect taxes and fees, the maintenance of all public accounts and records, the disbursement of public funds and the monitoring of the public debt.

The Directorate of Real Estate Affairs is responsible for all real estate transactions, cadastral services, and state properties.

The Directorate of National Lottery is responsible for all administrative and financial matters related to the state lottery whose proceeds are earmarked for social welfare activities of the government and some non-governmental voluntary organizations.

Customs Administration is responsible for collecting fees on all imported goods, preventing the illegal imports of such goods and preparing proposed legislation relating to all aspects of customs.

The Government Commissioner at the Bank of Lebanon exercises, on behalf of the Ministry, some oversight over the activities of the Lebanese Central Bank. The following part will focus on the financial control mechanism of the Ministry of Finance.

4.3 Financial Control The Ministry of Finance is clearly the most important tool of financial control

in the public service. Its responsibility in this respect is not limited to ensuring compliance of all government expenditures with budget requirements, but it also includes ensuring the compliance of such expenditures with all existing laws and regulations from an administrative and legal point of view.

The control role of the Ministry is exercised during the budget implementation phase through an intricate network of ex-ante checks, which are intended to prevent illegal expenditures before they actually occur. The jurisdiction of the Ministry in this respect extends to all government ministries and agencies whose budget allocations are included in the general budget of the State but does not include autonomous agencies and municipalities. It is worthy of note that the total budget allocations of autonomous agencies are quite large in comparison to the general budget of the State, and the functions performed by some of them are more important than those performed by some of the regular ministries.

The process of financial control by the Ministry can be divided into basic and sequential steps, each intended for a different purpose:

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4.3.1 Request for Authorization of Expenditures The first and most important step in the process of financial control is the

request for authorization of expenditures which is submitted by any government ministry or agency that wants to undertake certain actions that involve a commitment to spend some funds that have already been appropriated in the budget. Examples of such actions are: the appointment of a new employee, the purchase of equipment or the paving of a road, which are all considered normal and routine activities of any government.

According to Lebanese financial laws and practices, which are fashioned after those of France, budget allocations do not constitute in themselves an automatic authorization to public agencies to spend these funds. Before doing so, these agencies have to go through a variety of ex-ante checks and audits to ensure the compliance of their actions with existing laws and regulations as well as the availability of needed funds.

According to the Public Accounting Law in Lebanon, the Minister is the person authorized to submit a request for Authorization of Expenditures. In certain cases senior officials in the Ministry can submit such requests if they involve limited amounts of money. All requests for authorization of expenditures are subject to scrutiny and approval by the responsible accountant within each ministry, by the Ministry of Finance, and, in most instances, by the Court of Accounts. The responsibility of the internal accountant within each ministry is to check and verify two main things: - the compliance of the proposed expenditure with existing laws and regulations, - the availability of budgetary allocations.

Once this step has been completed, the request is submitted to a Controller of Expenditures, who is an official of the Ministry of Finance assigned to one or more ministries for the purpose of checking and approving all such requests. Until 1962 such requests had been centralized in the Ministry of Finance. But since then, this operation has been decentralized by the assignment of a special Controller of Expenditures to each ministry or in certain instances, a group of ministries. The responsibility of the Controller of Expenditures is to check the availability of authorized funds, the compliance of the request with existing laws and regulations, and the accuracy of cost estimates.

The first and most important stage in the process of financial control ends with the approval of the Controller of Expenditures. Without such approval, no expenditure request can be executed. In case of differences between an individual ministry and the Ministry of Finance, the matter is referred to the Council of Ministers for final settlement.

4.3.2 Liquidation of Expenditures The second step in the process of financial control takes place after the

financial obligation has been actually incurred in accordance with the terms of authorization for expenditure by the Ministry of Finance. If the request for the authorization of expenditure includes, as an example, the appointment of a new

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employee, the purchase of new equipment or the pavement of a road, the liquidation of expenditures is intended to check whether such actions actually took place and to determine the exact amount of money which the government owes as a result of such actions.

The liquidation of expenditures does not involve the Ministry of Finance and is performed by a special accountant within each ministry or agency.

4.3.3 Payment Order The third step in the process of financial control is the issuing of a payment

order for collection by the debtor concerned. In accordance with the existing Public Accounting Law the issuing of payment orders throughout the executive branch is the responsibility of the Head of Expenditures Service in the Ministry of Finance or a grade three employee within the service who has been officially delegated such an authority. Although the law permits the Head of Expenditures Service to delegate this authority to one of his employees who can represent him in other ministries and issue payment orders on their premises, this provision in the law has never been implemented. The centralization of this financial check in the Ministry of Finance is unusual, even in some European countries whose financial control systems are quite similar to those of Lebanon.

The issuing of payment orders is another important step in the financial control process which is to a great extent repetitive of the first step described above since it involves still another check on the legality of financial transactions and the availability of needed funds.

4.3.4 Payment of Expenses The fourth and final step in the process of financial control is the payment of

funds, which actually includes two operations, 1)the approval of the payment order by the central accountant of the Ministry of Finance, who is the head of the Treasury Service, and 2) the actual disbursement of funds by one of the cashiers of this service. In certain instances the head of the Treasury Service can, with the approval of the Director General, delegate the authority to approve the payment order to a lower level employee in his service.

5 Evaluations and considerations A review of Lebanon's complex and lengthy procedure of financial control

which is applied by the Ministry of Finance, and which is duplicated to a great extent by the pre-auditing functions of the Court of Accounts, raises a number of questions that deserve serious consideration.

The Lebanese system of a central pre-audit exercised by the Ministry of Finance over all budget expenditures is in sharp contrast to practices in some other countries, influenced by Anglo-Saxon practices, where the pre-audit on expenditures is exercised by the ministries or agencies concerned. The United

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States is a good example of the latter system. There is no compelling evidence that the former system is more effective in guarding against financial abuses, while there is strong evidence that the latter system helps in reducing bureaucratic delays and expediting government work. Many scholars and experts argue that the benefits to the public of reduced routine and red-tape far exceed the costs of tighter financial controls.

In Lebanon the government follows a policy of financial control in autonomous agencies, which is in clear contradiction with the policy applied in regular ministries. At present only three out of the 62 existing autonomous agencies are subject to the pre- audit of the Ministry of Finance. As an example, the Council for Development and Reconstruction, which is responsible for the execution of most of the important capital projects in Lebanon, is exempt from such a central pre-audit and conducts its internal financial pre-audit. This is true of other autonomous agencies which among themselves are in charge of the execution of the vast majority of capital and development projects of the government.

The question that arises is: why should regular government ministries not be freed from the cumbersome burden of a central pre-audit like the autonomous agencies? If such financial flexibility is necessary for expediting public works and services, it should be extended to all public agencies and departments.

Although it is very difficult to prove this point, there are many in Lebanon who argue that financial abuses in autonomous agencies, that are not subject to a central pre- audit, are not worse than in the ministries which are subject to such an audit. But this is certainly a subject that deserves further study and investigation.

Even if it is deemed essential and useful, the pre-audit of the Ministry of Finance is a cumbersome and complex operation and should be simplified to minimize unnecessary delays and frustration in government work.

It is quite clear that the process of financial pre-auditing includes a number of stages involving checks by different authorities which are highly repetitive and of marginal value. The requests for authorization of expenditures are checked by the accountant within each ministry, by the controller of expenditures of the Ministry of Finance and by the Court of Accounts. The liquidator of expenditures within each ministry in turn checks the approved authorization of expenditures which in turn is checked by an official of the Ministry of Finance who issues the payment order. The final stage of authorizing and disbursing the funds involves a limited material check which does not duplicate, to any significant extent, the checks conducted in previous stages.

In addition to the duplicate and repetitive checks described above, the preauditing process is highly centralized. Requests of authorization of expenditures are the responsibility of the Minister concerned or, in certain limited cases, the Director General. Regional offices of the ministry concerned have very limited powers in this respect which involve very small amounts of money. Although controllers of expenditures of the Ministry of Finance have been assigned to conduct their checks of expenditure requests in individual ministries, there are no such controllers assigned to the regional offices of these ministries. As a result, all

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requests for authorization of expenditures by regional offices have to be conducted in the central headquarters of each ministry. In addition, the requests for authorization of expenditures have to be approved by the Court of Accounts on its own premises since the Court does not have any representatives in the various ministries. The next step, which involves the liquidation of expenditures, is also conducted by the ministry's accountant in its central headquarters. These accountants do not have representatives in the regional offices to perform this task.

The issuing of payment orders, which is the next operation in the pre-auditing process, is also the responsibility of a central department, the Service of Expenditures in the Ministry of Finance. Despite the fact that the law allows this department to assign some of its employees to perform this task in individual ministries and their regional offices, it has chosen not to do so. Finally, the actual disbursement of funds cannot be effected without the approval of the central accountant within the Ministry of Finance.

In light of the above it is evident that the pre-auditing process in Lebanon is a slow and complex one involving repetitive and duplicate checks by different agencies as well as a high degree centralization in individual ministries as well as in the Ministry of Finance and the Court of Accounts. The simplification of this process through the elimination of some unneccessary checks and the decentralization of others could significantly contribute to debureaucratizing government work and reducing unjustified and frustrating delays.

It is interesting to note that the tight and rigid system of financial control in Lebanon has not been of much help in dealing with the problem of abuses in the public service. The problem of flagrant and widespread corruption is probably the single most important problem that the Lebanese Government faces today. This is an issue on which there is substantial agreement among all groups, including the government. Many Lebanese today believe that the relaxation of control mechanisms within the public service, financial and otherwise, could hardly result in a worse situation than the one we are presently facing.

6 Budget and Accounting reform The MOF succeeded in introducing a number of reforms concerning the major

functions at the MOF. These reforms cover the entire budget process starting from the preparation phase through the end of the execution phase of the budget.

6.1 Accounting Reforms Achievements to Date & Developments for the Future - Introduction of new Chart of Accounts at the Principal Accounting Offices

(PAO) and the Local Accounting Offices (LAO) - Integration of accounting procedures

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-Efforts were directed towards consolidating the accounting reforms implemented at the beginning of 1997 and ensuring their smooth implementation at both the central and local levels

- Regularization of accounting procedures and reporting requirements of the principal and local accounting offices

- Strengthening of coordination between the principal accounting office of the Treasury and the Central Bank

-Recruiting accountants for the Treasury Directorate (TD) to improve the centralization of operations at the Treasury principal office. The role of this group has been substantially expanded in the past years as it is starting to assume more of the Treasury Directorates' functions and responsibilities

-Producing and publishing (since 1998) up-to-date monthly fiscal data showing both budget and Treasury operations.

- Reconciling the monthly fiscal performance figures with the Central Bank Treasury account, with review by IMF experts

-Assuring, in collaboration with IMF expert, the future needs of the Treasury Directorate (TD) and the Public Accounting Directorate (PAD)

In this respect, the TD and the PAD are currently in the process of streamlining the internal procedures for improving efficiency and effectiveness, as well as for ensuring the integrity of the accounting system in order to generate better reports with reduced timeliness.

A number of newly-recruited civil servants have been trained for developing and maintaining regular reports and treasury operation statistics. These reports provide the Treasury Directorate with the required information to assume its functions of treasury management and monitoring of expenditure execution and will ultimately serve for forecasting monthly balances. The MOF is continuously working on enhancing this reporting system and on ensuring the integrity and regularity of the information.

6.2 Budget Reform Achievements to Date & Developments for the Future - Developing and implementing (in 1997) a new budget nomenclature for both

revenues and expenditures compatible with GFS 864. The new budget expenditure nomenclature introduces administrative, economic and functional expenditure classifications.

- Developing a budget preparation manual and introducing new guidelines to spending ministries for the preparations of budget requests

- Introducing new concepts such as the cost per unit - Conducting intensive training for all government officials involved in the

budget preparation and execution process - Improving forecasting methods of the budget revenues, allowing for a more

precise determination of the future evolution of each revenue category thereby greatly enhancing the budget preparation exercise

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6.3 Review and reform of procedures and controls project Objectives With the successful implementation of the budget and accounting reforms at

the Directorate General of Finance, the MOF has embarked in 1999 on an effort to improve and render more efficient its operations through a business process improvement approach. The goals of the “Review and Reform of Procedures and Controls” project are to review budget implementation procedures, controls and workflows and to recommend, where applicable, means to fortify the capabilities of the MOF in the performance of these activities, strengthening controls, and improving Treasury management.

Achievements to Date & Developments for the Future - Reviewed current internal audit procedures at the MOF and set up

mechanisms for the establishment of an internal audit unit - Documenting existing procedures, assessing efficiency and effectiveness, as

well as recommending new and enhancing existing procedures - Reviewing existing IT systems to secure a comprehensive and integrated

system - Designing training strategy for upgrading staff skills - Establishing manual of procedures setting forth various tasks to be carried at

the concerned directorates. - Recommended methods for the modernization of the control procedures,

oriented towards quality control to supplement compliance control

7 Overview on Lebanese decentralization Decentralisation is defined as the transfer of authority and responsibility for

public functions from central government to local governments. Fiscal decentralization, a core component of decentralization, aims to give local governments the authority to make expenditure decisions and the adequate revenues to carry out the decentralized functions. Having earned their political independence through the elections of 1998, municipal governments in Lebanon have yet to secure their fiscal autonomy for the decentralization process to be meaningful. The benefits of political decentralization can be only reaped if only if fiscal decentralization which consists of clear delineation of responsibilities between central and local governments, removal of spending bottlenecks, better tax administration, and a transparent grant system, are put in place.

7.1 Benefits and reform of fiscal decentralization Fiscal decentralization, if well designed and implemented, can reap economic,

political and social benefits. For one, fiscal decentralization can increase the efficiency and responsiveness of local governments. This is because locally elected leaders tend to know their constituents better than authorities at the national level and hence so should be well positioned to provide the public services local residents want and need. The larger the differences in preferences across

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jurisdictions, the greater are the benefits of decentralization. A result of this is that local governments can mobilize more revenues since (a) people are more willing to pay for services that respond to their priorities, especially if they have been involved in the decision making process for the delivery of those services; and (b) they are able to identify and access some tax bases more readily than central governments.

Second, fiscal decentralization plays a primary role in maintaining political stability in the face of pressures for localizations. That is a country that finds itself deeply divided along geographic, sectarian, or ethnic lines, decentralization can provide an institutional mechanism for bringing opposition groups into a formal, rule-bound bargaining process.

Third, it can be a positive force in alleviating poverty. Local officials and community groups are better placed to identify and reach the poor through their access to social networks than central authorities. In fact, central governments must provide the bulk of the funding and local governments must deliver and manage the social services. Despite these potential benefits, national governments have either postponed or ignored the pressure of fiscal decentralization citing macroeconomic instability as a primary and legitimate excuse. However, experiences show that the potential problems associated with decentralization in developing countries reflect more flaws in the design and implementation than any inherent outcome of decentralization per se. Thus macroeconomic stability can be ensured as long as two institutional parameters are in place. The first parameter is the hard budget constraint where local governments cannot spend more than they earn. It is often the case when there is a separation between spending and tax decisions that local governments overspend especially if they expect to get more resources from the central governments either through additional discretionary transfers or bailouts. The second parameter is borrowing constraints where creditors will be more conservative in lending to local governments only if they believe that the central government will not bail them out. Reaping the benefits of fiscal decentralization goes beyond avoiding macroeconomic instability. The most compelling lesson of recent decentralization experience is the need to synchronize the elements of reform (World Development Report 1999/2000).

A fiscal decentralization policy must first determine the expenditure assignments – that is the functions and responsibilities - that municipalities must undertake. This must be complemented by the decentralization of management. Expenditure assignment should thus be followed by the assignment of taxes and fees that local governments must levy to finance these responsibilities. And finally, the gap between the expenditure and revenue assignments is covered by the intergovernmental grant system.

For the benefits of fiscal decentralization - which are economic, political and social – to be realized, the elements of reform must be well synchronized. The government must first decide on what functions municipalities should provide and then assign the appropriate set of taxes and fees to finance these expenditures. The inevitable gap is to be covered through the intergovernmental grant system.

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The municipalities in Lebanon are entrusted by Law with a wide range of responsibilities. However, in practice, most municipalities are providing only a fraction of these functions due to a lack of clear delineation with central government, expenditure bottlenecks, and weak fiscal and managerial capabilities. With respect to the revenue assignment, Lebanese municipalities are, by Law, assigned an impressive list of taxes and fees they can collect. In practice, most municipalities rely on only 2 of these taxes and fees. This is mainly due to the weak municipal tax administration. Finally, most municipalities rely on the grant system as a source of revenue. In theory, the method of determining and allocating the total fund is very progressive. In practice, the method of determining the total divisible pool has been tampered with in such a way that has effectively reduced the amount available for distribution.

Authorities and Control Despite its moral personality and administrative and financial autonomy, the

government exercises both administrative and financial control over the municipalities through various ministries and agencies.

1. Ministry of the Interior (MOI): Responsible for planning, budgeting, and spending municipalities’ revenues as well as for providing technical and financial support to municipalities when needed. More specifically, MOMRA, through its Chief Controller, exercises its control over the following: Control of the budget and its adjustments; Control of expenditures contracts; Control of revenues; Control of financial operations and transactions; Control of infringement or violation; Participate in inquisitions of a financial character; Control over the settlement of accounts of the budget. Also responsible for organizing and supervising municipal elections, for providing internal security. The muhafiz and qaimmaqam, who are exercise administrative control over the municipalities are supposed to report to MOMRA on matters relating to municipalities, although they are officials of MOI.

2. Civil Service Board (CSB): Responsible for overseeing all municipal decisions related to employees, administrative organization, and salaries in large municipalities.

3. Bureau of Accounts (BOA): Responsible for financial control over large municipalities, including pre- and post-audits. The central government may appoint a Chief Controller to act as financial controller over municipalities. All large municipalities have a GC. According to article 1 of decree 82 on the Organization of the Bureau of Accounts issued in 1983, the Bureau of Accounts is an administrative court, responsible for the financial jurisdiction, and the supervision of the public funds and the funds deposited in the treasury. With respect to revenues, the Chief Controller who settles the municipal transactions, transfers the transaction to the Bureau of Accounts for administrative pre-auditing. This generally includes either transaction of revenue concession when the value exceeds LL 5 million or transaction of real estate sale when the value exceeds LL 5 million. With respect to expenditures, the Chief Controller transfers the municipal

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transaction to the Book of Accounts for prior approval. These include: · Transactions of equipment and affairs which exceeds LL 75 million. · Services transactions which exceed LL 5 million. · Consent agreements (incl. rental contracts) which exceed LL 50 million. · Transactions of equipment and affairs which exceed LL 75 million. · Grant and Aid transactions which exceed LL 15 million. · Amicable conciliation of settlement of disputes and allegations which exceed

LL15 million. 4. General Directorate of Urbanism (GDU): A unit of the Ministry of Public

Works, is responsible for urban planning. Its authorization is required for any real estate or infrastructure development.

5. Central Inspection Agency (CIA): Although article 137 of decree 118 excludes the legislative and executive powers in municipalities from the control of the CIA, this does not prevent MOMRA from delegating the CIA to inspect the municipality.

6. Ministry of Justice: The control of the Ministry of Justice is restricted to a single issue in financial control that is Conciliation, unlike the financial control exercised by the General Controller or Bureau of Accounts.

A. General Financial Delegation: This new control system over the fiscality of municipalities was created by the decree 1937 of 1991, stipulating the creation of a General Financial Delegation at the Court of Cassation, subject to the authority of the Public Prosecutor, and responsible for infringements related to tax laws: governmental, municipal, custom duties, fees on telecommunication, fees related to public institutions and municipalities.

B. Committees of Objections: These committees enjoy a judicial character. The president of each committee is a judge, appointed by a decree, responsible for studying the objections presented by the taxpayers, which represent an indirect control on the rightness of the municipal fees.

8 Conclusions and reflections For almost a year, and especially since Paris II2 was convened, major, radical

and positive changes took place. They were of great importance and impacted on the state of the Lebanese economy, public finances, and monetary conditions. Various economic indicators point to these changes. They were reflected in enhancing economic growth rates, bolstering macroeconomic stability, and reining in negative factors that affected real economic activity. This also had a positive

2 The HARIRI government met with international donors at the Paris II conference in November 2002 to seek bilateral assistance restructuring its domestic debt at lower rates of interest. While privatization of state-owned enterprises had not occurred by the end of 2003, massive receipts from donor nations stabilized government finances throughout 2002 and 2003.

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impact on public finances, whose indicators picked up, both on the level of implementing the budget and in the evolution of the growth of debt, its distribution, maturity profile and servicing. The monetary situation also witnessed positive improvements in terms of the balance of payments, the increase in the Central Bank’s foreign currency reserves, the major rise in banking sector deposits and monetary aggregates, and the decline in interest rates to less than half of their level a year ago.

The bulk of these indicators translated into palpable improvement in the overall economic situation, an upsurge in public confidence in the Lebanese economy, as well as an affirmation of the correctness of the government’s program for tackling most of the economic and financial problems experienced by investors and those concerned with Lebanon’s economic affairs.

These positive improvements and developments opened new horizons for Lebanon and made it possible for it to maintain efforts and build upon the great achievements recorded as a result of the Paris II conference, making it possible to deal with structural problems on the one hand, and working on developing the Lebanese economy so that it can make comparable progress in growth on the other hand.

The Lebanese people have, for decades, gambled on time being the sole answer to their problems. This may have been true in some cases, but the passage of time has shown that, in most cases, relying solely on time was never enough for solving these problems. Rather, it made them worse.

Failure to highlight real problems or temporarily forgetting them does not mean they do not exist. On the contrary, they ferment and become increasingly difficult to reform, change or solve.

A price and sacrifice is being asked of the Lebanese, each according to his position and ability. It is incumbent upon everyone to contribute to it. Tardiness in doing so will only lead to exacerbating these problems and the enlargement of costs of all sorts.

Experience over the last decade has shown that real reform leading to optimum use of human, temporal and economic resources will lead to resolving the real day-to-day problems of citizens. It will minimize suffering and curtail the size of future sacrifices. Reform will eventually lead to achieving sustainable growth and improving people’s standard of life and its quality. It will also treat economic and social problems arising from the addition of so large a number of youths to the labour market.

Unfortunately, regarding all of the above mentioned, the current situation and political climate do not, at least for the time being, allow for the introduction of reform measures that were passed in the 2003 budget proposal, and that constitute the only correct entry way to deal with structural problems that the economy, the country's public finances, and the Lebanese citizens are suffering from. Indeed, this is adversely affecting work areas of Lebanese citizens, including the growth of their economy, the development of their towns, and the improvement of their standards of living and work opportunities, all of which need to be addressed.

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The 2004 budget proposal, with its content, ideas, and orientations is, in fact, the most that can be done, although it is less than what is necessary at present; awaiting such a time when the political climate improves, providing the suitable conditions that would allow for the passing of additional financial and economic reforms. These reforms, which are subject to delays and vacillation, are not something we can do without, nor are they an option we can adopt or abandon. Instead, they are necessities. If we don’t achieve them today, we will have to come back to them tomorrow and pay a higher price. For this reason, we must preserve the momentum generated by the series of reforms and measures achieved since 2001, which made the Paris II conference and its outcome possible. Given the right political and social conditions, this momentum would be the real way to decrease the deficit and debt levels, and to move towards sustainable growth and development.

If what is currently available is less than what was desired and hoped for, then the sedative treatment of structural and urgent problems must be homogeneous and appropriate, in such a way as to safeguard the immunity we have attained and strengthened. This will keep the situation from

deteriorating or taking a wrong direction that will burden the State and Treasury unduly, both economically and politically.

Therefore, this momentum and the appropriate solutions for problems and detail files are indispensable in the current circumstances. These circumstances include:

• The need to protect immunity and steadfastness in the right direction. • The need to undertake improvements that bolster prospects of progress as

allowed by the givens. • Enhancing confidence in the State as one that safeguards citizens and their

rights now and later. Likewise, safeguarding the State will translate into protecting citizens’

existence, strategic interests and the future prospects of generations to come. The overall political setting cannot continue to give and survive if its concept does not remain above conflicts, wrangling and divisions. The debate ought to remain within the boundaries of the political system. The State’s higher morals should make the case for strategic interests. It is capable of taking decisions, however difficult, and conveying the message to its target for the sake of its existence and the public interest—despite the impact that this message might cause in the short-term.

Safeguarding immunity and tackling problems appropriately are two present factors, stemming from faith in Lebanon and the ability of its citizens and political and economic figures, and productive sector to undertake a serious effort and achieve consensus both on the greater interests of nation and its people, based on the idea that good solutions depend on determination and capacity for rational, far-sighted thinking, as well as the ability of institutions to explore new horizons for the economy and humanity.

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Bibliography & Sites consulted: www.finances.gov.lb (Ministry of Finance) www.bdl.gov.lb (Banque du Liban) www.abl.org.lb. (Association of banks of Lebanon)

Republic of Lebanon - Ministry of Finance, Original Draft Proposal of H.E. Minister Fuad Siniora Translation of the Public Budget and Annex Budgets for 2004;

Republic of Lebanon - Ministry of Finance, Budget law 2003 a brief note;

Republic of Lebanon – Ministry of Finance, Budget Proposal 2003 a brief note;

Paul Salem, Governance Reform and Development in Lebanon Abstract of Preliminary Draft;

Republic of Lebanon - Ministry of Finance, Reform Program The Ministry of Finance, May 2004;

Republic of Lebanon - Office of the Minister of State For Administrative Reform, Strategy for the Reform and Development of the Public Administration in Lebanon, supervised by the Minister of State for Administrative Reform Fouad el-Saad, September 2001;

Sami Atallah, Empowering Local Government Institutions in the MENA Region Workshop Session: The State of Fiscal Decentralization in the MENA Region: The Limitation of Local Government- How well is Lebanon fiscally decentralized? The case of Lebanon.

University at Albany State University of New York Center for Legislative Development Annual Report July 1, 2003 - June 30, 2004 To USAID “Lebanon Relief and Redevelopment Project”, Government Institutions Strengthening Component Local Government and Parliament Project, Mahmoud Batlouni, Lebanon Country Director Center for Legislative Development.

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Republic of Macedonia (FYRM)

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Accounting, Auditing and Budgeting system

Doct. Simon Maurano

1. THE EU FRAMEWORK The EU framework is important for the Republic of Macedonia, because its

government aims to become a member of the Union and is enhancing policies to respect and implement the agreements and the political relation with EU.

In the subjects of financial management, budgetary and accounting system, the aim of the EU is to extend a framework of principles for the prospective members to develop sound systems of budgeting and financial management, even in areas where this is not formally required by EU law, in order to:

- permit the political and economic priorities of the government to be achieved within the budgetary constraints that always apply;

- ensure that government decisions are implemented efficiently and effectively;

- lay the foundations for operating effectively in the EU, and make good use of the aid funds that the Commission makes available to candidate countries prior to their accession;

- create confidence and trust in the relationship with other member states and the European Institutions, the Commission in particular.

The EU intends to cooperate to develop better mechanisms for budgeting and financial management. The present weak mechanism could obstruct the progress of a candidate country towards accession to the EU because:

- the country may not meet the necessary conditions of macro-economic and fiscal convergence, consistent with the Treaty obligations;

- problems may be encountered in the management of EU pre-accession funds that both impede the country’s economic development and damage its relationship with the European Commission and member states.

The Commission has itself expressed the opinion that, in general, the budgetary and control systems of the candidate countries fall short of the required standards set by the Commission and by existing member states. In an Opinion issued in July 1997, the Commission referred to the need for candidate countries to develop their institutional and administrative framework in order to ensure effective administration of the acquis in the budgetary area:

“The protection of the Community’s financial interests requires the development of anti-fraud services, training of specialised staff (investigators, magistrates) and the reinforcement of systems of specific co-operation. The

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implementation of Community policies, especially for agriculture and the structural funds, requires efficient management and control systems for public expenditure, with provisions to fight fraud. Administratively, it is essential to have a clear separation between external and internal audit. Police and judicial authorities need to be able effectively to handle complex transnational financial crime (including fraud, corruption and money laundering) which could affect the Community’s financial interests”.

2. LEGAL FRAMEWORK The Constitution of the Republic of Macedonia at the Article 68 says: “(1)

The Assembly of the Republic of Macedonia […] adopts the budget and the balance of payments of the Republic” and at the Article 91: […] the Government of the Republic of Macedonia […] proposes laws, the budget of the Republic and other regulations adopted by the Assembly […].

The existing Law for Budgets has been amended several times. A Law for Public Finance, based on the Slovenian model, is being drafted with assistance from USAID. It is anticipated that this will be passed by the incoming government. This law will provide a wider definition of public money. 36

The external audit is regulated by the State Audit Law, applied since 1998.

3. BUDGETING PROCESS In accordance with the Law on Budgets (Official Gazette of the Republic of

Macedonia, Nos. 35/01, 93/01, 46/02, 61/02 and 24/03), planning of the budgets is done on the basis of the macroeconomic policy and the projection of macroeconomic aggregates for the relevant year. The Minister of Finance is responsible for preparing the Budget proposal and submitting it to the Government.

Based on the determined priorities of the Government, the Ministry of Finance prepares a circular for the budget users that contains the main directions for planning the budgets. After coordination with the users, the Ministry of Finance prepares the Budget proposal and submits it to the Government at the beginning of October.

The proposal of the national Budget is discussed and approved by the Government and then submitted to the Sobranie to be adopted no later than mid–November; the Minister of Finance has to present and explain the Budget proposal to the Sobranie. The budget should be adopted no later than 31 December. A separate Law for the execution of the Budget has to be adopted with each annual national Budget.

The present situation and reform in progress The Republic of Macedonia, pursuant to the obligations arising from the Stabilization and Association Agreement, has initiated reform of the accounting and auditing system with the aim of harmonizing the national legislation with that of the European Union.

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The Ministry of Finance has made significant strides in a relatively short period of time. This is partly due to a few very competent senior staff, but also reflects the seniority and authority of the Minister, which enables the Minister of Finance to enforce its functions. It has also benefited from significant long-term technical assistance. Changes at the political level are anticipated following the forthcoming election, due in September 2002, and these may adversely impact the ministry. Nevertheless, the Ministry of Finance is assessed as being capable of absorbing further reforms and technical assistance.

Budget Scope and Transparency The budget is comprehensive in scope, with revenues and expenditures treated separately on a gross basis. The Minister of Finance plans to publish the budget in both Dinars and Euro, in English and Macedonian. The budget documents are published in the government Gazette.

Budget Formulation - The budget process is top-down in its approach, with overall budgetary projects being approved by government prior to bids being sought from line ministries. Both capital and personnel expenditures are fully integrated. However, although the Ministry of Finance will know how much money is available for expenditure during 2003, line ministries will not be advised of sectoral ceilings. There is also little or no linkage between the various elements of the budget. The Ministry of Finance is showing very little leadership in relation to performance (programme) budgeting. The Ministry of Finance is a strong ministry and follows good practice in budget development, largely as a consequence of the high level of technical assistance. It has reasonable analytical skills and the staffs are capable of using the systems available to it. Because of the power and influence of the Minister of Finance though, the staff tends to be overworked. It is anticipated that many of the high quality senior officials will leave the Ministry following the forthcoming election.

Medium Term-Framework - A medium-term framework, looking at the two years following the budget year, has been put in place. The Minister of Finance intends to track changes in future years. The macro-economic analysis document, on the other hand, is weak, merely describing the forecasts and making no recommendations.

Budget Execution - The Treasury System is operational and effective; during Fiscal 2001, there was a central government surplus. Control of commitments is, however, still weak. The ZPP (Payment Operations Buraeu) has been successfully abolished, with the Central Bank handling the Real-Time Gross Settlements and the commercial banks handling the high volume, low value transactions. This was achieved, in contrast to other Yugoslav successor states, by careful analysis and preparation over several years. Although some statistical data has been lost as a consequence of the abolition, tax collections have not suffered and the system works reasonably well, with the accounting side handled by the Treasury System. Implementation of VAT has also been very successful and VAT in 2002 represented approximately 60% of revenues. The number of VAT registered payees, at 24,000, is probably too high.

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OECD recommendations - OECD suggested, as follows, what are the potential areas for future donor assistance, in order to drive the action of Macedonian government towards reform.

• Training for the Ministry of Finance in project implementation and monitoring

• Provision of a budget development and monitoring system • Advice on the reform of the extra-budgetary funds • Training for the Ministry of Finance and municipalities in relation to the

proposed fiscal decentralisation. Public Expenditure Management (PEM) training and the provision of suitable systems for municipalities will be essential if fiscal decentralisation is to be successful.

The Public Expenditure Management (PEM) systems in many low income countries are subject to weaknesses such as incompleteness, inappropriate classifications and poor auditing systems. Improving PEM systems is critical in order to successfully finance and track inputs for the policy actions identified in the PRSP (Poverty Reduction Strategy Paper) of World Bank, as well as to improve governance and accountability in general.

The World Bank suggests other measures like the medium-term expenditure framework (MTEF), to indicate plans on how to move towards medium term budgeting over time; and creation of Link expenditure tracking to monitoring of results indicators so that the connections between inputs, outputs and outcomes can be traced.

4. ACCOUNTING AND AUDIT SYSTEM Although the Accounting system works well, the audit system is quite weak,

with the SAI (State Audit Institution) understaffed and lacking effectiveness. Accounting - Committing to perform the accounting system reform process in

a manner, which will ensure maximum harmonization of the Macedonian accounting system with the International Accounting Standards and the European Union Directives, starting from 1996, the Republic of Macedonia continuously cooperated in establishing contacts for realization of the accounting system reforms.

In compliance with the authorization called for in the Law on Accountancy, the Minister of Finance accepted the commitment not to prescribe separate national accounting standards, but to accept the International Accounting Standards determined by the International Accounting Standards Committee (IASC), as standards applying in the Republic of Macedonia since 1 January 1998. (The International Accounting Standards Committee is an independent private sector body comprising representatives of 143 professional accounting bodies from 103 countries. The European Commission has observer status on the IASC Board which approves International Accounting Standards (IAS)).

The Ministry of Finance has demonstrated its ability to make use of the

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Accounting system, with the new Treasury System; reports produced by the system are good and the structure conforms to international standards. Recipients are generally pleased with the quality of the reports.

Audit – The Audit Law (amended and modified in 2000 and 2001), among other things, stipulates the audit activities to be performed pursuant to the International Audit Standards, and the Law on State Audit (amended and modified in 2001) comprises provisions, according to which the state audit activities are performed pursuant to the international audit standards for state audit (INTOSAI).

(INTOSAI is the professional organization of supreme audit institutions (SAI) in countries that belong to the United Nations or its specialized agencies. SAIs play a major role in auditing government accounts and operations and in promoting sound financial management and accountability in their governments. As citizens, international donors and others have increasingly higher expectations of national governments, these governments depend on SAIs to help ensure public accountability. INTOSAI supports its members in this task by providing opportunities to share information and experiences about the auditing and evaluation challenges facing them in today's changing and increasingly interdependent world).

Internal audit – Internal audit is regulated by the Law on Budgets pursuant to which audit is carried out regarding the earmarked utilization of the budget funds of all budget users and spending units, the budgets of the local government units and of the Funds.

The internal audit in the Republic of Macedonia is carried out in accordance with the International Standards on Internal Audit. The proposal for adoption of the Law on Internal Audit in the Public Sector is in Government procedure.

The State Budget Law, Articles 56 to 61, creates Internal Audit in government ministries and in local self-government. Article 57 seems to indicate that the concept of Internal Audit of the law is not in accordance with the EU standards: this Article assigns an operational role to Internal Audit, since financial liabilities and payments can only be undertaken with the signature of the Internal Auditor. Whilst these checks, if properly and effectively carried out, are very important for the processes of public internal financial control, they should not be performed by Internal Audit. This is clearly incompatible with the role and purpose of a functionally independent Internal Audit, as defined in the International Standards. The functional independence of Internal Audit is a key criterion of the EU definition of a sound PIFC (Public Internal Financial Control) system and a pre-requisite for the management of EU resources.

The Internal Audit Unit in the Ministry of Finance has ten staff: six auditors and four assistants. All staff are affiliated to the Institute of Internal Auditors. The role of this Unit does not appear to relate to the Law. They undertake tasks specified by the State Secretary and the Minister at the Ministry of Finance. These tasks arise either as the result of a complaint, or a query about an activity, or a payment in a budget user. In 2001, six staff investigated 27 cases. The report on the findings is delivered to the State Secretary of the Ministry of Finance and the

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budget user. Should the budget user not respond, or fail to act upon the Internal Audit report, the Unit can implement sanctions. There is an Internal Audit Handbook that was produced under the Phare Programme in 2000.

The Public Revenue Office (PRO) has a ‘Department for Internal Control’ with three staff and a ‘Department for Internal Revision/Audit’, which currently is not staffed. The former Department seems to ‘audit’ the Tax Inspectors’ relations with taxpayers in terms of compliance with the regulations and procedures of the PRO.

A Public Finance Law is currently being circulated for comment. Articles 100 to 106 of the draft Law establish ‘Budget Supervision’ for users of the National Budget and the Budgets of Municipalities. The terminology indicates that this is intended to operate with an Internal Audit Unit within the Ministry of Finance, and within the budget users’ departments. The relationship with the existing Budget Law is unclear.

The development of public internal financial control is underway through the major budgetary reform project supported by USAID. The linkages between PIFC and the Internal Audit function are likely to be established within that project.

The development of the internal audit function in the private sector is very limited, with only international auditing firms providing audit reports (primarily for the banking sector) that meet international auditing standards. There is no Institute to regulate the accounting or the auditing professions.

External audit - State or external audit is regulated by the State Audit Law, which set out the conditions and the methods for conducting a state audit of public expenditure, financial statements/reports and financial transactions. This law covered financial statements and transactions and other issues regarding the audit of administrative bodies, including: local self-government; legal entities funded by the Budget of the Republic as well as the budgets of local self-government, and the budgets of Funds; the agencies and other institutions established by law and the beneficiaries of the funds from the European Union Funds and other international Funds; public enterprises or legal entities in which the State is the major share-holder; state-owned enterprises; the National Bank of Macedonia; the Payment Operations Bureau (ZPP); and, other institutions founded by law.

State Audit Law has been applied since 1998, pursuant to which audit is carried out over the spending of budget and other government funds, provided from public revenues of the legal entities and the citizens.

In September 2001, an amendment to this Law expanded the remit of state audit to include the beneficiaries of EU and other international funds. The amendment also provided for the State Audit Office (SAO): to receive responses from audited bodies on how SAO findings have been dealt with; to provide Parliament with reports throughout the year, not just an annual report; and to establish a web site.

The State Audit Office is the highest external institution to carry out financial control and auditing of the work of the public administration. It is an independent institution reporting to the Sobranie. The Government and the Sobranie have the

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right to decide on the allocation of budgetary resources for the State Audit Office. The total number of employees is 59 and the budget for the year 2003 was 650.457 euros. The Sobranie elects the General State Auditor and his deputy for a ten-year term of office. The power to dismiss these office-holders also lies with the Sobranie. The General State Auditor appoints authorised state auditors who manage different departm ents of the State Audit Office.

The State Audit Office submits an annual report on the conducted audits and its other activities to the Sobranie. The General State Auditor publishes the annual report on the activities of the State Audit Office on the web site of the State Audit Office. The State Audit Office conducts independent audits of the financial reports of the following institutions: government bodies, bodies of local self-governments, general budget users, legal entities where the state is dominant shareholder, National Bank, Payment Operations Bureau and agencies, funds and other agencies and users of European and other international funds, according to the State Audit Law.

Subject to external audit are documents, papers and reports on performed internal control and internal audit, accounting and financial procedures and other records, the financial transactions, which involve government expenditures, regarding the legal and authorised spending of funds. The state audit also includes an assessment of the extent to which funds are spent economically, efficiently and effectively.

The state audit operations are carried out in accordance with the International Standards on Auditing (INTOSAI), published in the Official Gazette.

The Audit Law and the State Audit Law incorporate a provision on application of the Code of Ethics of Professional Accountants of the International Federation of Accountants by the certified auditors.

Some issues remain outstanding: the SAO budget is still controlled by the Ministry of Finance and the SAO and the Auditor General are not specifically covered in the Constitution. These issues will need to be addressed in due course to meet international standards on the independence of a Supreme Audit Institution. However the SAO became a member of the INTOSAI in 2001 and of EUROSAI on 31 May 2002.

The development of the SAO, with the support of the World Bank, was planned in three phases for the years 2001, 2002 and 2003. The targets set have been difficult to meet. It was planned, for example, that 50 staff would be engaged by the end of 2001, but only 16 were appointed. In that year the 16 staff undertook some 87 accounts’ audits, which amounted to about 5% of the total entities. Only 18 out of 124 municipalities and public enterprise companies were audited (7%). In the 2002 40 staff were in place.

Development of the external audit function in the private sector is very limited. International auditing firms alone provide audit reports (primarily for the banking sector) that meet international auditing standards. There is no Institute to regulate the accounting or the auditing professions.

Recommendations and Priorities by OECD and EU – In order to develop

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the Stabilization and Association Agreement with EU, some action are needed to develop SAO as a fully functioning and effective external audit institution in Macedonia. To implement this purpose, OECD recommends that:

- a needs assessment and possibly a peer review of the SAO be undertaken at the earliest opportunity to assist the SAO in defining its current priorities for further development in technical, administrative and IT areas and in targeting current and possible future technical assistance;

- the SAI legal framework is reviewed and the necessary amendments to the constitution are drafted, both drawing on comparative, international experience to ensure that the Law is fully compliant with international standards, with particular regard to the independence of the AG and the SAO;

- the development of the SAI in Macedonia should not be undertaken in isolation. Progress in the development of related areas of public internal financial control, internal audit, budget programming must be monitored;

- consideration be given to developing the private sector accountancy and auditing functions, in harmony with the developments in the public sector.

4.1. International projects towards European standards Audit and ‘Stabilisation and Association Agreement’ with EU - The

Republic of Macedonia and the EU currently have a Stabilisation and Association Agreement, which is in the stages of being ratified by the Member States.

Article 83.2 of the Agreement states: “The Parties shall co-operate with the aim of developing efficient audit

systems in the Former Republic of Republic of Macedonia following the harmonised Community methods and procedures. Co-operation shall focus on:

• Technical assistance to the Office of Auditors. • The establishment of internal audit units in official agencies. • The exchange of information with regard to auditing systems. • The standardisation of audit documentation. • Training and advisory services.” The OECD recommends that the internal audit legal framework and other

important, related decisions are assessed and supported on a comparative, international basis to ensure that the Laws are fully compliant with international standards;

• the development of public internal financial control and internal audit in Macedonia is not undertaken in isolation; progress in the development of related areas, budget programming and public finance, must be monitored and taken into account;

• consideration is given to developing the private sector accountancy and auditing sector, in harmony with the developments in the public sector. The aim is to ensure consistency of outcomes, cross-fertilisation of local needs and economy in training requirements, etc.

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• building on the work already undertaken as part of the USAID project, a needs’ assessment is undertaken at the earliest opportunity, to assist the Government in defining the current priorities for the establishment of a system of public internal financial control, and the creation of internal audit based on international standards;

Some international institutions are working to develop effective internal audit in Macedonia, that is fundamental to establishing transparent and accountable public internal financial control.

USAID is currently the key player in the development of Internal Audit in fYROM. The World Bank is very supportive of the initiative. DfiD are supporting a project in related areas.

USAID are supporting a major project, through KPMG Consulting/Barents, covering the reform of the Tax Administration, the Budget, the Treasury and macro-economic policy making. It also provides IT and specialists in criminal tax. It is planned to run until December 2004. As part of this project, a review of Internal Audit was carried out in May 2002, and it is envisaged that support for the development of this area will be undertaken once the other, basic accounting modules have been put in place.

DfiD (Department for international development, UK) are supporting a Public Administration Reform project in fYROM. It started in February 2001, and is due to run until December 2002. The project aims to assist the Government to develop a transparent and accountable system of state administration, meeting the standards of public administration in the EU. It has no direct links to the development of Internal Audit, but the project’s objectives are fully compatible with such a development.

The World Bank is supporting the public sector management reform program under the Public Sector Management Adjustment Loan (PSMAL) (US$30 million) which will support measures to consolidate improvements in budgetary planning and execution, such as the implementation of control over commitments by budget entities, the introduction of new audit and procurement practices, and assistance with civil service reform and with improving social sector expenditure management.3

It recognises though that there is limited capacity to absorb the many changes needed. The World Bank has, for example, been willing to support training for Internal Audit staff (and the State Audit Office). The World Bank has been working closely with the Dutch Government in this area but no training has yet been undertaken.

3 The World Bank approved a total of US$49. 8 million for three projects: the US$30 million Public Sector Management Adjustment Loan (PSMAL), the US$ 9.8 million Social Protection Implementation Loan (SPIL) and the US$10 million Health Sector Management Project (HSMP) for FYR Macedonia.

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5. Combating Corruption One of the problems of the Macedonian public administration is the high level

of corruption of its public officials. This reduces the efficiency of the administration and makes it more difficult to enhance sensible reforms and to implement the budget.

Corruption, especially at high levels of government, is endemic. It has evolved from passive exploitation to active coercion, and has acquired the capacity not only to retard economic progress, but also to feed organised crime and, in turn, political and communal instability. In effect, the state has come to function in important respects as a “racket”, while the racketeers thrive in a culture of impunity.

In 2002 a Law on Prevention of Corruption was adopted (Official Gazette of the Republic of Macedonia, No. 28/02). In 2003 the Government designed a Strategy for Combating Corruption.

The State Commission for Prevention of Corruption was formed in 2002 and it is responsible for preventing and fighting corruption. The Commission is independent in its work. The members of the Commission are appointed and dismissed by the Sobranie with a mandate of four years. The Commission has seven members from whom a Chairman is elected with a one-year mandate, with no right to another mandate. In June 2003 the Commission established a State Programme for Prevention and Repression of Corruption. The State Commission prepares annual reports of its work and the measures and activities taken and submits these to the President of the Republic, the Sobranie, the Government and the Supreme Court.

Criminal offences related to corruption are regulated in the Criminal Code. According to official statistics of the Ministry of Interior, in the first nine months of 2003, 663 criminal cases related to corruption were investigated and 872 criminal charges were imposed.

Holders of public functions (elected or appointed officials, civil servants, public employees and responsible persons in a public enterprise and other legal entity managing state capital) have to fill in a questionnaire in which they report their incomes and possessions, within 30 days of taking up their duties. The questionnaires are submitted to the State Commission for Prevention of Corruption and to the Office for Public Income. Holders of public functions have to report every change in income or possessions to these organs.

In spread of the effort, it seems that the corruption problems are not at the end: judicial power does not seem to be independent from the political, and it seems that the State Commission for the Prevention of Corruption does not investigate deeply and at the higher political levels.

6. Deconcentration and Decentralisation Deconcentrated State Administration - There is no regional government in

the Republic of Macedonia. State administration is deconcentrated. There is no

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integrated regional state administration in the form of general-purpose central offices at the sub-national level. Instead, most ministries have their own regional units that are legally part of the respective ministry. Their legal basis is contained in the Law on Administrative Organs. Regional units work under the supervision of the corresponding ministry. The respective minister appoints the heads of the regional units, and they are obligated to act in accordance with the ministry’s policy.

Local Self-government - Local self-government is regulated by the Law on Self-government (Official Gazette of the Republic of Macedonia, No. 05/02). Macedonia has an one-level local government system. There are 123 municipalities, including the capital, the City of Skopje, which has a special status according to the Constitution. The functioning of the City of Skopje is regulated with a separate law that was adopted in 2004. The main competences of municipalities include the following: urban planning (which includes urban and rural), issuing approvals for construction of objects of local significance established by the law, protection of the environment, local economic development, communal services, culture, social welfare, child care and education, and health care.

The Council and the Mayor are the organs of the municipality. The Mayor is elected in direct elections by secret ballot for a four-year term of office. The main responsibilities of the Mayor are: to represent the municipality; to control legality of the regulations of the council; and to propose the annual budget of the municipality. The main responsibilities of the Council are: to adopt the statute of the municipality and other regulations; to adopt the Budget of the municipality; to set up public services within the competence of the municipality and oversee their work.

The funding of the local self-government units is provided from: taxes, fees; supplementary income from the Budget of the Republic, in accordance with a special law; income from donations received from the state and from abroad; other income given to the local self-government units on various bases in accordance with the law, and raising loans from the budget of the Republic.

In working within their competence, municipalities may collaborate mutually. For the purpose of implementing common interests and carrying out common activities, they may pool their resources and means, and form common public services in accordance with the law. For the purpose of carrying out certain functions, municipalities may also form common administrative bodies in certain fields, in accordance with the law.

Development of a decentralised government still requires significant legislative reforms. The implementation of the fiscal decentralisation process and, in particular, the strengthening of the capacity of local entities to manage expenditure and collect revenues, remains a great challenge. Establishing and developing a modern and unified system of financial reporting within local self-government units is needed.

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Marocco

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Budget public, comptabilité et système de contrôle. Organisation budgétaire et reddition des comptes au Maroc : contraintes et perspectives

Pr. Mohamed HARAKAT

• Professeur des finances publiques à l’université Mohammed v – Souissi Rabat (Maroc)

• Directeur fondateur de la Revue Marocaine d’audit et de Développement,

• Directeur de l’UFR « gouvernance et stratégie des organisations »,

• consultant en Gouvernance des organisations • membre du comité permanent de gouvernance Gold Maghreb

–PNUD Naples (Italie) -1-2 Décembre 2004

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Note méthodologique La gestion des finances publiques au Maroc est aujourd’hui en pleine

mutation. La généralisation de la nouvelle approche de gestion budgétaire dans la perspective de substituer la logique de résultat à la logique de moyens qui prévaut actuellement, à travers la globalisation des crédits, l’accélération du processus de déconcentration, le renforcement du contrôle, l’exigence de transparence exprimée par l’opinion publique sont autant de facteurs d’évolutions et de réformes qui sont loin d ‘être achevés.

L’objectif de l’intervention : Cette communication consiste à : exposer les fondements institutionnels et juridiques de l’organisation

comptable et financière et du système de contrôle des finances publiques au Maroc, dégager les spécificités de l’organisation comptable, budgétaire et financière

du Maroc, définir les contraintes des structures budgétaire et financières et les

conditions d’une bonne gouvernance des finances publiques. Hypothèses de départ : définir le développement historique l’état des lieus de l’organisation

comptable et financière au Maroc déterminer les nouvelles missions et rôles des finances publiques dans la

bonne gouvernance dégager les contraintes de l ‘organisation budgétaire et du système de

contrôle, avancer une stratégie de développement du système de gestion et de contrôle (contrôle interne, audit, évaluation des politiques publiques).

Plan de l’intervention : Iere partie Généalogie de l’organisation comptable, budgétaire et financière

marocaine développement historique (protectorat français- indépendance, organisation

actuelle) origine et développement de la comptabilité publique et des structures

régissant les décisions budgétaires (constitution, lois, loi organique des finances, règlement, jurisprudence)

création des organismes de contrôle et d inspection (IGF, cour des comptes, commissions d enquête).

Deuxième partie Anatomie de l’organisation budgétaire et des structures de contrôle

financier au Maroc les principes de séparation des pouvoirs et de contrôle marquant

l’organisation comptable et financière du Royaume (ordonnateurs, contrôleurs et comptable)

les organes d’élaboration du budget (gouvernement, ministère des finances, parlement),

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les organes de contrôle (contrôle financier préalable, contrôle administratif, contrôle opéré par les juridictions financières, contrôle politique, l’opinion publique).

Troisième partie : Physiologie des instances de gestion et de contrôle missions et compétences des instances de gestion, missions et compétences des comptables et des contrôleurs financiers, missions et compétences des juridictions financières les contraintes communes des instances de gestion et de contrôle les contraintes spécifiques de la gestion publique et les impératifs de la bonne

gouvernance financière et administrative. proposition de réforme ;

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LE SYSTEME BUDGETAIRE AU MAROC

Doct. Maria Maggio

1.Introduction Ce rapport vise à mettre en relief la politique budgétaire mise en œuvre du

gouvernement. En particulière on évidence, en première lieu, la nouvelle politique de gestion

des dépenses publiques à travers des idées innovatrices comment la globalisation des crédit, la stipulation des contractas entre l’administration centrale et ses services déconcentrés et le partenariat entre l’Etat et les acteurs locaux.

En deuxième lieu on analyse la modernisation du système fiscale en posent l’attention sur les modalités de présentation et exécution du budget, la simplification et l’harmonisation fiscales et la modernisation de l’administration fiscale.

Enfin on met en évidence la structure des budgets des collectivités locales et le rapport entre l’administration centrale et les collectivités locales.

Principaux indicateurs économiques Maroc 2001 2002 2003 2004 2005 PIB (Variation %

a/a)

6,5 3,2 5,2 3,5 4,9

Prix au consommation (Variation % a/a)

0,6 2,8 1,2 2,3 2,6

Production industriel (Variation % a/a)

3,3 2,9 3,3 4,9 5,5

Export (million

US$)

7.142 7.859 8.615 11.542 12.508

Import (million

US$)

10.164 10.997 13.067 14.063 15.172

Balance commerciale

(million US$)

-3.022 -3.139 -4.451 -2.521 -2.664

-en % du PIB

-8,9 -8,4 -9,7 -4,9 -4,9

Déficit public en % du PIB

2,7 4,2 3,5 2,9 3,9

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Principaux indicateurs financiers Dette étranger 2001 2002 2003 Institutions

financiers internationales

5.577 5,687 5,561

Crédit bilatéral 5.734 5.499 4.943 Banques

commerciales 5.577 5.687 5.561

Privé 155 159 158 Total 15.790 15.433 14.388 -en % du PIB 46.6 41.5 34.9

2. La politique budgétaire La politique budgétaire mise en ouvre par le gouvernement vise a maîtriser les

dépenses et a combattre les disparités sociales. La maîtrise des dépenses est axée sur l’amélioration de la gestion publique et

des modalités de présentation et d’exécution du budget, sur la réforme de la gestion des ressources humaines et sur la priorité accordée au social.

Le renforcement de l'efficacité de l'Administration en matière de gestion des dépenses publiques est recherché à travers la mise en œuvre d'une nouvelle approche qui s’articule autour de trois axes principaux :

• assouplir les conditions d’exécution du budget à travers notamment la mise en place de la globalisation des crédits;

• consolider la déconcentration au sein de l’administration publique en instaurant des relations de contractualisation entre l’administration centrale et ses services déconcentrés ;

• instaurer des relations de partenariat notamment entre les services extérieurs et les acteurs locaux.

Cette approche est fondée, d'une part, sur l'amélioration de la programmation budgétaire à travers l'élaboration d'un cadre budgétaire pluriannuel présentant les projections des ressources engagées et le niveau soutenable des dépenses sectorielles.

D'autre part, elle est basée sur la mise en place d'une gestion budgétaire axée sur les résultats et fondée sur la responsabilisation des gestionnaires à travers la mise en place des budgets à le niveau local et national et la mise en place d'un cadre relatif aux modalités de la déconcentration et à l'affectation des dépenses par niveau d'administration.

2.1. La globalisation des crédits Principes et objectifs :

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Dans l'optique d'améliorer l'efficacité et l'efficience de l'administration et de rationaliser les dépenses publiques, une nouvelle approche devant régir le processus de la dépense publique a été mise en œuvre à compter de janvier 2002 en vue de conférer aux ordonnateurs et sous ordonnateurs plus de responsabilité en matière de gestion de la dépense publique.

La première mesure concrète dans ce sens porte sur la globalisation des crédits qui constitue un outil important au service d'une dynamique de modernisation de la gestion des finances publiques basée sur une meilleure programmation et exécution de la dépense publique d'une part, et une meilleure adaptation du contrôle de celle-ci d'autre part.

Les principaux objectifs assignés à la globalisation des crédits sont : • améliorer l’efficacité et l’efficience de l’administration ; • octroyer une plus grande autonomie aux services

gestionnaires dans l'utilisation de leurs dotations budgétaires ; • renforcer la déconcentration, en tant qu'axe fondamental de

la réforme de l'administration ; • améliorer la programmation, l’exécution et le contrôle de la

dépense publique; • simplifier les procédures budgétaires et assouplir le contrôle; • accroître davantage la responsabilisation des gestionnaires

des services déconcentrés en matière de prise de décision administrative et financière.

Pour bénéficier de cette nouvelle procédure, chaque Ministère doit satisfaire des conditions d'éligibilité qui sont:

• la restructuration de la morasse budgétaire (fonctionnement et investissement) du ministère concerné en vue de disposer de paragraphes cohérents, destinés chacun d'eux à la réalisation d'un programme, d'un projet, ou d'une action homogène en vue d’assurer principalement l’efficacité de la dépense publique et de lisibilité du budget de l’Etat.

• la définition d'indicateurs d'objectifs. Le corollaire logique de la flexibilité d'emploi des crédits dans un même paragraphe consiste en la définition d'indicateurs d'objectifs chiffrés permettant d'établir un lien entre les crédits alloués à l'action, programme ou activité et les résultats visés et attendus de l'utilisation de ces crédits.

L'intérêt de ces indicateurs d'objectifs et de résultats est de donner à chaque Ministère, au gouvernement ainsi qu'au parlement, des outils de gestion et de contrôle leur permettant, chacun en ce qui le concerne, de procéder à la programmation, l'exécution et le contrôle de la dépense publique d'une manière plus efficace et plus efficiente.

Les administrations qui n'ont pas pu satisfaire les conditions préalables à la mise en place de la globalisation ont été autorisées à titre exceptionnel de demander à bénéficier de cette nouvelle procédure en cours d’année sous réserve

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de produire des documents englobant les indicateurs d'objectifs chiffrés au regard des crédits alloués au titre de chaque paragraphe.

Les modalités de mise en œuvre La circulaire du Ministre chargé des Finances n° 483/E du 28 Février 2002

adressée aux membres du gouvernement et concernant les mesures d'application des nouvelles dispositions relatives aux virements de crédits vise à fixer les mesures concrètes de transfert de crédits entre lignes d'un même paragraphe du chapitre de matériel et dépenses diverses et du chapitre d'investissement du budget en introduisant plus de souplesse au niveau des opérations à réaliser par les ordonnateurs et les sous ordonnateurs lesquels pourront désormais procéder au redéploiement des crédits qui leur sont délégués.

En vue de consolider les nouvelles dispositions relatives au virement de crédits par des procédures souples et simples, un plan novateur en matière de contrôle et de circulation de l'information a été envisagé et porte sur :

a. le contrôle de la disponibilité des crédits à redéployer sur proposition des sous ordonnateurs à l'échelle des services déconcentrés du contrôle ;

b. l'établissement d'un état récapitulatif semestriel de l'ensemble des virements opérés au niveau de chaque département concerné.

Cet état, visé par le service du contrôle des engagements de dépenses, remplacera les décisions individuelles de virement et servira comme pièce comptable pour la loi de règlement de l'exercice budgétaire considéré.

2.2.Contractualisation entre l’administration centrale et ses services déconcentrés

La contractualisation des relations entre les administrations centrales et leurs services déconcentrés s’inscrit dans une optique basée sur l'amélioration des performances et le renforcement de l'autonomie et de la déconcentration et définit les engagements réciproques en matière d’objectifs à atteindre et de moyens humains et matériels à mobiliser au profit des services déconcentrés en vue de réaliser lesdits objectifs.

La mise en oeuvre de cette nouvelle approche de gestion budgétaire basée sur

l'évaluation des résultats modifiera la nature des relations existantes entre les administrations centrales et leurs services déconcentrés dans la mesure où ces derniers procéderont à la gestion de leurs ressources humaines et financières et à la réalisation de leurs programmes d'action sur une base contractuelle en concertation avec les administrations centrales.

2.3.Partenariat Etat - Acteurs locaux Parallèlement aux mesures de déconcentration de crédits, l’Administration et

particulièrement ses services déconcentrés renforceront leurs relations partenariales avec les acteurs locaux (Collectivités Locales, secteurs associatif et privé) pour

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optimiser leurs prestations et apporter une réponse de proximité aux besoins exprimés par les populations à travers notamment :

1. la participation et la mise en commun des ressources humaines, matérielles ou financières en vue de la réalisation de prestations sociales, de projets de développement ou de la couverture de services publics;

2. la dispense du visa de la direction du budget des décisions d’octroi d’une contribution publique aux associations au titre des projets de partenariat.

Objectifs du partenariat • mettre en place une administration de proximité ; • définir un nouveau cadre de partenariat conforme aux

principes de bonne gouvernance entre les administrations déconcentrées et les intervenants locaux (collectivités locales, associations, secteur privé) pour optimiser les prestations et les services rendus ;

• accroître les capacités d’action de l’Etat et de ses partenaires pour permettre une plus grande mobilisation des ressources disponibles ;

• renforcer la coordination et l’équilibrage des relations entre les partenaires par la mise en place d’un cadre conventionnel adéquat axé sur l’appréciation des résultats ;

• inscrire dans l’espace territorial des actions partenariales dans le cadre du renforcement du processus de déconcentration et de décentralisation.

Modalités de mise en œuvre du partenariat • Institution, par chaque Ministère concerné, aux niveaux

central et déconcentré de comités d’éligibilité chargés de statuer sur l’opportunité et le niveau de financements publics de ces projets;

• octroi de la contribution financière publique sur la base de critères objectifs, transparents précisés dans le cadre d’un manuel de procédures à élaborer par chaque département concerné, ainsi que sur la base de comptes certifiés lorsque la contribution publique annuelle est supérieure à 300.000 DH;

• évaluation et suivi des projets exécutés en partenariat à travers l’établissement par les départements concernés d’un rapport semestriel faisant ressortir le bilan de l’exécution de ces projets tant sur le plan physique que financier et comptable et établissement d’un rapport national sur l’état du partenariat et les mesures permettant d’assurer une meilleure efficacité des relations partenariales.

En définitive, les nouveaux dispositifs budgétaires décrits ci-dessus permettent de :

1. renforcer la déconcentration et améliorer l’efficacité et la transparence de la dépense publique ;

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2. instituer une nouvelle vision budgétaire permettant de répondre aux besoins de proximité et améliorer le rendement de l’administration ;

3. adapter en permanence les procédures budgétaires aux objectifs de responsabilisation et d’assouplissement en contrepartie de la réalisation de performances prédéfinies ;

4. impliquer les départements ministériels à travers des mesures d’accompagnement tendant à adapter leurs modes de management, à améliorer leurs systèmes d’informations et à développer une culture d’audit et d’évaluation.

3.La modernisation du système fiscale

3.1.Présentation et exécution du budget La réforme du règlement général de comptabilité publique et la mise en place

d’un nouveau plan comptable de l’Etat s’inscrivent dans le cadre de la réforme d’ensemble des textes financiers (Loi Organique des Finances, Code de Recouvrement, Code des Juridictions Financières, Loi relative à la responsabilité des ordonnateurs, des contrôleurs et des comptables publics…).

Suite à la réforme de la nomenclature des dépenses, il est envisagé d’intégrer la dimension «régionale» et de «projet» dans la nomenclature budgétaire et d’adapter cette dernière aux exigences d’une information financière fiable et transparente. Cela suppose la mise en place de normes et de procédures en vue d’optimiser les ressources consacrées à la réalisation des objectifs de la politique économique menée par les pouvoirs publics.

A cet effet, l’amélioration des méthodes de prévision et la mise en œuvre de la nouvelle approche de préparation budgétaire basée sur la programmation pluriannuelle et la gestion intégrée de la dépense (GID) seront d’un grand apport. La réalisation de cette dernière, en particulier, permettra de rationaliser et de simplifier les procédures, d’accélérer le traitement de la dépense et de disposer d’une information à jour et fiable.

La maîtrise des dépenses est fondamentale pour l’assainissement des finances publiques, mais elle n’est pas suffisante. Elle nécessite en parallèle l’amélioration des recettes ordinaires hors privatisation en général et les recettes fiscales en particulier.

3.2.Simplification et harmonisation fiscales Une série de mesures a été prise en vue de simplifier et d'harmoniser le

système fiscal. Les plus importantes se rapportent à l’intégration dans l’impôt sur les sociétés et dans l’impôt général sur le revenu de plusieurs taxes cédulaires, la mise en place d’une déclaration unique IS/TVA ou IGR/TVA et la réduction du niveau des taux des droits d’enregistrement et de timbre.

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Les attributions des commissions locales de taxation et de la commission nationale de recours fiscal ont été renforcées en intégrant le recours relatif aux droits d’enregistrement par l’institution d’un barème d’évaluation des livraisons à soi-même en matière de TVA sur les constructions.

Les mécanismes de lutte contre la fraude fiscale ont été renforcés et le système de gestion intégrée des impôts est en cours de généralisation.

D’autres mesures ont permis d’assurer la cohérence de certaines dispositions du Code du recouvrement avec la réglementation en vigueur, notamment les majorations de retard, le calcul de la valeur en douane conformément aux standards internationaux et l’alignement du traitement fiscal des contrats des groupements d’intérêt économique sur celui des sociétés.

Pour ce qui est de la fiscalité extérieure, après la révision du Code des douanes, les mesures les plus importantes ont concerné l’intégration du prélèvement fiscal à l’importation dans le droit d’importation, l’assouplissement des sanctions et l’institution des commissions consultatives en matière de litige entre l’Administration et les usagers.

Les efforts de modernisation du système fiscal seront poursuivis en vue d’aboutir à une simplification et une meilleure harmonisation des impôts et taxes nationaux. Ces mesures concerneront en 2004, essentiellement, le réaménagement des taxes relatives aux droits de l’enregistrement.

La simplification et harmonisation fiscales devraient permettre, à terme, d’élaborer le Code Général des Impôts.

3.3.Modernisation de l’Administration fiscale Parallèlement aux mesures liées au dispositif réglementaire, la politique fiscale

s’assigne également comme priorité, la modernisation de l’Administration fiscale et l’amélioration de son efficacité en vue de renforcer les recettes fiscales, notamment à travers la lutte contre la fraude et l’évasion fiscales.

Les actions de modernisation de l’Administration fiscale passent essentiellement à travers une gestion rationnelle des ressources, la valorisation des ressources humaines, le rehaussement du niveau d’encadrement, le renforcement du contrôle, la déconcentration, le développement du système d’information, l’harmonisation des procédures et la mise en place de systèmes de suivi des performances.

Sur le plan externe, il est programmé de renforcer l’assistance mutuelle en matière fiscale avec les administrations fiscales étrangères et de rendre plus marquée la présence de la Direction Générale des Impôts sur la scène internationale. Par ailleurs, il sera procédé à la révision des conventions signées auparavant et au développement du réseau des conventions fiscales internationales.

La finalité de ces actions est de doter le pays d’une Administration fiscale moderne et performante caractérisée par un contrôle de gestion performant, une utilisation développée des nouvelles technologies de l’information et un service de qualité rendu aux contribuables.

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3.4. Enjeux des finances publiques Les politiques budgétaire et fiscale décrites présentent les actions et mesures

menées et qui seront poursuivies pour limiter les effets d’un certain nombre de contraintes qui pèsent sur le développement des recettes et la maîtrise des dépenses.

Pour infléchir la situation actuelle les orientations des pouvoirs publics en matière économique et financière devraient s’articuler autour du renforcement à moyen terme de la croissance économique, de la stabilisation du cadre macro-économique, du maintien des équilibres fondamentaux et, enfin, de la réalisation d’une épargne publique suffisante à même de reconstituer les marges de manœuvre et de couvrir une large part des investissements publics tout en renforçant leur importance.

Dans ces orientations, les politiques financières publiques s’avèrent déterminantes, notamment en ce qui concerne la garantie de la soutenabilité des finances publiques.

Le niveau du déficit budgétaire hors privatisation, à moyen terme, ne devrait pas excéder 3% du PIB.

La réalisation de cet objectif fait appel à la stimulation des conditions de croissance de l’économie nationale, à l’amélioration des recettes fiscales en vue de maintenir la pression fiscale à un niveau satisfaisant et à une réelle maîtrise des dépenses publiques.

3.4.1.Nécessité de maîtriser les dépenses publiques Les dépenses publiques devraient être maîtrisées et rationalisées de manière à

ce que le rythme de leur progression soit inférieur à celui des recettes fiscales. Dans ce sens, les pouvoirs publics comptent réduire le poids de la masse salariale à moyen terme à moins de 10% du PIB.

Les actions envisagées concernent notamment l’encouragement des départs anticipés à la retraite, la limitation des recrutements au renouvellement partiel des départs à la retraite et le redéploiement du personnel de l’Etat.

Ces actions devraient être appuyées par des mesures visant la réduction du train de vie de l’Etat de manière à réaliser des économies de dépense conséquentes et par le ciblage des dépenses de compensation pour pallier les insuffisances actuelles et garantir l’allocation de ces subventions aux populations défavorisées.

La maîtrise des dépenses publiques suppose par ailleurs l’amélioration des performances du secteur public de manière à réduire les transferts de l’Etat aux entreprises publiques et améliorer la contribution de ces entités quant aux recettes non fiscales, et à renforcer le potentiel d’offre de l’économie nationale.

La réduction des dépenses de l’Etat fait appel aussi à la poursuite de la politique de gestion active de la dette, aussi bien interne qu’externe, en vue de réduire les charges en intérêts de la dette publique.

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3.4.2.Enjeux en terme de recettes La maîtrise des dépenses est fondamentale dans l’assainissement des finances

publiques, mais elle n’est pas suffisante. Elle nécessite en parallèle l’amélioration des recettes ordinaires hors privatisation en général et les recettes fiscales en particulier.

L’ouverture de l’économie nationale et le démantèlement tarifaire vis-à-vis de l’Union Européenne se traduiraient à moyen terme par une perte de recettes de près de 1,5 point du PIB.

Cette perte serait plus importante si l’on y ajoute les répercussions sur les recettes de l’Etat de l’accord en cours de négociation avec les Etats Unis. Ces moins-values fiscales résultant de la déprotection douanière devraient être plus que compensées par les autres recettes fiscales et non fiscales.

Des mesures compensatoires s’avèrent donc nécessaires pour stabiliser la pression fiscale.

Pour y parvenir, il serait nécessaire de poursuivre la modernisation et l’amélioration du rendement de l’Administration fiscale, de poursuivre la simplification du système fiscal et d'élargir les bases taxables, notamment à travers la révision des exonérations et le renforcement des moyens de lutte contre la fraude et l’évasion fiscales.

L’ensemble des actions et mesures afférentes à la maîtrise des dépenses et au renforcement des recettes devraient aboutir, à moyen terme, à la réduction du déficit budgétaire.

4.Structure des budgets des collectivités locales Les budgets des collectivités locales ont été élaborés sur la base d’un ensemble

d’orientations visant à rapprocher la prévision budgétaire de la réalité financière des collectivités locales, à assurer les équilibres budgétaires et à accroître la propension à la formation de l’épargne et à l’investissement. 4.1. Dans la domaine des recettes

Les ressources mises à la disposition des collectivités locales (régions, provinces, préfectures, communes) sont constituées de recettes provenant essentiellement de :

• la fiscalité locale (15 %) ; • la fiscalité affectée par l’Etat aux collectivités locales (27 %)

notamment la taxe urbaine, la taxe d’édilité et l’impôt des patentes ; • la fiscalité de péréquation versée par l’Etat aux CL sous

forme de dotations globales TVA (58 %) et les recettes patrimoniales ;

• sources de financement externes, sous forme de prêts pour la couverture de leurs besoins de financement des dépenses d’investissement.

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4.2. Dans la domaine des dépenses En dehors des deux postes de dépenses obligatoires que sont les dépenses de

personnel et les annuités d’emprunt, les prévisions des dépenses à caractère stable et régulier ont été estimées sur la base de la moyenne annuelle des trois derniers exercices.

Il s’agit notamment des dépenses du parc automobile, de la consommation publique d’eau et d’électricité, et des frais de l’administration générale, avec une marge d’ajustement qui se situant dans une fourchette de 5 à 10 %.

Pour l’année 2002, à l’instar des années antérieures, les budgets des collectivités locales ont été examinés par une commission composée des représentants des ministères de l’Intérieur et des Finances et de la Privatisation. Cette opération a concerné les 426 entités décentralisées suivantes :

16 régions ; 71 provinces et préfectures ; 14 communautés urbaines ; 249 communes urbaines ; 25 budgets annexes et 51 syndicats. Le montant global prévisionnel des budgets locaux qui a atteint 12.608 MDH

en 2002 est ainsi réparti : • Dépenses de fonctionnement: 10.051 MDH • Dépenses d’investissement : 2.557 MDH

Les budgets des communes rurales au nombre de 1.298 et qui ne représentent que le 25 % environ du volume global des budgets des C.L. sont approuvés, au niveau local, par les gouverneurs et visés par les receveurs des finances relevant de la Trésorerie Générale du Royaume et dont la mission consiste à contrôler la régularité des engagements de dépenses locales en sus de leur mission d’exécution des budgets et de comptables.

4.3.Comptes d'affectation spéciale, outils budgétaires annuels Au nombre de 78 en 1992, les comptes d'affectation spéciale (CAS) des

collectivités locales ont atteint 194 en 2002, soit plus d’un dédoublement en 10 ans. Quant au financement prévu dans le cadre de ces CAS, il est évalué globalement à 9,8 milliards de dirhams (montant prévisionnel pluriannuel). La structure du financement reste dominée par les recettes propres des projets objets de CAS avec 84 %, suivies par les contributions des budgets principaux (7,5 %), des prêts bancaires (3%), des prêts FEC (3,5 %) et de subventions d’organismes ou de fonds publics (2%).

Durant l’année 2002, 8 comptes d’affectation spéciale furent créés, mobilisant 90 MDH. Par ailleurs, un compte de dépense sur dotations (CDD) fut ouvert au budget de la région Rabat-Salé –Zemmour-Zair pour un montant de 63,54 MDH en vue de domicilier la contribution du Fonds Hassan II pour le développement économique et social. Ce montant est destiné à la réalisation du parc industriel ain Johra.

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Les CAS ainsi créés portent sur des projets relatifs à la réalisation de lotissements communaux (47%), à l’habitat social ou à usage commercial (53%). Quant au CDD ouvert, il vise la promotion de l’investissement et de l’emploi dans la collectivité concernée.

4.4. La mise en application de la nouvelle nomenclature budgétaire des CL

Les collectivités locales ont inauguré l’exercice avec une nomenclature budgétaire complètement rénovée.

Il devenait nécessaire non seulement d’adapter les principes et l’architecture du document budgétaire à l’évolution des rythmes de la décentralisation et aux nouveaux rôles des collectivités locales mais aussi d’appliquer au budget et à la comptabilité des collectivités territoriales les principes et les normes comptables universelles pour permettre la consolidation de la comptabilité et des comptes nationaux.

Cette nouvelle nomenclature repose, à l’instar du budget général, sur une classification fonctionnelle et économique, assurant la cohérence et la lisibilité des agrégats financiers des collectivités locales, et facilitant la surveillance et le suivi des résultats et des performances.

4.5. Fiscalité locale L’objectif du projet de réforme de la loi 30- 89, relative à la fiscalité des

collectivités locales et de leurs groupements, est de mettre en place un système fiscal local transparent, simple, cohérent et évolutif, en procédant à :

• la réduction du nombre des impôts et taxes ; • l’amélioration du rendement de la fiscalité locale ; • le redressement de certaines imperfections de la loi 30-89.

Principaux éléments de la Réforme de la Fiscalité Locale La réduction du nombre des

impôts et taxes Amélioration du rendement

de la fiscalité locale Redressement de certains

imperfections de la loi n° 30-89 • Suppression de 11

taxes (sur 40) représentant 8% environ du produit global de la fiscalité locale

• Regroupement de 5 taxes et redevances en 2 seulement.

• L’instauration d’un système de fourchette de taxation comportant un minimum et un maximum ;

• L’élargissement de la base imposable de certains taxes ;

• La révision à la baisse des abattements appliques à la taxe d’édilité ;

• L’extension du champ d’application de certains taxes et redevances aux communes rurales ;

• La création de nouvelles taxes, participations et d’un redevance ;

• Délimitation des attributions de chaque organe du recouvrement ;

• Rectification du délai réglementaire de déclaration et de paiement ;

• Rationalisation des procédures ;

• Renforcement du contrôle de la matière imposable.

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4.6.Mise a niveau des finances locales Depuis 1960, date de la promulgation de la première charte communale, le

Maroc s’est, par phases successives, organisé en collectivités locales aux niveaux communal, provincial et régional, dotées d’assemblées élues et jouissant d’une large autonomie administrative et financière. Leur existence est garantie par la constitution ainsi que leur fonctionnement démocratique. Un important dispositif législatif garantit à ces collectivités locales un vaste domaine de compétences et des ressources financières et fiscales correspondantes.

On mettra l'accent sur les trois axes suivants : • Les ressources des collectivités locales; • Le contrôle budgétaire; • Les actions de réformes.

Au préalable, il convient de s'appesantir sur les missions et attributions de la Direction du Budget concernant les aspects de gestion budgétaire liés au dossier des finances locales.

En vertu du dispositif légal et réglementaire régissant l’organisation et le fonctionnement des collectivités locales, le Ministère des Finances et de la Privatisation assure la tutelle financière de celles-ci.

Dans ce cadre, la Direction du Budget est chargée, après étude et contrôle, du

visa des : 1. budgets des collectivités locales et de leurs groupements à

l’exception des budgets des communes rurales qui relèvent des attributions de la T.G.R. ;

2. documents pouvant modifier les budgets initiaux des collectivités locales au cours de la gestion budgétaire (autorisation spéciale, modification du tableau des effectifs…) ;

3. opérations relatives aux budgets annexes et aux comptes d’affectation spéciale des CL ;

4. dossiers de prêts pour le financement des projets d’équipement des collectivités locales auprès du Fonds d’Equipement Communal.

4.7.Sources de financement des collectivités locales 1. Faiblesse des ressources patrimoniales des CL Les transactions immobilières « acquisitions, cessions, échanges des domaines

public et privé des collectivités locales » sont concrétisées habituellement par des décrets et arrêtés soumis au visa du département chargé des finances.

Avec la lettre Royale du 9 janvier 2002 destinée à Monsieur le Premier Ministre relative à la gestion déconcentrée de l’investissement, les délibérations des conseils communaux relatives aux acquisitions, cessions et échanges d’immeubles suscités sont désormais approuvées par :

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• le Ministre de l’Intérieur lorsque le montant de l’acquisition, de la cession ou de l’échange est supérieur à 2,5MDH ;

• le Wali de la région concernée lorsque le montant est égal ou inférieur à 2,5 MDH.

• Les dossiers traités du 1 janvier 2002 au 7 mars 2002, date de la publication au bulletin officiel des textes de délégation des pouvoirs aux Walis, ont été au nombre de 95.

2. Poids marginal de la fiscalité propre des CL Les arrêtés relatifs à la fiscalité locale, les décisions relatives à la part des

régions dans le produit de l’impôt sur les sociétés et de l’impôt général sur le revenu ainsi que les décisions relatives à l’attribution aux régions de leur part dans le produit de la taxe additionnelle à la taxe sur les contrats d’assurance ont été examinés par la Direction du Budget. Au titre de l’année 2002, 251 arrêtés et décisions fiscaux ont été visés.

3. Importance de la part des CL dans le produit de la TVA La part des collectivités locales dans le produit de la TVA structure

profondément, depuis son institution en 1986, les finances locales. Au titre de l'année 2002, le volume prévisionnel, autorisé par la loi de finances, de cette part s’élève à 7.005.429.000 dirhams, soit exactement 30% du produit global de la TVA comme le stipule l’article 65 de la loi 30-85 relative à ladite taxe. Depuis l’exercice budgétaire 1996/1997, les dotations TVA/CL font l’objet d’une péréquation entre les collectivités locales fondée sur un nouveau système de répartition intégrant des critères de partage tels que « la population » et « la superficie » pour les provinces et les préfectures et « le potentiel fiscal » et « la promotion des ressources propres » pour les communes.

Les dotations TVA attribuées aux CL, au titre de l’année 2002, ont été réparties comme indiqué cidessous:

Dotations (en millions)

Provinces & préfectures

Communes Urbaines

Communautés urbaines

Communes rurales

TOTAL %

Dotations globales

1 409 1 997 198,6 1 984,5 5 589,1 85,5

Dotations spéciales

284,3 199 114,7 3,4 601,4 9

Dotations de transfert

0,2 39,3 39,5 0,5

Charges communes

308,1 5

Cet tableau indique que: • les préfectures et provinces ont bénéficié, au titre de l’année

2002, de près de 1,7 milliards de DH, soit 26% des dotations servies aux CL en guise de leur part dans le produit de la TVA. Ce montant est constitué de 25% des dotations globales, soit 1,4 milliards DH et de 47% des dotations spéciales, soit 284 millions de DH.

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• Comparativement à l’exercice 2001, la part de ces collectivités dans la TVA/CL a enregistré une évolution de 9,5%. Cette dernière est due notamment à l’augmentation de leur part dans les dotations spéciales, qui est passée de 137 millions de DH à 284 millions de DH et qui a financé essentiellement la régularisation de la situation administrative du personnel local.

• Les communes et communautés urbaines ont, quant à elles, reçu 39,5% des dotations globales, soit près de 2,2 milliards de DH ; 52% des dotations spéciales, soit 314 millions DH et seulement 0,5% des dotations pour charges transférées, soit 0,2 millions DH. Ces collectivités ont ainsi drainé 38% des dotations TVA/CL effectivement réparties en 2002 correspondant en volume à 2,5 milliards DH, dont 314 millions au profit des communautés urbaines. Les dotations de la TVA accordée à ces CL ont enregistré un recul de 3,7% par rapport à l’exercice 2001. Cette baisse est la conséquence, notamment, de la diminution de leur part dans les dotations spéciales. Cette dernière a été de 314 millions de DH en 2002 contre 500 millions de DH en 2001, et ce au profit des provinces et préfectures, qui ont vu leur part au titre des dotations spéciales augmentée.

• Les communes rurales ont profité de 31% de la TVA/CL distribuée en 2002, soit l’équivalent de 2 027 millions de dirhams, soit une légère diminution par rapport à l’année antérieure, où cette part a été estimée à 2.073 millions de DH. Elles ont été les principales bénéficiaires des dotations pour charges transférées avec une part de 99,5% et un volume de 39 millions de DH (PAGER/PERG). Cependant, elles n’ont bénéficié que de 1% des dotations spéciales (3 millions DH). Leurs budgets ont été financés à concurrence de 35,5% à partir des dotations globales, soit l’équivalent de 1.984 millions de DH.

4.8. Répartition des dotations TVA entre le milieu rural et le milieu urbain

Si la répartition des dotations TVA entre les 16 régions montre des inégalités, selon la dimension administrative, démographique et économique des régions et aussi selon la nature des dotations TVA, une comparaison des structures urbaines et rurales dans cette ressource peut s’avérer intéressante.

4.8.1. Milieu urbain On entend par « les dotations versées au milieu urbain » l’ensemble des

dotations, toutes catégories confondues, excepté celles pour charges communes, accordées aux préfectures, provinces, communes et communautés urbaines.

Les dotations pour charges communes sont gérées au niveau central, elles couvrent des dépenses de fonctionnement et d’équipement au niveau central, des

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charges de fonctionnement communes à l’ensemble des CL et des dépenses de solidarité avec le milieu rural. On ne peut, dès lors, distinguer précisément la part attribuée au monde urbain de celle accordée au monde rural.

Ainsi, on observe que le milieu urbain a profité d’une proportion de 67% des dotations TVA (hors charges communes), soit l’équivalent de 4.202.672.507 DH (contre 4.152.622.259 DH, en 2001). Mais, seulement 188.585.400 DH (soit 4,5% de cette ressource) ont été utilisés pour des projets d’investissement.

4.8.2. Milieu rural On entend par « les dotations versées au milieu rural » l’ensemble des

dotations, toutes catégories confondues, excepté celles pour charges communes, qui sont transférées des budgets des préfectures et provinces aux budgets des communes rurales (dotations globales et dotations de soutien), et celles qui sont destinées à couvrir des dépenses d’équipement dans les zones rurales (dotations spéciales et dotations pour charges transférées).

Le milieu rural a bénéficié d’une contribution TVA d’une valeur de 2.027.250.524 DH contre 2.073.305.134 DH en 2001, soit 33% de la TVA hors dotations pour charges communes.

Cependant, uniquement 41.704.300 DH, soit 3% de cette ressource, (contre 60.123.782 DH en 2001) ont été utilisés pour couvrir des charges d’investissement.

Le tableau ci-après fait ressortir la répartition des dotations TVA en fonction du milieu (2002).

Milieu de

résidence Urbain Rural Total %

Fonctionnement 4 014 087 107

1 985 546 224

5 999 633 331

96

Equipement 188 585 400 41 704 300 230 289 700 4 Total 4 202 672

507 2 027 250 524

6 229 923 031

100

% 67 33 100

4.9. Affectation des dotations au fonctionnement et à l’investissement Les dotations TVA/CL servent principalement à financer les dépenses de

fonctionnement et subsidiairement les dépenses d’investissement des CL comme le montre le tableau ci-après :

Dotations D.G. D.S D.T. C.C TOTAL %

Fonctionnement 5 589 410 562 125.146 6 124 779 94

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070 953 378 000 331 Equipement 190 813

400 39 476 300

183 000 000

413 289 700 6

Total 5 589 070 953

601 375 778

39 476 300

308 146 000

6 538 069 031

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4.9.1. Dotations de fonctionnement Le volume des dotations TVA affectées au financement des dépenses de

fonctionnement des CL a atteint 6,1 milliards DH, soit 94% de l’ensemble de la TVA/CL.

Cette enveloppe est constituée de : • 100% des dotations globales, soit 5.589.070.953 DH ; • 68% des dotations spéciales, soit 410.562.378 DH (contre

439.690.153 DH au titre de l’année 2001). Ces dotations, dites spéciales, sont destinées théoriquement à renforcer la capacité d’investissement des CL, mais elles sont affectées, en réalité, aux dépenses de gestion;

• 40% des dotations pour charges communes, soit 125.146.000 DH (contre 154.138.091 DH en 2001).

La structure des dépenses couvertes par les dotations TVA/CL reste dominée par les charges de fonctionnement.

Ainsi, 94% du volume de la TVA affecté aux CL, au titre de l’année 2002, a financé des dépenses de fonctionnement de ces dernières.

Ainsi, les CL, sont appelées, plus que jamais, à renforcer et à développer leurs ressources propres, afin de réduire leur forte dépendance vis-à-vis de cette ressource affectée.

4.9.2. Dotations d’investissement Les dotations d’investissement n’ont pas dépassé, durant l’année 2002, la

valeur de 413.289.700 DH (soit 6% du total de la TVA). Cette masse est répartie comme suit:

• 32% des dotations spéciales, soit 190.813.400 DH (contre 228.362.471 DH en 2001) ;

• 100% des dotations pour charges transférées, soit 39.476.300 DH.

• 60% des dotations pour charges communes, soit 183.000.000 DH. Ces dotations ont été destinées à l’acquisition du matériel de bureau, du matériel informatique, technique, de télécommunication et audiovisuel, à l’achat de véhicules (62,5 MDH) et aux travaux d’aménagements au profit des administrations relevant du Ministère de l’intérieur.

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Une dotation de 5.000.000DH a été affectée à la promotion de l’emploi dans les provinces du Sud et une somme de 15.000.000 DH a été versée au Fonds de la protection civile au titre de la participation des CL à ces services.

La très faible part de la TVA/CL affectée au financement des dépenses d’équipement rend impérative la nécessité, pour les CL, de chercher d’autres ressources pour couvrir leurs projets et programmes d’investissement.

Les dotations réservées à cette catégorie de dépenses voient leur part dans les dotations TVA diminuer, et ce depuis que la proportion réservée aux dotations globales est passée de 70% à 75%, ensuite de 75% à 80% et récemment de 80% à 82%, au détriment de la part consacrée à l’équipement.

Répartition des dotations TVA/CL entre fonctionnement et investissement

DOTS SPECIALES CHARGES COM. CHARGES TRANS.

PART DES COLLECTIVITES LOCALES DANS LE PRODUIT DE LA TVA

100%68% 32% 40%

60% 100%

FONCTIONNEMENT (94%)

INVESTISSEMENT (6%)

DOTS GLOBALES

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Serbia

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PUBLIC FINANCES IN THE REPUBLIC OF SERBIA

Biljana Blagojevic

At the end of 90s, the state of the affairs in the public finances in the Republic of Serbia reflected two important problems that need to be solved: Lack of reliability and Lack of transparency.

The public finances were not reliable. The budget and the social funds have been betraying the trust of citizens and companies for years. As an example, in October 2000, the delay in payment of children’s allowances was 24 months, 26 months for the support allowance for the sick and the disabled while farmer’s pensions were three years late.

The public finances were not transparent. Over 40% of all budget revenues in the year 2000 were coming through the so-called special accounts. There were 39 special accounts mainly introduced through decrees or decisions by the Government. Every budget beneficiary had his own account and could spend money for whatever he wanted because there were some special positions in budget called “ special purpose”. Every budget beneficiary had his own accountancy and that’s why the control over the state funds was insufficient and the whole system was very unstable.

A reform of such a system could not possibly have been implemented through a policy of “small steps” and that’s why a fundamental and speedy reform was the optimal strategy for our country.

In February 2002, the Government of the Republic of Serbia passed the Law on the Budget system and that represents the great beginning. Finally we got a document which regulates almost every part of important problems in public finances in previous time.

The budget system in our country comprises the budget of the Republic, the budgets of the local authorities and the financial plans of the mandatory social security organizations. The integrity of the budget system is ensured by a uniform legal basis, use of single budget documentation for drafting budgets, single system of budget accounting, the transfer of information from one budget level to another and use of single budget classification.

The Law on Budget system regulates the planning, preparation and enacting of the budget of the Republic of Serbia and the budgets of the territorial autonomies and local self-government. This Law, through establishment of the Treasury of the Republic, also regulates budget execution, borrowing, issuing of guarantees, debt management and budget accounting and reporting.

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The most important and far reaching innovation of the Law on Budget system was implementation of Treasury system. Founding it, as public institution, the Ministry of Finance abolished all forms of collecting public revenues through sub legal norms and non budgetary accounts and promoted the single account of Treasury. This account encompasses all revenues and outflows. The main targets of this are fiscal discipline and control. Today, all budget beneficiaries are obliged to justify their demands for each period based on equal principles. Every budgetary user has his own limits set for a specified purpose over a period of one year termed as - appropriations and limits set by month – termed as quota. All transactions and business events, including appropriations and quotas, commitments, revenues and receipts, expenditures and other outlays, as well as the state and changes in assets, liabilities and sources of equity are being recorded in the Treasury General Ledger.

Main duties and responsibilities of the Treasury are: 1. Financial planning 2. Management of cash assets 3. Expenditure control 4. Debt management 5. Budget accounting and reporting 6. Management of financial information system When a commitment is required, budget beneficiary can not enter into

purchase contracts without authorization from the Treasury System that the commitment has been recorded. The system will check to make sure there is enough available quota or cash to make the purchase. If there are funds available, the system issues a report and only then the beneficiary may enter into a purchase contract. If no funds are available the Treasury System will reject the commitment and the user may NOT enter into a purchase contract.

The uses of the commitment function are: Enforce better planning of purchases Reserve budget funds in the month the payment of the commitment is

expected. Control overspending by reserving budget appropriations and quotas before

goods and services are purchased and invoices are due for payment Provide basis for cash planning and management Provide enough guarantees for the vendors that cash will be available to pay

invoices All payments for beneficiaries including payments from own-source revenues

must be paid through the Treasury System and each outflow from the budget must be based on bookkeeping documents. The system controls outflows from budget revenues on the basis of a monthly quota. All transactions are being recorded in the Treasury’s new accounting system which has a steering function of all public payments and directly controls whether budgets funds are being properly spent.

Apart from that, public payments are being controlled by two other sides: Internal control of each user on one side and Budgetary Inspection and Audit service on the other.

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The internal control consists of a special team for every budgetary user, whose aim is to ensure:

1. Application of laws, policies and procedures; 2. Effectiveness of operations; 3. Economic and efficient use of resources; 4. Safeguarding of assets and interests from losses of all kinds, including

corruption; 5. The integrity of information, accounts and data Budgetary Inspection and Audit Service was carried out by Ministry of

Finance for the purpose of: 1. Legal control 2. Assessment of internal control systems – meaning evaluation of whether

internal controls in the system are appropriate, effective and complete; 3. Control of application of the law in the field of material and financial

operations as well as appropriate and lawful use of funds by a budget beneficiary 4. Performance audit – which means reviewing the operations and processes of

audited bodies to assess their performance in terms of economy, efficiency and effectiveness;

5. Providing advice on the control and audit implications when new systems, procedures, or work responsibilities are introduced;

A special way of controlling public outflows is realized through the work of the Commission for Optimizing Public Expenditures. The task of this Commission is to propose measures that will reduce public expenditures.

As you can see, our model of Treasury system is very similar to Italian and French, with wide authority – from collecting of revenues to payments and controlling of budget beneficiaries.

Founding the Treasury provided control and management of financial currents and debts, rationality in using the funds, better liquidity and quality information. After consolidation of Treasury on the republican level, the next step is strengthening of financial independence of local administration with the aim of creating conditions for local authorities to make long term investments plans. Decentralization of public finance will produce the change in financing ministries and other state bodies on the republican level and local government will get a higher degree of independence of management but also greater responsibility and publicity of work.

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TUNISIA

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PUBLIC BUDGET ACCOUNTANCY AND FINANCIAL CONTROL SYSTEM IN TUNISIA

NAPLES 1-2 DECEMBER 2004

Prepared by: SAMI MHAMDI DEFENCE MINISTRY AUDITOR

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1.PUBLIC BUDGET DESCRIPTION

INTRODUCTION The public budget is composed of resources and expenditures allowed yearly by the parliament. Preparation, execution and control of public budget are set up by several regulations mainly the organic Law number 42 of 13 May 2004 completing the organic Law number 53 of 8 December 1967 called organic Law of the budget ;the second important law is the public accountancy code(organic Law number 86 of 6 November 1996 state) "Finance Law foresees and authorizes, yearly, the state expenditures and resources according to the Development plan objectives, considering the economic and financial balance” Public finances are submitted to administrative, jurisdictional and political control which are previous or preliminary, concomitant and post budget execution”

BUDGET STUCTURATION

Public budget is divided into two parts resources and expenditures in one side resources or incomes which are either ordinary related to traditional state role (taxes) or credit and loans (local-foreign), in the other side public expenditures are affected to common purchases or public investments. SECTION 1: public expenditures -Ordinary expenditures:

1. payments of wages; 2. common procurement; 3. public intervention; 4. unexpected ordinary expenditures; 5. payments of debts interests; 6. Investments expenditures; 7. direct investment 8. public financing economy 9. unexpected investments 10. investment by foreign funds 11. the debt refund of principal

SECTION2: public resources -Ordinary resources:

1. category 1: direct taxes; 2. category 2: indirect taxes;

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3. category3: ordinary financial incomes; 4. category4: resources of the public domain;

"Title two" resources: 5. category 5: resources of public loans; 6. category6: other resources; 7. category 7: local credit resources; 8. category8: foreign credit resources; 9. category9: resources of affected foreign Funds (gifts-partnership and

Cooperation-grants)

2. PUBLIC CONTROL SYSTEM IN TUNISIA

SECTION1/Previous (preliminary) expenditure execution control The control of public expenditure was create by virtue of the decree 20-1912 in 1912 having for mission to exercise a preliminary control before execution of public expenditures (the State , local state, regional and local authorities and public establishments) The control of public expenditure is a head office connected with the prime ministry. Considering the evolution of the public finances rules in Tunisia and to give more budgetary responsibility to managers the decree n ° 1999-89 of 31/12/1989 established new measures for softening the principle of the preliminary control of public expenditure. The auditor intervenes to validate his acts of control through a computer network called usually A.D.E.B. (System of help in the budgetary decision), this budgetary network connects all interested by the execution of public expenditure notably the auditor of public expenditure, the administrator of the budget who assures commitment and gives order to spend and the bookkeepers to pay. Attributions of the public expenditure auditor:

1. Preliminary authorization to execute expenditure ( preliminary visa) before execution of public expenditure the auditor makes sure the following elements : Exactitude of the expenditure object and account's inscription ( budgetary imputation) The existence and availability of credits. Respect of the expenditure act to the public finances regulations. Conformity of the expenditure to the preliminary documents of the budget at the preparation level.

2. Participation as obligatory member in public procurements committees: check the call of tenders documents and gives opinion on it:

• Examination of the despoiling reports of tenders calls • Examination of public procurement contestations with suppliers,

work-makers and service delivers during contracts execution • Examination of modifications intervening during public

procurement execution.

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• Approval of The definitive closure of the procurement contracts

SECTION2: concomitant control Public management is governed by basic a principle which is the safety of the public deniers, seen the specificity of their origin, and their use and check the respect of financial regulations. Several organisms assure concomitant control of public finances in Tunisia:

1. General control of the public services; 2. General control of finances ministry; 3. General control of the State domains; 4. The ministries inspection; 5. The high committee of the administrative and financial control

1-General control of the public services The CGSP is directly connected with the authority of Prime Minister; the inspection missions are authorized by Prime Minister order. The CGSP verifies budgets of the following public authorities:

• Central state; • The administrative public establishments; • Local state, regional and local authorities; • Public companies;

All kind of organization company association receiving financial assistance of public authority The CGSP establishes every year a program of control and communicates to the high committee of administrative and financial control. For their investigation missions the CGSP is legally enabled to obtain all kinds of documents and financial reports 2-General control of finances ministry The CGF, under the direct authority of the ministry of finances and having the same attributions as well as the CGSP as described in the previous paragraph. 3-General control of the State domains General control of the State domains is under the authority of the state domains ministry having the following attributions: Assists managers and proposes measures to improve management of public patrimony Guarantees the control of affairs related to good use management maintenance and conversation of civil buildings of public authorities. Gives advices to central and local authorities on operations of management of public domains Particular missions and investigations confided to them by domains minister 4-Ministries inspections

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Each ministry has its own inspection office which is charged to accomplish financial and administrative verification on the ministry offices at the central and regional level This type of control gives to minister databases about performance of deferent activities offices under his supervision. Controls are made unexpectedly The ministry inspection office carry out its mission according to an annual plan signed by the minister in charge. 5/ The high committee of the administrative and financial control The high committee of the administrative and financial control is charged to coordinate the programs activities of deferent control organs described in the previous paragraphs. The committee studies reports of control activities and proposes practical measures, to improve the management methods and to assure the follow-up of their execution, develop methods to get better the effectiveness of the of the organs of the administrative and financial control

SECTION3: post control of the accounts court The execution of Public budget is subjected to several forms of controls

exercised by a multitude of organs. These controls occur from the beginning of budget execution till budgetary year closure. They have as first objective to make sure of respect for the financial legislation and procedures. This control of the regularity of acts with regard to budgetary and accounting legal rules is indispensable to guarantee conformity of budget execution with financial law as authorized by legislative authority.

The constitution of 1959, in its article 57, set up the accounts court and charged it to verify the accounts of public authorities and obligation to send its annual report to the president of the republic and the representative's chamber).

The Tunisian accounts court was created by the 8 mars 1968 and was inspired from the French model. Its attribution is very close to the French accounts court (cour des comptes) and has some similarities with the British National Audit Office (N.A.O).

The accounts court is the upper institute of public finances control it has for that purpose an administrative and jurisdictional power status indeed the accounts court has a double mission:

Firstly checks the accounts of the public bookkeepers and gives judgments on public accounts.

Secondly; assumes a mission of general scrutiny on managers. Annual report of the accounts court contains Observations and notices of cases

in which public budget rules were not respected, the report is sent to the president of the republic, to Prime Minister, to the president of the representative's chamber (parliament).besides the court appreciates the results of the economic or financial assistance that the State, “gouvernorats” or local authorities grant to private

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companies (tax, guaranteed exemptions, subsidies etc). it has legal authority to control the finances of the political parties.

The legal scope of the accounts court covers the following public authorities: Central state; The administrative public establishments; Local state, regional and local authorities; Public companies; All kind of organization company association receiving financial assistance of

public authority; Defined public projects by order of Prime Minister. Besides the role of the control the court has a very important consultative role,

it is represented in some national institutions and consultative chambers such as high council of legislation and the competition council.

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LE CADRE BUDGETAIRE EN TUNISIE

Doct. Monica Capossella L’administration publique tunisienne est relativement efficace, notamment au

niveau central. Elle est toutefois très centralisée, hiérarchique et fortement liée au parti au pouvoir.

Le Ministère des Finances est l’organe responsable de l’élaboration et de la mise en œuvre de la politique fiscale.

Le Ministère des Finances a développé et mis en application un grand nombre de systèmes intégrés de contrôle fiscal. La dématérialisation des formalités administratives et fiscales est achevée et tous ces systèmes sont informatisés. Tous les services centraux et régionaux du Ministère des Finances sont intégrés en un seul réseau national. La liaison entre Tunisie Trade Net (douanes, transitaires et banques) et la Direction des Impôts est opérationnelle.

Les autorités ont entrepris des actions afin d’améliorer la qualité du service (guichet unique de l’API, Agence pour la promotion de l’industrie, programme de réduction des autorisations administratives) et de permettre le recours aux technologies modernes (Tunisie Trade Net, base de données et de formulaires administratifs SICAD). Le coût budgétaire de cette administration est lourd; la masse salariale du secteur public représente quasiment 12% du PIB. Dans ce contexte, le gouvernement envisage une réforme organique de la dépense budgétaire, permettant de réaliser simultanément des améliorations de qualité de la dépense et des économies. Une des conséquences de cette réforme sera la déconcentration des responsabilités.

Il existe peu d’organes indépendants de régulation à l’heure actuelle, même si les autorités ont entrepris de séparer, au sein des organes compétents, les activités de régulation des activités commerciales (télécommunications, transports, marchés financiers).

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1. Le système financier et les réformes structurelles

Le système financier, qui combine outils modernes et pratiques traditionnelles, contribue insuffisamment à une allocation optimale des ressources, alors que les réformes structurelles prennent du retard.

Les entreprises continuent de faire appel largement pour leurs besoins au financement bancaire, plus facile à utiliser, jugé moins coûteux et moins contraignant que le recours au marché. Or le secteur bancaire n’est pas suffisamment modernisé et est largement dominé par les banques publiques (55% de part de marché). De plus, compte tenu des freins institutionnels, l’arrivée de banques étrangères (dernière en date, la Société Générale, qui a repris l’UIB à la faveur d’une privatisation) ne se traduit pas encore par une relance de la concurrence, porteuse de progrès. Le système bancaire affiche un taux de créances classées élevé (21% au 31/12/01), mais toutes les banques ou presque avaient un ratio Cooke supérieur à 8% à la même date. Le marché boursier, bénéficiant de tous les derniers développements de la technologie et d’une réglementation moderne, ne peut pleinement jouer son rôle. Les industriels (PME à caractère familial) jugent contraignant le respect des règles de transparence relatives aux sociétés cotées. Les particuliers donnent encore largement la préférence aux placements monétaires et immobiliers. Les institutionnels ne dégagent pas les ressources suffisantes pour investir à long terme. Le financement des déficits publics absorbe une part importante de l’épargne nationale disponible.

Le programme de privatisations du secteur concurrentiel (démarré en 1987) s’achève et une stratégie de relève par des concessions des grands services publics s’amorce lentement. En 2003, les secteurs de l’agriculture, de l’industrie et des services (notamment la Banque du Sud) ont été plus particulièrement ciblés. Les réformes relatives au secteur bancaire ont tardé à produire tous leurs effets. A ce jour, les autorités tunisiennes n’ont toujours pas entrepris de réforme de la dépense publique, obérée par les charges de personnel et de subventionnement de certains prix. Du côté des recettes, de réels efforts ont été faits en matière de recouvrement. Ils sont cependant limités par la persistance de nombreuses exonérations et le choix de maintenir une taux de prélèvement par l’impôt bas (autour de 20%), afin de lutter notamment contre l’évasion fiscale.

Les politiques publiques : les politiques budgétaires et monétaires

Pour maintenir le budget sous contrôle et préserver la stabilité du cadre macro-économique, le gouvernement tunisien a adopté en 2002 une loi de finances

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complémentaire en vue d’ajuster les recettes et les dépenses publiques au ralentissement de l’activité économique. Cette loi a revu à la baisse les recettes et les dépenses, pour tenir compte de la diminution des impôts indirects par rapport aux prévisions initiales du gouvernement (imputable notamment au repli des importations) et pour contenir les dépenses.

La croissance des dépenses budgétaires a été de 3.8% en 2002 contre 7.5% en 2001 reflétant l’effort de contrôle du déficit budgétaire et de l’équilibre extérieur, tout en ménageant les secteurs sociaux. Cet effort s’est traduit par un ralentissement de la progression des dépenses courantes à 5.4% en 2002 contre 6.4 pour cent en 2001, et surtout une décélération de la croissance des investissements directs de l’État à 3.4% en 2002 contre 6.2% en 2001.

Cette conduite de la politique budgétaire a généré un déficit budgétaire global représentant seulement 1.9% du PIB en 2002 contre 3.5% en 2001, totalement financé, pour la deuxième année consécutive, par des emprunts extérieurs. La poursuite d’une politique budgétaire prudente a permis de maintenir ce déficit à un niveau comparable en 2003 (évalué à 2.1% du PIB), très proche de l’objectif de la loi de finance 2003.

La loi de finance 2004 s’oriente dans la même direction et le déficit devrait pouvoir être encore abaissé à 1.8% du PIB en 2004.

Les autorités tunisiennes ont opté, depuis un peu plus d’une décennie, pour une politique monétaire visant à contenir la progression des agrégats monétaires dans des limites permettant la maîtrise de l’inflation et une certaine stabilité du taux de change réel, tout en essayant de garantir des niveaux de financement appropriés à une économie en pleine restructuration.

La politique monétaire poursuivie en 2002 et 2003, dans un contexte de conjoncture économique difficile, s’est inscrite dans cette même perspective. Elle s’est caractérisée par un ralentissement de la croissance de la masse monétaire reflétant, globalement, une progression modérée des concours à l’économie, un affermissement des créances nettes sur l’extérieur et une contraction de l’endettement de l’État. En conséquence, le taux de liquidité de l’économie a été relativement stable en 2002 et 2003. Au même temps, la politique monétaire, combinée à la rationalisation des dépenses publiques, a permis au gouvernement tunisien de maintenir le taux d’inflation à 2.7% en 2002, comparable aux 2.8% de 2001. La tendance récente est à la consolidation de ce progrès, puisque l’inflation a été estimée à 2.5%pour 2003 et devrait être ramenée selon les prévisions à 2.4% en 2004 et 2005.

En ce qui concerne le taux de change, l’évolution du dinar a été caractérisée par une dépréciation vis-à-vis de l’euro et une appréciation par rapport au dollar en 2002 et 2003 s’expliquant, globalement, par la reprise de l’euro sur les marchés des changes internationaux. En effet, en moyennes annuelles, le dinar s’est déprécié vis-à-vis de l’euro de 4% en 2002 et 7.9% en 2003 et s’est apprécié vis à- vis du dollar de 1.3% en 2002 et 10.6% en 2003.

Répartition sectorielle du PIB en 2002

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Perspectives économiques en Afrique © BAfD/OCDE 2004

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Recettes et dépenses de l’Etat

L’équilibre du système budgétaire et du système financier pour l’année 2004

Les prévisions du financement intérieur de l’économie s’inscrivent dans le cadre des objectifs de l’année 2004: le renforcement du financement et de l’activité économique, l’accélération du rythme de croissance, l’impulsion davantage

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l’investissement, l’intensification des créations d’emploi et la préservation des équilibres financiers à travers la modernisation du secteur financier.

Sur cette base, les prévisions des finances publiques au titre de l’année 2004 supposent le maintien d’une pression fiscale modérée au taux de 20,9% du PIB et la limitation du déficit budgétaire aux alentours de 2,1% du PIB contre respectivement 20,9% et 2,6% estimés en 2003.

La réalisation de ces objectifs requiert l’intensification des efforts pour consolider les recettes propres du budget moyennant l’amélioration de la mobilisation des recettes fiscales et la poursuite de la maîtrise des ressources d’emprunt tout en améliorant la structure de la dette publique.

En parallèle, l’exécution des dépenses publiques est poursuivie selon la même démarche qui consiste d’une part à maîtriser davantage les dépenses de gestion avec l’allocation des ressources requises pour améliorer les moyens de travail des différents services administratifs et d’autre part à renforcer les dépenses de développement sur la base des priorités nationales moyennant l’inscription des crédits nécessaires à l’exécution des programmes et projets publiques dans les domaines économique et social conformément aux objectifs tracés.

Egalement, les prévisions de l’équilibre financier pour l’année 2004 reposent sur la poursuite des efforts visant à mobiliser les ressources adéquates compte tenu de l’évolution et la diversification des besoins de financement tout en veillant à la limitation du rythme d’évolution de la masse monétaire en deçà de la croissance du PIB afin de maîtriser davantage l’évolution de la liquidité et faire baisser le taux d’inflation. Ces prévisions supposent, en outre, l’amélioration du rythme d’évolution des concours à l’économie prévu à 7,1% eu égard à l’augmentation de la demande des crédits bancaires et l’accroissement des créances nettes sur l’extérieur pour assurer la couverture de trois mois d’importation, alors que l’encours des créances nettes sur l’Etat continuera sa tendance baissière en relation avec l’orientation de la dette intérieure de l’Etat vers le marché financier.

Les prévisions du budget de l’Etat Les prévisions du budget de l’Etat sont intégrées dans le cadre des objectifs de

développement tracés pour l’année 2004 et qui sont inscrits dans le cadre du dixième Plan outre la consécration des objectifs du programme présidentiel d’avenir.

Ces prévisions supposent la poursuite des actions visant la mobilisation des ressources appropriées pour le financement des interventions de l’Etat dans les différents domaines, la rationalisation des dépenses ordinaires ainsi que la maîtrise de la dette. Ces prévisions reflètent, également l’intensification des efforts déployés pour le renforcement de l’activité économique et l’amélioration du climat des affaires à travers l’accélération du rythme de réalisation des programmes d’investissement public conformément aux priorités tracées, notamment, ceux relatifs à l’amélioration de l’infrastructure de base et la valorisation des ressources humaines.

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Sur cette base, le volume global du budget de l’Etat a été fixé à 12 730 MD, contre 10 908 MD de l’année 2003. Ainsi, les dotations budgétaires compte non tenu du service de la dette publique atteindront 8 180 MD, soit un accroissement de 5,9% en comparaison avec les résultats escomptés pour l’année 2003. Cette enveloppe d’intervention a été financée principalement par les ressources intérieures qui proviennent des recettes propres et des ressources d’emprunt intérieur et ce, en veillant à la nécessité de préserver le taux de la pression fiscale à un niveau adéquat avec les impératifs d’impulsion de l’activité économique.

A cet égard, l’équilibre tracé du budget de l’Etat suppose une meilleure maîtrise du déficit budgétaire qui se limitera à 2,1% du PIB et le maintien de la pression fiscale au taux de 20,9% du PIB.

Opérations financières de l’Etat (en pourcentage du PIB)

2. LE DEVELOPPEMENT REGIONAL

Ouvrir des horizons plus larges aux régions

Des acquis considérables ont été enregistrés au niveau du développement régional depuis le changement du 7 novembre 1987. Ils ont touché toutes les régions et ont concerné notamment l’implantation de réseaux modernes de routes, de télécommunications, de ports, d’aéroports, de zones industrielles et de petits métiers, de zones touristiques intégrées, en plus de la mise en place des équipements collectifs tels que les espaces d’enseignement supérieur, les centres de formation professionnelle et la consolidation des établissements sanitaires.

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Les régions de l’intérieur et les zones prioritaires ont bénéficié de mesures spécifiques en vue de consolider le processus de leur développement en se basant sur leurs potentialités propres. Elles ont bénéficié également de nombreuses mesures et projets présidentiels destinés à renforcer l’emploi et la promotion de l’initiative privée.

La politique de décentralisation administrative a été initiée en 1989 avec la création des Conseils régionaux. Le Gouverneur de région, représentant de l’Etat, préside ces conseils d’élus.

Le Xème Plan de Développement 2002-2006 du gouvernement tunisien dessine les approfondissements nécessaires afin d’atteindre les objectifs de décentralisation régionale, comme par exemple le renforcement de l’autonomie administrative et financière par l’institution d’une fiscalité régionale. Globalement, la mise en œuvre de cette politique est encore peu avancée.

Un grande nombre de municipalités a développé une forte structure institutionnelle, mais existent encore des areas de la nation qui n’ont pas une représentation local.

Le développement régional bénéficie d’une priorité absolue dans la mesure où il constitue un choix stratégique dans la politique de développement économique du pays. Cette démarche a permis aux régions de bénéficier de plusieurs acquis en matière de consolidation de la décentralisation, de réduction des disparités régionales, d’amélioration des conditions de vie, en plus du renforcement des infrastructures et des équipements collectifs et de la diversification de la base économique dans les différentes régions.

Le développement régional reste l’un des enjeux fondamentaux de la prochaine étape, du fait que la croissance ne peut être durable qu’en respectant le principe de l’égalité entre les régions et entre les générations; en outre, la concrétisation des objectifs nationaux, notamment en matière d’emploi et d’intégration dans l’économie mondiale, impliquent une contribution accrue des différentes régions.

Le futur plan du développement régional s’inscrira dans le cadre de l’orientation du programme présidentiel conférant des « perspectives plus larges aux régions ». Il s’intégrera, également, dans le cadre de l’ouverture accrue de l’économie tunisienne et du rôle central dévolu au secteur privé dans l’action de développement et l’insertion de la Tunisie dans l’économie du savoir.

Dans ce cadre, l’intervention du secteur public s’articulera autour des axes suivants :

la promotion continue des zones prioritaires et à problématiques spécifiques telles que les zones frontalières, minières, sahariennes et montagneuses ;

la poursuite de l’amélioration de l’infrastructure de base et des équipements collectifs tels que les télécommunications, les routes ainsi que l’amélioration et la mise à niveau de l’environnement de production, l’interconnexion des réseaux nationaux de télécommunication aux réseaux internationaux pour mieux attirer les investisseurs et intensifier la création de projets ;

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la valorisation des ressources humaines et la mise à la disposition des régions de compétences dans les spécialités requises compte tenu de leur rôle essentiel pour l’accroissement de la compétitivité et le relèvement des défis futurs en particulier ceux liés à l’accord d’association avec l’Union Européenne.

Concernant le secteur privé, son rôle sera décisif en tant que moteur de l’action de développement du fait de l’existence de capacités potentielles ainsi que de la valorisation des incitations destinées aux régions.

Au vu des opportunités de coopération internationale que procure la mondialisation, les régions sont appelées à établir des partenariats directs avec les régions similaires dans les différents pays afin de s’insérer dans les réseaux internationaux, attirer les investissements directs étrangers et se lancer à la conquête du marché de services à haute valeur ajoutée.

La concrétisation de ces orientations implique l’octroi de plus d’autonomie aux structures et organisations régionales et ce par :

la délégation de nouvelles prérogatives aux structures régionales et le renforcement de leurs moyens pour leur permettre de mieux exercer ces prérogatives ;

la consolidation de la fonction consultative des structures locales et régionales et une meilleure implication de ces dernières dans la programmation et le suivi des projets ;

la modification de la composition des conseils régionaux par l’élection du tiers de leurs membres par les conseils municipaux et les conseils ruraux ;

l’adoption de contrats de partenariat entre les collectivités locales et les différents partenaires et organismes économiques et sociaux pour concrétiser les objectifs des plans de développement régionaux.

Développement Régional: Objectifs 2004 L’année 2004 représente une année extrêmement importante du fait qu’elle

constitue l’année finale de la concrétisation du programme prospectif et l’année centrale de l’exécution du Xème Plan. Dans ce cadre, l’action se concentre dans le domaine du développement régional notamment sur :

• L’amélioration du rendement du secteur privé dans les régions • L’amélioration de la compétitivité des régions • L’amélioration du rendement des structures régionales • La consolidation de l’attention accordée aux zones prioritaires • L’impulsion de la coopération internationale décentralisée

L’ amélioration du rendement du secteur privé dans les régions L’amélioration du rendement du secteur privé dans les régions constitue l’un

des principaux axes de la stratégie de développement régional durant la période du Xème Plan, dans la mesure où le secteur privé est le moteur de l’action du développement eu égard aux incitations et mesures établies en faveur du développement de l’investissement privé dans les régions, ainsi que la mise en

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place des mécanismes d’intervention spécifiques selon le type de promoteurs et la nature des projets.

Pour concrétiser les orientations du Xème Plan dans ce domaine, l’année 2003 a été marquée par l’adoption de plusieurs mesures d’encouragement à la création d’entreprises et au développement de l’initiative privée dont notamment la création d’un régime de garantie des crédits accordés aux moyennes entreprises dans l’industrie et les services et des participations dans leur capital, le doublement du capital des Sociétés d’investissement à capital risque régionales et la déduction de leurs provisions au titre des créances douteuses, le renforcement de leurs ressources financières internes et externes, et la consolidation de leurs interventions pour le financement des projets innovants, ainsi que l’assouplissement des conditions d’intervention du FOPRODI en donnant à l’investisseur dont le coût de son projet ne dépasse pas les 500 MD le choix entre une dotation remboursable à travers la Banque qui finance le projet ou une participation au capital à travers une SICAR. Pour les projets dont le coût dépasse les 500 MD, l’intervention du FOPRODI se fait sous forme de participation au capital à travers une SICAR. Parallèlement, la liste des activités bénéficiant des encouragements au titre du développement régional a été élargie pour y inclure les publinets, les activités d’hébergement et d’animation touristique ainsi que le tourisme thermal.

L’amélioration de la compétitivité des régions L’amélioration de la compétitivité des régions représente l’un des principaux

objectifs de la stratégie de développement régional du Xème Plan et ce conformément aux orientations du programme prospectif visant la dotation des régions d’une infrastructure répondant aux exigences de la mondialisation à même de développer l’investissement et diversifier la base économique des différentes régions notamment celles de l’intérieur.

L’amélioration du rendement des structures régionales L’amélioration du rendement des structures de développement régional

constitue une nécessité pour la mise en oeuvre de la stratégie de développement régional étant donné leur rôle en matière de mise à disposition de l’information économique régionale, d’une part et de promotion de l’emploi et de l’investissement, d’autre part. Ces organismes ont été renforcés en 2002 par la création des comités régionaux de création d’entreprises et de développement des projets innovants dans le but d’améliorer l’efficacité des organismes d’appui et de soutien à même d’accélérer le rythme de création des projets dont notamment les projets innovants.

Aussi, il est prévu au cours de l’année 2004, l’évaluation de la méthodologie de travail de ces comités en vue de consolider leur rôle tant au niveau de la création d’entreprises dans les secteurs prometteurs et les nouveaux métiers, qu’au niveau de la coordination entre les différents intervenants sur le plan régional pour la promotion de l’investissement et de l’emploi.

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Il est prévu la création au niveau central, d’un groupe de travail pour assister les comités régionaux et leur fournir l’appui logistique nécessaire à même de mener leurs attributions dans de bonnes conditions.

Par ailleurs, les interventions des Offices de développement et du Commissariat Général au Développement Régional ont été intensifiées en 2004 notamment en matière de la mise à disposition de l’information économique régionale, ainsi que l’identification des opportunités d’investissement dans les gouvernorats relevant de leur compétence. En outre, ils ont concentré leurs efforts pour la promotion de l’investissement privé dans les régions à travers le parrainage des promoteurs en leur aidant à trouver le financement nécessaire et ce en exécution de la décision présidentielle dans ce domaine.

A cet effet, les Offices de Développement et le Commissariat Général au Développement Régional sont appelés à consolider leurs ressources financières et humaines pour améliorer leur capacité d’identification et d’étude de projets et faciliter la mise à niveau de leur structure pour la préparation d’études sur les opportunités d’investissement dans les régions relevant de leur compétence.

Consolidation de l’attention accordée aux zones prioritaires L’attention accordée aux zones prioritaires constitue l’un des principaux

objectifs de la stratégie de développement régional du Xème plan de développement dans la mesure où elle est considérée comme un des facteurs de développement global et équitable. Aussi, et en concrétisation de cette orientation, l’année 2004 a vu la poursuite de la réalisation des différents programmes spécifiques régionaux visant la consolidation du développement local et l’insertion des zones à problématiques de développement dans la dynamique économique locale et régionale.

Dans ce cadre, l’année 2004 est caractérisée par l’élaboration du Programme de Développement Intégré sur la base des résultats de l’étude d’évaluation approfondie des projets de la deuxième génération du programme de développement rural intégré qui a démarré au courant de l’année 2003. Cette étude déterminera les composantes du nouveau programme tout en les intégrant dans les stratégies nationales et régionales du Xème Plan de développement, ce qui est de nature à créer une dynamique économique dans les zones d’intervention et à donner une impulsion à l’auto développement et à l’investissement privé compte tenu des problématiques spécifiques à chaque zone d’intervention.

L’année 2004 a vu, également, le démarrage effectif des projets améliorés de développement rural et urbain intégré décidés par le Président de la République lors des Cessions Extraordinaires des Conseils Régionaux des gouvernorats (de Siliana, de Kasserine, du Kef et de Sidi Bouzid).

Il est prévu également le démarrage de l’élaboration d’un plan d’action pour le développement des zones frontalières visant l’impulsion de leur développement par la mobilisation de leurs ressources naturelles et humaines et par une meilleure optimisation des mécanismes existant pour la promotion de l’investissement et de

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l’emploi permettant ainsi la diversification des activités économiques, l’augmentation des revenus de la population des zones concernées et l’amélioration de leurs conditions L’attention est, également, portée sur les régions forestières pour les intégrer dans la dynamique économique, améliorer les conditions de vie de leurs habitants à travers la continuation du projet de gestion intégrée des forêts Les crédits alloués à ce projet au titre de l’année 2004 s’élèvent à 8,5 MD permettant l’aménagement et la sauvegarde des arbres forestiers, la réhabilitation du milieu forestier par le reboisement, l’amélioration des conditions de vie des habitants des forêts.

Le programme régional de développement est considéré comme un instrument pour renforcer le développement local à travers sa contribution à la consolidation de l’infrastructure, à la promotion de l’emploi et l’amélioration des conditions de vie.

Les crédits alloués à ce programme au titre de l’année 2003 s’élèvent à environ 75 MD dont 36,2 MD réservés à l’amélioration des conditions de vie, 34 MD pour les chantiers régionaux, 3 MD pour la création et la consolidation de l’emploi et 1,8 MD pour la formation professionnelle.

Concernant l’année 2004, ont été alloué 71 MD au programme régional de développement dont 9,8 MD au titre des projets en continuation, 25,2 MD pour les dépenses annuelles de formation professionnelle et les chantiers régionaux et 27,5 MD pour le financement des nouveaux projets dans le domaine de l’amélioration des conditions de vie, la création et la consolidation de l’emploi. Le reliquat estimé à 8,5 MD sera réservé à la poursuite du programme présidentiel des chantiers conjoncturels dans les gouvernorats de Gafsa, Kasserine, du Kef, de Siliana et de Zaghouan ainsi qu’à la participation au financement du programme de réhabilitation des zones industrielles situées en dehors des zones de développement régional.

L’impulsion de la coopération internationale décentralisée La coopération internationale décentralisée représente un soutien important au

développement régional car elle permet aux régions tunisiennes d’avoir des opportunités de partenariat avec leurs homologues à l’étranger dans les différents domaines économique, social et culturel, surtout dans le cadre des programmes financés par le PNUD et l’Union Européenne.

Dans ce cadre, les offices de développement régional ont entrepris des projets de coopération avec les parties étrangères en vue de bénéficier de leurs expériences et des opportunités de financement et de partenariat existantes. Ainsi, l’Office de Développement du Nord Ouest a réalisé en 2003 un projet de coopération avec la partie italienne pour la promotion de l’investissement privé dans les gouvernorats du Nord-Ouest. Ce projet a permis à l’office d’améliorer la capacité de ses cadres dans le domaine de l’encadrement des investisseurs et la promotion de l’industrie agro-alimentaire à travers des projets de partenariat avec des sociétés italiennes. Il est attendu la consolidation du programme de coopération technique entre l’Office

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de Développement du Nord Ouest et la partie italienne en 2004 notamment dans les domaines de la mise à niveau des unités agroalimentaires installées dans le nord-ouest et d’adhésion des entreprises dans le programme de l’amélioration de la qualité.

Le Commissariat Général au Développement Régional et les autres offices de développement régional continueront leurs efforts pour identifier des opportunités de coopération avec les régions économiques dans les pays amis soit dans le cadre de la coopération technique pour l’amélioration de leur capacité technique dans le domaine de la promotion de l’investissement et l’encadrement des investisseurs soit pour établir des partenariats entre les institutions régionales tunisiennes et leurs homologues à l’étranger.

De même, la conclusion d’accords de coopération et de jumelage entre les collectivités publiques locales à savoir les conseils régionaux et les municipalités avec leurs homologues à l’étranger sera poursuivie en 2004 à même d’attirer l’investissement étranger dans les différentes régions et de créer des postes d’emplois.

Décentralisation financière: mobilisation des ressources pour le financement des collectivités locales

En Tunisie, la Caisse de Prêt et de Soutien des Collectivités Locales (CPSCL) dotée de la personnalité civile et de l’autonomie financière, a été créée en mai 1975. Ses ressources proviennent de transferts de l’Etat, du recyclage de prêts antérieurs accordés aux communes (annuités de capital et d’intérêts), des emprunts contractés auprès des bailleurs de fonds extérieurs, du produit des opérations financières effectuées dans le cadre de ses attributions, et de toute autre recette créée ou affectée par la loi. En plus de sa vocation de prêter et d’allouer des subventions pour les programmes d’investissement communaux, la CPSCL consent des bonifications d’intérêts pour les emprunts des collectivités locales contractés auprès d’autres organismes. Il fournit également une assistance technique, économique et financière pour leurs projets d’investissement qu’il finance.

3. Le développement municipal et urbain

Le secteur du développement municipal et urbain revêt une importance particulière pour ses dimensions sociales et économiques et pour l’élargissement des domaines d’intervention de l’institution municipale suite au développement rapide du tissu urbain pour répondre aux besoins des citoyens en infrastructure, en

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équipements socio-collectifs et services urbains dans les divers domaines d’intervention de l’action municipale. A cet effet, l’effort au cours de l’année 2004 est focalisé sur la poursuite de la réalisation des projets inscrits au Plan d’Investissement Communal et la mise en place de nombreuses mesures en vue de concrétiser les objectifs assignés au Xème Plan.

L’année 2004 est caractérisée par un rythme ascendant des investissements municipaux.

Dans le domaine de l’embellissement des villes et la création d’espaces verts programmés dans le cadre du Plan d’Investissement Communal, l’effort portera sur la mobilisation d’un montant d’investissement d’environ 6,7 MD afin de poursuivre la réalisation d’espaces verts et l’aménagement des entrées des villes, la mise en place d’équipements socio-collectifs et la création d’institutions économiques. En ce qui concerne l’intervention dans les communes touristiques, des crédits de l’ordre de 10 MD ont été alloués par le Fonds de Protection des Zones Touristique.

Concernant le programme des décharges contrôlées et centres de transformation des déchets, l’année 2004 a vu la réalisation d’investissements importants de l’ordre de 32,5 MD afin de poursuivre la réalisation de 9 décharges programmées au cours du Xème Plan.

Dans le cadre de l’intérêt continu accordé à l’amélioration des conditions de vie des citoyens dans les quartiers populaires, (28,5 MD est le total des investissement à réaliser).

Au cours de l’année 2004, l’action s’est poursuivi afin de consolider les équipements socio –collectifs et les bâtiments de jeunesse, de sport et de la culture avec des investissements de l’ordre de 8,8 MD.

Par ailleurs et en ce qui concerne les programmes des conseils ruraux, des crédits de l’ordre de 6 MD ont été alloués au profit de la consolidation des infrastructures dans leurs zones d’intervention afin de renforcer leurs réseaux de voiries, d’éclairage et d’assainissement public outre leur dotation en outils de travail nécessaires et la réalisation de plusieurs projets économiques à leur profit.

D’un autre côté, un intérêt accru sera accordé au volet institutionnel de l’action municipale.

Ainsi, et dans le cadre du troisième Programme de Développement Municipal (PDM III), l’année 2004 a connu la poursuite de la réalisation des composantes d’appui institutionnel notamment celles relatives à l’élaboration et l’exécution des plans de restructuration des municipalités souffrant de difficultés financières ainsi que des plans de mise à niveau de plusieurs communes en vue de doter l’action municipale de l’efficacité requise.

Par ailleurs, l’action est poursuivie afin d’impulser davantage la coopération intercommunale au niveau national et international et renforcer la contribution du secteur privé à la fourniture de services urbains outre la consolidation de la relation de partenariat parmi les communes, les associations et les comités de quartiers.

L’année 2004 a connu également la poursuite des réformes visant le renforcement des ressources financières des communes à travers la poursuite de

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l’augmentation du volume du Fonds Commun des Collectivités Locales de 5 MD. En outre, une réforme du code de la fiscalité locale a été entreprise pour la révision de certaines taxes et la dotation des collectivités locales des prérogatives pour l’instauration de certaines taxes et la détermination de leurs tarifs dans le cadre des services publics payants. Par ailleurs, la loi organique des budgets des collectivités locales a été révisée afin de mieux maîtriser l’élaboration, l’exécution et le contrôle des budgets des communes.

L’action a porté également sur la consolidation des mécanismes de recouvrement par l’extension du réseau des recettes des finances et la réalisation d’une étude technique afin d’assurer d’une manière progressive la connexion des recettes des finances aux communes par un réseau informatique outre l’élaboration d’une étude pour la mise en place dans une première étape d’un système d’information géographique dans 8 communes pilotes.

S’agissant de la question du surendettement des communes, une commission de suivi a été mise en place afin de trouver des solutions adéquates pour mettre fin à la prolifération de ce phénomène et contrôler la situation financière des communes dotées d’un schéma de financement des investissements totalement subventionné ou d’un schéma de financement réajusté.

Par ailleurs, l’action est poursuivie afin de diversifier les interventions de la Caisse des Prêts et de Soutien de Collectivités Locales à travers le financement d’autres projets liés à l’action municipale. En outre, une amélioration et une modernisation a été réalisé sur les méthodes de gestion de la Caisse des Prêts et de Soutien de Collectivités Locales en phase préparatoire à sa restructuration à la lumière des résultats de l’évaluation à mi-parcours.

Sur le plan du renforcement des ressources humaines, l’action est poursuivie afin d’améliorer les capacités et compétences professionnelles des agents municipaux en vue de leur permettre d’être au diapason des évolutions que connaissent les domaines de leur action au niveau de l’organisation et de la gestion. Dans ce cadre, l’action au cours de l’année 2004 a été orienté sur l’amélioration du taux d’encadrement afin de répondre aux besoins des communes en cadres administratifs et techniques par l’organisation de concours régionaux et les recrutements directs outre la formation de 30 contrôleurs de la réglementation municipale. Par ailleurs, c’est poursuivi l’organisation de séminaires et de sessions de formation au profit des agents municipaux couvrant les différentes spécialités outre l’organisation de programmes de formation continue au profit de plusieurs cadres afin de promouvoir l’action municipale.

En outre, il y a lieu de poursuivre l’action de développement des activités de formation du Centre National de Perfectionnement et de Recyclage des Cadres Régionaux et Municipaux à la lumière des résultats de l’étude stratégique relative au renforcement institutionnel du centre.

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4. LE BUDGET ET L’EMPLOI

Pour ce qui est de l’emploi, les créations demeurent en deçà des prévisions initiales, atteignant 65 mille emplois contre 67 mille prévus dans le Budget économique (2004) et ce, compte tenu des pertes d’emplois enregistrées dans les secteurs du tourisme et des industries manufacturières, en rapport avec l’évolution de l’activité économique dans les deux secteurs.

Réduire les écarts et se rapprocher des objectifs tracés dans le Xème Plan constituent une priorité absolue pour les années restantes de la période d’exécution du Xème Plan.

En effet, les nouvelles créations d’emplois atteindrent près de 70,4 mille postes (dans l’année 2004) contre environ 65 mille en 2003.

Cette amélioration provienne, essentiellement, de l’évolution attendue au niveau de quelques secteurs productifs et intensifs en main d’œuvre à l’instar des industries manufacturières et, plus particulièrement, le textile, habillement et cuir et les industries mécaniques et électriques ainsi que les communications, le transport et le tourisme.

L’année 2004 se caractérise, par conséquent, par le déploiement davantage d’efforts en matière de création de petites et moyennes entreprises ainsi qu’une meilleure identification des spécialités demandées sur le marché de l’emploi et ce, outre l’attention continue qui sera accordée en vue de saisir les opportunités d’emploi notamment au niveau des secteurs qui emploient un nombre important de diplômés de l’enseignement supérieur. L'année 2004 se caractérise, également, par la dynamisation des fonds de financement et des programmes de promotion d’emploi et, plus particulièrement, ceux sont orientés vers les jeunes et les diplômés de l’enseignement supérieur.

Parallèlement, une attention particulière est accordée au niveau du marché de l’emploi à travers l’extension de la capacité d’accueil du système de la formation professionnelle, le développement des méthodes de formation au niveau de l’initiative privée et la création d’entreprise, la dynamisation des différents programmes relatifs à l’encouragement à l’employabilité des jeunes et le renforcement des programmes orientés vers les demandeurs d’emploi parmi les diplômés de l’enseignement supérieur.

Ceci outre le déploiement davantage d’efforts pour la préservation des postes d’emploi existants et ce, à travers l’amélioration du rendement et de l’efficacité des mécanismes d’intervention du programme national de la formation continue et la réinsertion des employés notamment grâce à la mise en place du système des contrats pour la réinsertion concernant les licenciés pour causes économiques.

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L’emploi constitue, pour la communauté nationale tunisienne, un pari qu’elle

doit gagner eu égard à son rôle dans la sécurité et la stabilité de la société. Aujourd’hui, les indicateurs sur l’emploi et le chômage ne cessent de

s’améliorer, toutefois, même si le taux de chômage semble quelque peu élevé, il ne devrait pas constituer un facteur très préoccupant si on prend en considération, d’une part, la transformation de la structure des chômeurs selon la durée de chômage qui enregistre une baisse de la proportion des chômeurs de plus d’un an de 39,4% en 1999 à 33,6% en 2001. Il démontre bien le rôle positif des instruments d’insertion dans le marché de l’emploi et, d’autre part, le nombre croissant de demandeurs d’emploi soit pour des raisons démographiques et aussi soit pour des raisons relatives à l’amélioration des revenus et du niveau de vie.

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Pour l’offre de l’emploi il est attendu que les secteurs d’activité ayant connu

des difficultés au cours des deux premières années du Xème Plan, reprendront leur niveau d’activité auparavant dont notamment les secteurs du tourisme, du transport et de l’agriculture. Une telle reprise permettrait d’accélérer le rythme de la croissance dans l’ensemble des secteurs d’activité offrant ainsi de meilleures opportunités pour augmenter le rythme de création d’emplois.

Des efforts sont été déployés pour accélérer le rythme de création de la petite et moyenne entreprises en dynamisant le Conseil Supérieur et les Comités Régionaux chargés de promouvoir la création des entreprises et des projets innovateurs et en réactiver les différentes mesures stimulant le travail indépendant et la création des entreprises.

Aussi les interventions de la Banque Tunisienne de Solidarité, du Fonds National de l’Emploi et du système de micro crédits ce sont accentuées en raison de leur large couverture sectorielle, régionale et des différentes catégories d’âges. En outre les interventions des autres programmes et instruments, visant la promotion de l’emploi d’une façon directe ou indirecte, seront renforcées tels que les programmes de développement intégré, le Fonds Spécial de développement agricole et de la pêche et le système de crédits du Fonds de roulement.

Concernant le Fonds National de l’Emploi, il convient de souligner la diversité de ses interventions qui couvrent l’adaptation, l’apprentissage, la formation et le financement des projets.

Outre la décentralisation de la gestion, il sera procédé à des campagnes au niveau national et régional pour sensibiliser les entreprises et les différentes structures professionnelles des avantages de ce système.

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Il est prévu que 16700 personnes bénéficieront des programmes d’incitation à l’emploi des jeunes au cours de l’année 2004 contre 10800 en 2003. La répartition de ces bénéficiaires se présenterait comme suit:

1 - intensifier les programmes destinés aux demandeurs d’emploi du niveau du supérieur en conformité avec l’accroissement important du nombre de nouveaux diplômés, en les incitant à l’auto-emploi et à monter leurs propres projets. Un nouveau programme sera mis en oeuvre en 2004, visant à accroître le rythme d’emploi des diplômés du supérieur, et qui consiste à employer 10500 nouveaux demandeurs d’emploi dont 1000 dans la fonction publique en plus de 8400 recrutements prévus par le budget de l’Etat pour l’année 2004.

Concernant les créations d’emploi en 2004, les estimations disponibles montrent qu’elles sont de l’ordre de 70 milles nouveaux emplois contre 65 milles en 2003, ce qui fait que le total des créations d’emploi durant la période (2002-2004) s’élèverait à 197600, soit 52% du total des créations prévues pour toute la période du Plan (380 milles) et 49,4% de la demande additionnelle d’emploi attendue au cours de la période du Xème Plan.

En raison du lien qui existe entre la préservation des emplois et les relations professionnelles, une attention particulière sera accordée, durant la prochaine période, au dialogue social et à l’encadrement des entreprises en difficultés et ce en parallèle des efforts qui seront consentis pour améliorer les conditions du travail et pour renforcer la sécurité professionnelle considérée comme élément fondamental de la paix sociale et aussi pour réduire les risques professionnels qui constituent un pari à gagner pour les différents intervenants.

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ANNEXE 1-Budget Economique 2003 – investissements par domaine 2000 2001* 2002** 2003*** 2004***

AGRICULTURE ET PECHE

890.00.00 930.00.00 822.00.00 862.00.00 940.00.00

INDUSTRIES MANUFACTURIERES

926.08.00 1022.03.00 979.04.00 1020.00.00 1115.00.00

... Industries agricoles et alimentaires

215.02.00 204.03.00 200.00.00 210.00.00 220.00.00

... Industries des mat.construct. et verre

129.07.00 153.08.00 175.00.00 185.00.00 210.00.00

... Industries mécaniques et électriques

150.00.00 175.00.00 179.04.00 190.00.00 215.00.00

... Industries chimiques 84.09.00 96.02.00 95.00.00 100.00.00 110.00.00

... Industries textiles, habillement et cuir

233.01.00 263.00.00 190.00.00 190.00.00 210.00.00

... Industries diverses 113.09.00 130.00.00 140.00.00 145.00.00 150.00.00

INDUSTRIES NON MANUFACTURIERES

914.08.00 1031.01.00 997.02.00 943.00.00 1072.00.00

... Mines 24.07.00 42.08.00 40.02.00 48.00.00 47.00.00

... Ext. Raff. de pétrole et gaz 304.08.00 370.00.00 477.00.00 400.00.00 325.00.00

... Prod. d'électricité 378.08.00 386.06.00 230.00.00 235.00.00 420.00.00

... Prod. d'eau 80.00.00 91.00.00 100.00.00 105.00.00 110.00.00

... Bâtiment et génie civil 126.05.00 140.07.00 150.00.00 155.00.00 170.00.00

ACTIVITES DE SERVICES MARCHANDS

3507.09.00 3749.06.00 3907.00.00 4123.00.00 4485.00.00

... Commerce 126.09.00 170.00.00 178.06.00

... Transport et communication 1490.00.00 1475.00.00 1520.00.00 1740.00.00 1850.00.00

... Hôtels, cafés, restaurants 324.00.00 355.00.00 340.00.00 320.00.00 340.00.00

... Organismes financiers 85.09.00 97.00.00 99.06.00

... Activités de services marchands divers

1481.02.00 1652.07.00 1768.08.00 2063.00.00 2295.00.00

....dont logement 1063.02.00 1193.08.00 1308.07.00 1300.00.00 1440.00.00

EQUIPEMENTS COLLECTIFS DES ADMINISTRATIONS PUBLIQUES

683.03.00 808.06.00 833.08.00 857.00.00 953.00.00

... Education et formation 221.05.00 262.01.00 259.05.00

... Santé 71.06.00 84.07.00 81.07.00

... Assainissement 21.09 25.09.00 24.05.00

... Urbanisme 44.04.00 52.05.00 49.02.00

... Social et Culturel 75.07.00 89.06.00 90.02.00

... Services administratifs divers

248.01.00 293.07.00 328.06.00

TOTAL GENERAL 6922.08.00 7541.06.00 7539.04.00 7805.00.00 8565.00.00

Unité : million de dinars

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Les domaines correspondent à des secteurs d'activité pour les entreprises et à des domaines d'intervention pour les administrations publiques.

(*) : Données semi-définitives (**) : Données provisoires (***) : Données probables pour l'année 2003 et prévisionnelles pour l'année 2004

ANNEXE 2

Finances publiques - Budget de l'Etat*

Source: Ministère des finances

2000 2001* 2002** 2003*** 2004***

A- Ressources de l'Etat 9936.00.00 10821.7 11533.0 10908.0 12730.0

a- Recettes propres 6872.05.00 7105.04.00 7561.00.00 7847.00.00 8458.00.00

--- Recettes fiscales (1) 5678.4 6239.8 6584.0 6736.0 7303.0

--- Recettes non fiscales (2) 1194.1 865.6 977.0 1111.0 1155.0

b- Ressources d'emprunts 3063.5 3716.3 3972.0 3061.0 4272.0

B- Dépenses de l'Etat 10603.6 10659.9 11533.0 10908.0 12730.0

a- Dépenses de gestion (3) 4363.6 4686.6 4955.0 5325.0 5669.0 b- Dépenses de développement

(4) 2097.1 2329.1 2330.0 2396.0 2511.0 c- Prêts et avances de Trésor

(5) 175.8 126.4

d- Services de la dette (6) 3967.1 3517.8 4248.0 3187.0 4550.0

... Principal 3079.4 2634.4 3272.0 2236.0 3535.0

... Intérêts 887.7 883.4 976.0 951.0 1015.0

C- Déficit budgétaire (7) -651.7 -920.1 -700.0 -825.0 -737.0

Pression fiscale (8) 21.03 21.06 21.00 20.09 20.09

Unité : Million de Dinars

*Le budget de l'Etat comprend le Titre I, le Titre II, les fonds spéciaux du Trésor, les fonds de concours et les paiements directs.

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1. Les recettes fiscales comprennent les impôts indirects, les impôts directs et les différentes taxes...

2. Les recettes non fiscales sont formées par les revenus du domaine et des services payants de l'Etat, les revenus des participations financières et les bénéfices des entreprises publiques, les dons, le recouvrement de prêts, les recettes non fiscales des fonds spéciaux et des fonds de concours et les produits divers.

3. Les dépenses de gestion correspondent à la rémunération des salariés et aux dépenses de matériel et de gestion administrative, aux subventions de fonctionnement aux établissements publics dotés de la personnalité civile ou organismes assimilés, aux interventions directes et indirectes de l'Etat dans les domaines économique, social et culturel ainsi qu'aux participations aux organismes internationaux.

4. Les dépenses de développement sont constituées par les investissements directs, le financement public, les dépenses de développement sur ressources extérieures affectées et les dépenses de développement émargeant sur les Fonds Spéciaux et les Fonds de Concours.

5. Il s'agit des dépenses de trésorerie. 6. Le service de la dette correspond au remboursement des intérêts

et du principal de la dette publique intérieure et extérieure. 7. Le déficit budgétaire net est égal aux recettes propres moins les

dépenses nettes du remboursement du principal de la dette publique (intérieure et extérieure)

8. La pression fiscale est égale aux recettes fiscales rapportées au P.I.B

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TURKEY

101

PUBLIC BUDGET, ACCOUNTANCY AND CONTROL SYSTEMS IN TURKEY

Prof. Ferhat EMİL*

* TESEV, Governance Program Director , Former Deputy Undersecretary of the Turkish Treasury,

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1. INTRODUCTION

Turkish public budget system has a long institutional history which dates back to Ottoman era .The new republic which inherited the system and added its own touches to create a new system which has lasted by now. Centralist ottoman tradition and republican era which was inspired from French financial administration system of that time have created a regime that emphasizes strong control over inputs through the extensive use of ex ante approvals by multiple agencies as explained below . However , recent developments made it necessary to reform the budget and expenditure management system as a whole to address the institutional weaknesses stemming from within the system itself. Turkish budget system has now had two new laws to replace 80 year long General Accounting Law which was regarded as the constitution of the public financial management system. In this paper I will briefly analyze the existing system from different angles in the context of expenditure management , accountancy , financial reporting , financial control and external audit. I will then turn into the new laws namely “Public Finance and Debt Management Law” and “ Public Financial Management and Control Law” which has been enacted a year ago and is “expected” to become effective at the beginning of 2005.

2. EXISTING BUDGET , ACCOUNTANCY AND CONTROL SYSTEMS

A. Legal, Institutional and Operational Structure of the Budget (Consolidated Budget) System

1. The legal basis of the existing budget system are the Constitution , State Accountancy Law enacted in 1927 and annual budget laws. Besides , Public Procurement Law which replaced another “years old” law recently and the Law of Court of Accounts which is expected to be replaced with a new law in near future are the regulations framing the specific and general terms of the governments’ budget practices and procedures.

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2. The main institutions involved in budget process are the Ministry of Finance (MoF) , The State Planning Organization (SPO) , The Undersecretaiat of the Treasury (UT) . As noticed , unlike the other countries , the Treasury is a seperate entity from MoF in Turkey.

3. Ministry of Finance has principal responsibility for the preparation of the budget. It prepares the budget call of the prime minister as well as issuing budget guide for the spending departments.Budget speech is delivered by Finance Minister in the parliament. It has also main central financial control unit of spending during the implementation phase. In coordination with the Treasury , it releases the appropriations . It exercises ex ante controls such as issuing visas for procurements exceeding certain limits . It controls cadres of the spending units and pre approves recruitments etc.Under the existing system , each spending department has a so called “budget department” which represents the MoF within the line agency. It compiles the statistics , regulates the accountancy rules and monitors the activities of state accountacy offices accross the country.

4. State Planning Organization founded in 1961 has the responsibilty of preparing annual investment program and budget. SPO prepares 5 year development plans and sets out macroeconomic targets for the preparation of the budget. It also provides secretarial services to the High Planning Council which is a kind of mini economic cabinet to overview the budget proposal for the approval of the cabinet before submitting it to the Parliament. SPO prepares investment budget which is added to current budget compiled by MoF.

5. The Treasury which takes up % 50 of the central government budget due to interest payments and transfers. UT is responsible for the preparation of the transfer budget including agricultural subsidies , state aids to private sector , capital transfers to state economic enterprises. The Treasury is also responsible for cash and debt management and for making debt service payments.

6. The budget year is the calendar year and budget follows the annual appropriation system . Appropriations are granted for one year and they are cancelled at the end of each

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year.Contracts extending over several years are paid from yearly appropriations.Tha annual budget bill submitted to the parliament is composed of two budget books. General budget and annexed budget both of which are presented on a gross basis. However Budget law is voted on a consolidated basis by deducting the revenue receipts(transfers from the general budget) of annexed budget agencies from the total appropriations .Thus the consolidated budget equals general budget plus annexed budget minus treasury aid to the annexed budget.

7. The general budget is the budget of central government agencies and legislative and judicial and other executive bodies of the State which have no revenues of own while annexed budget covers other central government entities which generates revenues from their activities. In this sense general budget represents the main government services such as health, education, defense, infrastructure and justice . Annexed budget agencies are mainly universities which charges fees , directorate of highways which has revenues from tolls , general directorate of rural works , directorate of hydrolic works etc. They are called “annexed budget agencies” as their budgets are annexed to general budget to form the “ consolidated budget of central government”. Local government budgets are not part of central government budget and their budget are not presented to the parliament for approval. State Economic Entreprises (SOEs) are not also part of consolidated budget. Same is true for extra budgetary funds (EBFs).

8. Consolidated Budget , local administrations , financial and non financial SOEs and EBFs and some other government agencies constitute the public sector . Total borrowing requirement of public sector is called PSBR.which is equal to GGBR and SOE boorowing requierement In this paper we examine the consolidated budget structure of the general government as it represents the main aggregates within the public sector.(see. below tables)

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Instutional Breakdown of Borrowing Requirements (trillion liras) 1999 2000 2001 2002 2003

GGBR (General Government Borrowing Rquierement) 10.105 12.531 31.669 33.87735.851

Consolidated Budget 7.389 11.786 30.714 27.64224.639

Social Security Institutions 2.201 2.026 3.046 5.676 9.648

Local Authorities -27 -231 -663 464 959 Revolving Funds -69 -158 -135 -495 -537

Extrabudgetary Funds 612 -891 -1.293 591 1.143

As a Share Of GNP (%) GGBR 12,9 10,0 17,9 12,3 10,1

Consolidated Budget 9,4 9,4 17,4 10,1 6,9 Social Security Institutions 2,8 1,6 1,7 2,1 2,7 Local Authorities 0,0 -0,2 -0,4 0,2 0,3 Revolving Funds -0,1 -0,1 -0,1 -0,2 -0,2 Extrabudgetary Funds 0,8 -0,7 -0,7 0,2 0,3

Percentage Distribution of Borrowing Requirements (%)

GGBR 100,0 100,0 100,0 100,0 100,0

Consolidated Budget 73,1 94,1 97,0 81,6 68,7 Social Security Institutions 21,8 16,2 9,6 16,8 26,9 Local Authorities -0,3 -1,8 -2,1 1,4 2,7 Revolving Funds -0,7 -1,3 -0,4 -1,5 -1,5 Extrabudgetary Funds 6,1 -7,1 -4,1 1,7 3,2

9. Under the existing system annual budget cycle begins in June six

months before the start of fiscal year with a “ budget call “ issued by the Prime Minister. The Prime Minister’s Budget Call offers a broad statement of principles for the budget.Meanwhile MoF issues “Budget Guide” which states a number of technical principles for the budget preparation e.g classification of programs , unit-cost standarts relating to current expenditures. On the basis of these instructions spending departments prepare their budgets during June and July. During August and September , line

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agencies negotiate their budgets with MoF for the current expenditures. Investment budget is negotiated with SPO. The final figures of the budget is shaped by MoF,SPO and the Treasury and is brought to the attention of High Planning Council (HPC) which in theory is the main body for strategic decision making and policy formulation where program and budget is linked to each other. HPC decides economic and social targets,specifies the ceilings of investment and current budget as well as transfers.Within this framework SPO and MoF finalizes the draft budget.

10. The draft budget is then submitted to the Parliament seventy five days before the beginning of the fiscal year. This is a constitutional requirement.The Budget Bill is first considered by the Plan and Budget Committee of the Parliament. Members of the commitee are allowed to make chages over the budget.However this not always the case as majority (25 out of 40 members) of the membership belongs to the ruling party.The committe has to adopt the budget bill as ammended , within 55 days which subsequently is considered by the Parliament in plenary session.During the debates at the general assembly members of the parliament can not propose amendments which would increase expenditures or decrease revenues. Budget Bill is then approved to become effective as of 1st of January.If,exceptionally,Budget Bill is not approved by the Parliament or is not passed before the start of fiscal year , Parliament may adopt a provisional budget law that authorizes government to spend up to certain percentage amount appropriated by the budget of previous year until a new budget is passed by the parliament. Non approval of budget usually results in resignation of the government which happened only once back in early 1970.

11. Implementation of the Budget involves various stages such as release of appropriations and preparing for actual expenditures under exante control and visa system. The budget law authorizes MoF to regulate of the funds appropriated and ensure the expenditure control throughout the fiscal year. Shortly after the enactment of the Budget Law, MoF issues a circular to all spending agencies specifying the main principles of the commitments to be undertaken and give visas to them for their detailed expenditure programs which cover appropriations to be relesed for the next 3,6 months. The second stage of the budget execution is the allocation of released appropriations to the sub units of the spending departments.This is done by the heads of the budget offices in agencies.Before the appropriations may be sent to a field agency they must be approved the Court of Accounts (by receiving its visas).

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12. The third and fourth stage of the expenditure process is the utilization of allocated appropriations by spending departments through the budget and accounting offices of the MoF. This stage includes four phases; commitment, accrual, payment order and payment instruction.These phases require intervention of four levels of authority as designated by General Accounting Law. First phase of spending requires “authorizing officer” who is the head of the spending departments (governors at the local levels) must authorize the expenditures. At the second phase , “realization or assessment “ officer determines and prepares the documents for accruing an expenditure. After the authorization and assessment , third phase “government accountants” ensures the accuracy and compliance of the commitment with the legislations. At fourth stage accountants make the payments after securing payment order from the “authorizing officer”.Government accountants who play dominant role in budgetary accounting are appointed on a geographic and fonctional basis by the MoF. In other words they are in effect outposts of MoF , staffed and controlled by General Directorate of Public Accounts. Thus spending agencies do not undertake accounting transactions themselves.They request the relevant accountancy to do this on their behalf.This classic division of function enables accounting transactions to be strictly controlled. About 1500 accountants function at central and local levels.

13. MoF has extensive powers in implementation of the budget. If required , MoF has the power to make transfers between the appropriations of the agencies , between the programs (with the approval of the Parliament), within programs in the budget of a spending agency.It has also authority to make transfers from the contingency funds to the individual budgets. Investment appropriations can only be transferred by MoF with the consent of SPO .

14. At the end of the fiscal year , the results of the budget are presented in the final budgetary accounts namely Final Accounts Bill. The government accountants prepare number of reports reflecting the results of the budget transactions . These reports are submitted to the General Directorate of Accounting of MoF and to the Turkish Court of Accounts (TCA).Each ministers of spending department must submit the final accounts of his/her department to the MoF and TCA within the five months from the end of fiscal year. The MoF must submit Final Accounts Bill within the seven months from the end of the fiscal year. TCA reviews the statements of accountants , Minister’s final accounts and then submits the “general conformity statements” to the parliament 75 days before

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the start of new fiscal year so that the accounts of the previous fiscal year can be brought to the attention of the Parliament together with the draft budget of the new fiscal year.The budget cycle is then completed when the Final Accounts Bill is approved by Parliament.

Public Accounts and Financial Reporting 1. The General Directorate of Public Accounts (GDPA) of MoF is

responsible for government accounting and financial reporting. Its main functions are to; keep accounting records for transactions on the consolidated budget , ensure the accuracy , timeliness and the reliability of the accounting records , control and inspect accountants , compile periodic statements of receipts and payments for budgetary control and other purposes , prepare the annual financial statements for the consolidated budget and regulate accounting standarts for the consolidated budget and for revolving funds.Accountancies send the summaries of their transactions (receipts/paymens) to GDPA head office each month.These figures are then aggregated for nation wide reporting in the Monthly Bulletin of Public Accounts. Since late 1998 monthly figures have also been publicly available on the GDPA web-site. Although many accountancies used to maintain their records manually , the above system managed to report timely (reporting in aggregate after an average delay of 30 days) responsive in terms of public accountability and reliable. The accounting system is well documented (instructions, documents, formats, accounting entries, reportig responsibilites) and discipline is enforced

2. Modernization of accounting system and financial reporting made a good leap recent years . An information technology / accounting reform project initiated by GDPA in 1999 made almost all accountancies to link their accounts electronically to the servers of GDPA head office. In this system the government’s accounting data base is held centrally and contains data on all transactions wherever they occur in the system. This brings the possibilities of integration budgeting and accounting information via the introduction of commitment accounting , accounting information on accounting bases other than cash and timeliness and reliability of budget reports in the near future .

3. Existing Public Accounts systems lays between “modified cash accounting” and “modified accrual accounting”. Despite the technological achievement accounting base have not yet been fully transformed to reflect all government transactions at all stages (commitment,accrual and cash ). Revenues are recorded on

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cash basis while expenditures are recorded on the mixed basis of cash and accrual depending the availability of the cash . Some debt data is also recorded on accrual basis. This reflects the accrual character of the system. On the other hand some cash transactions committed within the previous year but effected during the first month of the new fiscal year (float) are recorded to the accounts of the previous year thereby reflecting the modified cash character of the system .As explained below , this system is now about to change towards more on accrual side.

4. Treasury cash management system is the important component of the public accounts system. Cash management of the budget is the responsibility of Turkish Treasury. The Treasury maintains two types of accounts. For the payments of the central level which mainly consists of debt service, expenditure requierements of defence ministry, subsidy transfers , Treasury has accounts at the Central Bank where revenues collected by big tax offices are flown . Treasury makes its payments from this accounts. Second type of Treasury account is held for the provincial levels.This type of account is known as “unified Treasury account” which is held at the State owned Agricultural Bank which has the largest network of branches accross the country .Within the unified tresury account each government accountant holds a current account with the local branch of Agricultural Bank where the said accountancy is located. As long as the transction is a regular one the government accountant is allowed to write checks for the payments exceeding the balance of his/her account. This kind of automatic payment system which relies on spot finance by Agricultural Bank saves accountants from waiting cash to be transferred from the central treasury accounts . The balances are settled between the Treasury and Agricultural bank on weekly basis. However weekly settlement is now gradually moving to daily settlement thanks to improved accountancy system.

Audit and Control Systems of the Budget 1. Exante control and audit of the system is mainly exercised by

MoF and respective spending agencies also has internal control and audit facilities. As explained in the previous parts of the paper , ex ante control of the expenditures through layers of visas and permissions are the main characteristic of the control system. The types of expenditure which are subject to MoF and TCA exante control and the limits of commitment are specified in the budget law. Internal control within the spending department is mainly carried out by assesment officers , directors of the budget offices

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and then by the respective government accountant. Internal controls involve examining and verifying the commitment , delivery of goods and accrual and payment procedures of the expenditures. Head of the spending departments can also use their Audit bodies to carry out internal audits within the system. Irrespective of the internal audit carried out by the spending departments themselves , MoF has also wide powers of exercising audits within a spending department by Inspectors of Finance , Budget Controllers .The transactions of government accountants are also examined by GDPA and local chief officers of Finance . System is therefore quite complex .

2. External audit of the budget is performed by TCA (Turkish Court of Accounts) on behalf of the Parliament.The court has both exante control and external control functions. TCA is the supreme Audit Institution of Turkey.The constitution requires it to audit the government accounts relating to revenues,expenditure and property financed by the general and annexed budgets on behalf of Turkish Parliament.TCA has two main functions; judicial and auditing. The judicial work is carried out by specialized chambers in which court members try accounts and either acquit or hold liable those responsible for them.The auditing work is carried out by auditors. The assessment officers and accountants are accountable to TCA while authorizing officers are not unless they undertake the responsibility of any transaction in writing.

3. TCA audit is mostly based on compliance audit with very little emphasis on performance audit. TCA sees its financial and compliance audit as being of continuing fundemental importance. This, in practice involves 100 percent audit checks which is costly and impedes TCA’s capacity to move towards system based audits.

3. The Weaknesses of the Current System

A. The Principles of well functioning budget system 1. Macro fiscal discipline. Well functioning budget system should enable governments to act in a fiscally responsible manner based on an information judgment about what level of expenditure could be sustained by tax and non tax resources and a sustainable deficit strategy. 2. Strategic Decision making. The budget system should generate the information necessary to provide policy makers with the basis to make stategic

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decisions regarding resource allocation and to ensure that key policy objectives are adquately funded. 3. Efficiency and effectiveness in use of resources during budget execution. Sound budget systems should generate incentives for efficiency and effectiveness by public agencies and support the achievement of performance objectives. 4. Accountability and fiscal transparency is the pillar of well functioning system. Waste and fraud should be discouraged by the system of internal control and external audits but should not be so onerous as to discourage performance oriented management. Fiscal transparency in financial reporting increases the credibility of budget process as well as reducing fiscal risks.

B. Existing Budget System in the Light of These Principles On all accounts the Turkish expenditure management system presents major weaknesses. 1. Aggregate Fiscal management is major weakness reflecting the disability of budget to cover and report hidden deficits coverage . The evidence against the effectiveness of aggregate fiscal management is most obviously displayed by the high level deficits and mounting debt. The evidence suggest that aggregate fiscal discipline has been jeopardized by the significant growth of off- budget activities particularly quasi fiscal activities or so called hidden deficits .(Figures above do not include the hidden part of the deficit which amounted 10-12 % of GNP before 2000). Thus while the official fiscal stance was being defined by the measured fiscal deficit and the corresponding PSBR , actual fiscal policy has been more expansionary and has contributed to a rapid build up of total debt which was also fuelled by the cost of banking crises . Total public debt has jumped from % 30 of GNP in 1990 to 90 % of GNP in 2002 before smoothing down to % 68 of GNP in 2004.

2. Strategic decision making is neglected and policies and plans are not linked to the budget. Although Turkish Budget system is officialy designed to cater the needs of program budget approach , in fact it is classic line item budgeting which serves very little in linking policies to their fiscal costs. Five year development plans is confined to establishing five year priorities but does not provide an assessment of plan proposals , weakening the linkage of policy proposals to the budget. The high inflation environment which compress budgetary time horizons and frequently changing of governments also discourage longer term fiscal planning. In general budget is not seen as an instrument to achieve discretionary policy objectives. Policy formulation is neglected by line agencies under the absence of guiding principles. The budget process has very little credibility with line agencies. Existing budget system fails to provide certainty to line agencies to be able to make sound and informed judgments in preparation of their budgets. Budget preparation is a bottom up exercise through which spending departments bargain with MoF and SPO with mutual distrust , aiming at snatching few more appropriations for many projects.

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3. Excessive controls over budget implementation fails to prevent waste and inefficiency. The system of financial controls and ex ante visas are extremely rigid and emphasizes compliance with existing regulations . The TCA performs ex ante approval function which further reduces the degree of managerial discretion in the budget management. These rigid controls provide strong incentive for agencies to seek to develop off budget sources of funding thereby contributing to further budgetary fragmentation. Despite these tight layers of controls the system provides no assurance that waste ,ineffciency and diversion of funds are minimized.The external audit reports focus on compliance with regulations and do not offer an assesment or performance and efficiency.

4. Absence of common accounting standarts and lack of uniformity in classification of government agencies in the chart of accounts adds further to reduce fiscal transparency . In the absence of commitment and accrual accounting the budget system does not capture and record the accumulation of arrears (unpaid obligations) of the government.

5. Despite the existence of TCA and other multiple control and inspection bodies significant part of government finance are not subject to audit examination. Such audits are focused on compliance and very little attention is given to performance or value for money audits.Financial reporting is subject the problems due to lack of comprehensiveness of the budget . Despite the timely information about the monthly figures of government budget , comprehensive coverage of general government (including local government and all off budget activities ) and lack of adequtae classification of expenditures were major setbacks for fiscal transparency until very recently.

In summary , each aspect of the infrastructure of public budget , accountancy

and control displays major structural weaknesses.

C. Reforming the Budgetary Institutions and systems Under the pressing need for better expenditure management and control systems in the light of financial crises which were regarded as the result of weak fiscal discipline and aggregate fiscal management deficiencies governments adopted two new laws to strenghten the public budget and control systems. 1. The New Public Finance and Debt Management Law brought a new understanding in arresting fiscal deficits and controlling public debt. Learning from the experiences of past , new law effected as of January 2003 defines the borrowing limits for the central government and sets principles for effective debt and risk management as well as managing the receivables of the Treasury from different government agencies. The law especially addresses the problem of contingent liabilities and brings restrictions over the borrowing capacity of local authorities under Treasury guarantees. The law also defines the rules for debt accounting and budgeting the fiscal risks and external credit use which have gone unrecorded until then.

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2. The New Public Financial Management and Control Law attempts to address the weaknesses of the budget system. The law enacted in 2003 and is expected to become effective with the start of 2005. An assessment of the propositions of the law on the accounts of sound financial management , reveals that it undisputedly bears certain advantages over the existing inept system. 3. From the aggregate fiscal discipline perspective , the law brings fundemantal change of approach to that end. First of all it solves the coverage problem of the budget by bringing the local authorities and social security nstitutions under the auspices of the law along with the central government agencies thereby allowing the policy makers to assess the fiscal position of the whole of the government. Governmet is now required to declare medium term macro fiscal framework at the start of budget process as to announce its fiscal policy intentions over the midterm . Topdown budgeting is adopted with expenditure ceilings assigned to line agencies at the start of the budget preparation. Strict sanctions and penalties are proposed for those officers who exceeded appropriation limits . Multi year (3 years) budgeting is to be introduced to assess better the consequences of the decisions of today over the coming year which may make the policy makers to think twice before committing extravagant expenditures. 4. Strategic Decision Making is also strenghtened with the introduction of multi year budgeting , strategic planning and early start of budget process. Line agencies are required to prepare their budget under the directions of strategic planning guidelines as set by SPO. Budget process will start one month earlier namely in May . With the expenditure ceilings assigned to line agencies in advance and macro fiscal policy statements of governments at the beginning of the process are expected to allow spending departments to prioritize their spending with respect to resources available to them under more predictable and flexible settings. 5. The Law proposes ,with some flaws , performance based budgeting for improving efficiency and effectiveness. The law proposes the removal of exante control by TCA over the budget process while retaining the visa power of MoF for a transition period. It also envisages to give flexibility to managers to make transfers between the lines of their budget within the certain limits. However despite its rhetoric , the law makes exante control system even more complex by introducing internal controllers and financial controllers who controls and verifies virtually every transaction before an expenditure commitment is made thereby reducing the incentives for managers to act in line wih perfromance targets which are set for them.In other words ex ante controls within the new system replace the existing system in a more rigorous and complex manner . Existing accountancy structure is preserved .However ,now not only the assessment officers and accountants are to be held accountable agaisnts the TCA but also the authorizing officers will have the same accountability. 6.The law requires financial reporting to be enhanced and accrual accounting to be adopted . The financial tables to be submitted to the parliament will now include local authorities’ and social security agencies’ accounts as well as the accounts of regulatory bodies. The law adopts accrual accounting concept and

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orders MoF to unify the the accounting standarts of all government agencies. In this respect central government agencies alredy switched to accrual accounting. However budget reporting will still be made on cash basis. 7. TCA is openly mandated to carry out performance audit and its coverage is extended. However the capacity problems of TCA raises some cause for concern given the fact that TCA is already equipped with performance audit power which TCA has never practiced. In conclusion , increasing awareness of policy makers paved way for passing new laws to which the signs of new approaches of expenditure management are visibly attached .However implementation challenges awaits. As a result of this challenge Government now decided to postpone the date of effectiveness of the new Public Financial Management and Control Law for one year with concerns that neither the MoF nor the spending agencies are sufficiently ready for the implementation and more time is needed to digest the new paradigm that the lwas attempts to introduce.

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Public Budget for results

Doct. Ivan Raffaele Silvio Pacifico

1. Introduction about Turkish economy

To analyze correctly the economic incentives in Turkey and to understand the Turkish market it’s important to study the problems connected to the economic field in Turkey and the economic problems of the last years. We cannot understand the Turkish Market or the economic Turkish future if we don’t understand the economics trend and social indicators of Turkey. In the table below (Table. 1), there the main social indicators which allow to make a complete analysis.

1999 2000 2001 2002 2003AREA ( Km2) 774.815 774.815 774.815 774.815 774.815POPULATION (1000 persons) (Mid-Year Population) 64.345 67.461 68.618 69.626 70.712 ANNUAL POPULATION GROWTH RATE (In thousand) 17,5 17,1 16,7 15,7 15,3 POPULATION DENSITY 83,0 87,1 88,6 89,9 91,3 ENROLLMENT RATE (%) 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 Primary education 83,6 90,5 90,7 89,8 ... Secondary education 38,2 39,1 40,4 43,2 ... University and other higher education 11,0 11,6 11,5 11,8 ...

1999 2000 2001 2002 2003INFANT MORTALITY (İn thousand) 36,3 34,8 38,7 39,4 38,3AVERAGE LIFE EXPECTANCY (Year) 68,3 68,5 68,6 68,5 68,7 Female 70,7 70,9 71,0 70,9 71,0 Male 66,1 66,2 66,4 66,2 66,4POPULATION PER DOCTOR 820 834 776 744 ...LENGTH OF ROAD (Km) 60.923 61.090 61.305 62.369 ...LENGTH OF MOTORWAYS (KM) 1.749 1.773 1.851 1.851 ...RAILWAYS (Km) 8.682 8.671 8.671 8.671 ...AUTOMOBILE (Per 1000 persons) 63,3 65,2 66,1 66,1 ...TELEPHONE (Per 1000 persons) 281 271 276 272 ...TELEVISION SETS (Per 1000 persons) 419 439 459 474 ...ANNUAL CONSUMPTION OF ELECTRICITY (Per capita/Kwh) 1.417 1.505 1.415 1.479 ...(*) Covering October 1-June 15(**) 2000-2001 / 2001-2002 education years were calculated by using the final result of General Census of Population in 2000. The eight-year compulsory education was initiated as from 1997/1998 with the law no: 4306 dated 18.8.1997.

SOCIAL INDICATORS OF TURKEY

Table 1. Social Indicators

Turkey experienced a positive trend in the annual rate of growth from 1996 to 1998 with on average 6.4%, however in 1999, the growth rate contracted by 6.1%

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due to policies aimed at reducing inflation and declining production because of the earthquake which took place in August of the same year. As a result of the three-year disinflation and structural adjustment program started at the end of 1999, that was supported by a stand-by agreement with the International Monetary Fund (IMF), inflation fell significantly in 2000 (from 84.9% in 1996 to 32.7 % in 2000).

In the meanwhile the interest rates brusquely decreased below expected levels, production and domestic demand started to increase, GDP by expenditures grew by 7.1 % and as a result an annual growth rate of 6.1 % was achieved.

The financial crisis of the last months of 2000 has been transformed into an economic crisis in February 2001, in few months a new programme for restructuring economy and achieving stability had to be designed in April 2001. Although with the new program annual growth rates of -3.0% and 5.0% were foreseen for years 2001 and 2002 respectively, they were reduced to -8.5% and 4.0% following the September 11 events. The inflation rates for 2001 and 2002 were targeted as 65% and 35% respectively. In 2001, annual growth rate and year-end inflation were -7.4% and 68.5% respectively. The economic program has been implemented successfully with a prospect that targets for 2002 will be met by the end of the year. Growths in GDP and GNP have been 8.2% and 8.8% year on year in the second quarter of 2002. For the first six months of 2002 taken together, GDP rose by 5.2% and GNP by 4.7% year on year, and at the end of the year the GNP was grown of 5.9%. Increases in exports and stocks have been the main components of growth in 2002. The year-end rate was 30 %, below the Government's target of 35 % for 2002.

How we can see below the financial and economic crisis started in the last months of 2000 determined his effects in all the sectors, agriculture, industry4 and services in 2001. Only in 2002 the Turkish Gross national product start again to grew with a rate of 7.9%.

4 For further details, Industry Employers’ Union. (http://www.ieis.org/eng/yayin/index2.htm), Istanbul, 2004 (accessed June 2004);

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ECONOMIC INDICATORS OF TURKEY1999 2000 2001 2002 2003 (1) 2004 (1)

GROSS NATIONAL PRODUCT (GNP) (2) At current prices (TL Billion) 78.282.967 125.596.129 176.483.953 275.032.359 356.680.888 At current prices ($ Million) 185.267 200.002 145.693 180.892 239.235 At 1987 prices (TL Billion) 112.044 119.144 107.783 116.338 123.165 GNP Per capita (TL Thousand) 1.216.609 1.861.759 2.571.978 3.950.139 5.044.135 GNP Per capita ($) 2.879 2.965 2.123 2.598 3.383 Deflator 55,8 50,9 57,8 44,4 22,5 Gross domestic product per capita - At current prices and current purchasing power parity ($) 6.135 6.730 6.046 6.448 6.718 GNP - RATE OF GROWTH BY SECTORS (% ) Agriculture -5,6 3,8 -6,0 7,4 -2,4 Industry -5,1 5,6 -7,4 7,9 7,3 Services -3,9 6,5 -6,1 6,0 5,1 GNP -6,1 6,3 -9,5 7,9 5,9GDP COMPOSITION BY SECTORS (% ) Agriculture 16,0 15,4 12,8 13,0 13,4 Industry 19,0 20,0 21,1 19,7 18,5 Services 64,9 64,6 66,1 67,3 68,2FIXED INVESTMENTS (TL Billion) (Programme, 2004) 16.863.755 27.688.468 32.408.981 46.031.221 61.179.859 76.737.211 Public (TL Billion) 4.435.215 7.983.004 10.047.332 15.880.805 14.969.350 17.914.349 Private (TL Billion) 12.428.540 19.705.464 22.361.649 30.150.416 46.210.509 58.822.862EMPLOYMENT (2000-2003 Q4) Civilian labour force (1000 persons) 22.925 22.031 22.269 24.347 23.206 Civilian employment (1000 persons) 21.236 20.579 20.367 21.658 20.811 Agriculture 8.595 7.103 7.217 7.618 6.799 Industry 3.664 3.738 3.734 3.953 3.836 Services 8.976 9.738 9.416 10.086 10.176 Unemployment rate (%) 7,4 6,6 8,5 11,0 10,3 Number of workers abroad (January-September, 2003) (Februar 1.206.067 1.170.226 1.178.412 1.200.725 1.197.968 1.197.964(1) Provisional(2) The new series in producers' price

Table 2 In August 2002, the High Planning Council, approved the economic

programme of Turkey for 2002-2005, and in the year 2003 economic performance was even better.

The program covers economic targets for meeting the EU accession criteria. An average growth rate of 5.2 % and an inflation rate of 8 % are targeted by the program. It is aimed to reach a sustainable growth rate and the EU average in the ratio of public debt stock to GNP, and to strengthen the free market economy. It is foreseen that an increase in the growth rate will be mainly achieved by increasing investments and exports. Expected increase in investments and exports are calculated at 14.2% and 6.6% respectively. Due to the recent macroeconomic program, Turkey has gone through a large number of structural reforms. The aim of these reforms is defined as increasing the efficiency of growth and production factors in the country in order to meet the requirements of both globalization and growth based on human capital and technology. Legislative measures taken in that respect are categorized as: a) financial sector restructuring; b) increasing transparency in the State and strengthening of public finances; c) enhancing of competition and efficiency in the economy; d) strengthening of social solidarity.

Actions taken to adopt the EU 'acquis', contribute to these efforts to a large extent.

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2. An outlook about financial situation in Turkey Financial crises in November 2000 and February 2001 required the three-party

coalition government, IMF and World Bank, to take extraordinary measures to prevent further social and economic obscurities. The crisis, although fiscal in nature, had important financial consequences for the banking sector — including the failure of some private banks, which were taken over by the Deposit Insurance Fund. This of course increased the burden on the fiscal accounts of the government. The IMF and World Bank agreed to provide support to overcome the extra burden created by the defaulted banks and to restructure the financial sector to make the system immune from future disturbances. Budget deficits have been a common phenomenon in the post-1980 period (Figure 1).

During the 1980s, Personnel Expenditures and Interest Payments constituted 38 percent of total expenditures on average (though at the end of the period this total was 50 percent of total expenditures), whereas Tax Revenues were the main item on total revenues with 84 percent on average. In the post- 1990 period, tax revenues averaged 79 percent of total revenues, and total personnel and interest payments averaged 62 percent of total expenditures — double the previous period's figures. It is important to mention that in 2001, total interest payments were 50 percent of total expenditures.

Transfers to State Economic Enterprises (SEE) in the first half of the 1980s and 1990s also contributed to the ongoing budget deficits. Although the composition of revenue items of the consolidated budget did not present much of a difference in the post-1980 period, the personnel expenditures and interest payments became the major source of expenditures in the total expenditures part of the budget. In the meantime, investment expenditure remained at almost the same quantity, which fluctuated between the two and four billion US dollar band. The main reason for this dramatic change is the heavy reliance on domestic borrowing to finance the budget deficit, especially after 1990. (Figure 1)

Due to two crucial crises, one domestic in 1994 and the other international in 1998, aggregation of systematic risks in the economy triggered the risk premium, and in some cases the real interest paid on domestic debt, which went up to 35 percent. The average real interest rate paid over the post-1990 period was 13.1 percent, where as the post-1994 period it averaged 17.8 percent. On the other hand, the maturity of the total debt stock was approximately one year.

This of course raised the total debt stock exponentially over the past eight years.

In 1996 the total debt stock was 59 percent of GDP, which increased to 87 percent of GDP in 2000 and 134 percent of GDP in 2001. Of this total, the domestic debt stock was 17 percent of GDP in 1996 and 57 percent of GDP in 2001. Currently, the total debt stock is 204 billion dollars, which is almost double the 1996 level of 108 billion dollars. The share of the public debt of the total debt stock is almost 80 percent.

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The IMF programs after the 1994 and 2001 crises intended to exercise contractionary fiscal policy aimed at lowering expenditures and raising taxes to obtain a primary surplus (the budget balance excluding the interest expenditures). On the other hand, the privatization revenues and a pick-up in the

growth of the economy were expected to help lower the interest expenditures. However, the growth rate of the debt stock has been significantly higher than the growth rate of the primary surplus, mainly due to the presence of both internal and external risks. Therefore, the budget deficit has continued to grow up to the present day. By the end of 2001, the budget deficit climbed to almost 20 percent

of GDP. Growing deficits and established inflation inertia averaged CPI inflation to 44

percent in the 1980s, which increased to 76 percent in the 1990s. Despite the presence of disinflationary attempts, little success was achieved in lowering inflation. In two (1993 and 1997) of the 4 cases (1991, 1993, 1997, 2001) the attempts resulted in financial crises. It is also important to note that for the two decades the average growth rate of GDP was five and four percent, respectively, with a high degree of volatility. (Figure 1)

3. Budget for results Government’s legislate benefits, delivered in the future, which are not

reflected on current budget accounts. This is especially true for social insurance services. Demographic changes, retiring population and lengthening of life span, will play a crucial role in determining the size of future payments to social insurance institutions. Moreover, rather than increasing taxes governments may decide financing current expenditures through borrowing. However, stock of debt does not guarantee when the government will pay its obligations. We can safely claim that short term legislative process does not necessarily correlate with long-term obligations of the government. The budget deficit in its foundation, is an arbitrary measure in assessing the stance of the fiscal policy. It is a decision on

choosing different labels for it’s revenues and expenditures. It also understates the financial obligations that the central government has to fulfill under current fiscal policies (Cecchetti, 2002) and (Jackson, 2002).

The government could easily choose different methods and magnitudes of borrowing, taxation and expenditures and methods of reporting budget deficits, surpluses and balances. The arbitrary nature of fiscal labeling has been discussed in various articles by Kotlikoff (1984, 1986 and 1988). Kotlikoff indicates that the labeling is irrelevant to the stance of fiscal policy. The size and sign of government deficits are not unique.

As Kotlikoff (1993) points out: “… equations of neoclassical models do not

uniquely define the size or sign of government deficits, and “the deficit” in such

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models is purely a reflection of how the government chooses to label its receipts and payments”.

The goal of this paper is to define a measure that we call Intertemporal Budget Gap (GAP) to evaluate the stance of fiscal policy. GAP is similar to the “opengroup liability” concept that is used in the analysis of social insurance programs and sometimes called the Fiscal Imbalance (Gokhale and Smetters 2003) or Fiscal Gap (Auerbach, Gale, Orszag, and Potter 2003). GAP is the comparison of the present value of the government’s projected net receipts (revenues minus expenditures) in the infinite horizon and government’s net worth (government assets minus domestic and foreign debt). With the help of GAP, we can answer the following questions. What is the current situation in a government’s intertemporal budget? How much reduction (increase) is needed in expenditures (revenues) to balance the GAP? What are the implications of alternative polizie on the fiscal stance of the economy? Are the ongoing policies in the right size and magnitude? Is further adjustment needed? What are the tradeoffs between changes in interest rates and changes in productivity growth? etc.

GAP, although similar in nature, should not be confused with Generational Accounting, which was developed by Auerbach, Gokhale and Kotlikoff (1991), that involves a reform that forces the GAP to zero by increasing tax burden on unborn generations. Generational Accounting in this respect, is simply the difference in the tax burden per capital between current newborns and future generations.

Of course, not all items of the government’s budget are predictable as the net debt.5 One needs more information on the forecasts of various items of the budget. One aspect of forecasting future expenditures and revenues is to figure out the population dynamics in the future. This will accommodate the population

growth rate into the figures. On the other hand, one can argue that the number of people in each age group will not be the same due to the changes in population dynamics. At this point, we can move further by incorporating the information regarding the portion of population who will be benefiting from expenditures or paying taxes. These we will call the relative profiles. Relative profiles are the average payments or revenues that certain gender and age groups benefit or pay with respect to a reference individual in the economy, the 40 year old male.6

5 The complexity of the instruments used in domestic and foreign borrowing and uncertainties that can prevail in the future would bring uncertainty to the future net position of the government, however an educated guess would help the policy maker to determine the size of net debt easier than other budgetary items. 6 As an example, consider education expenditures. Those who are benefiting from these expenditures are the ones that belongs to the pre-education, primary education, higher and college education which correspond to the age groups 4 to 25 in both gender. If we know the growth dynamics of these ages for both males and females we can observe part of the expenditure that the government will be making in the future

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Bringing the population dynamics and relative profiles together will costitute the first component of our analysis.

The second component of the analysis is to find out the responsiveness of revenues and expenditures to the growth rate of the economy. In order to examine this, we need to observe a stable relationship between the growth rate and the budgetary items. Elasticities of the budgetary items with respect to the

growth rate of the economy is a measure to serve the purpose. Therefore, by assuming that this stable relationship will prevail in the future we will construct forecasts for these expenditures in different growth rates.

We chose Turkey to be the country for analysis. Turkey has undergone major changes in fiscal accounts over the last two decades. Nevertheless, problems created by the fiscal state of the economy characterized economic developments in Turkey. The rise of chronic inflation and heavy financing of government deficits through domestic borrowing created a vulnerable economy to both internal and external shocks. The two financial crises of April 1994 and February 2001 led to a significant devaluation of the Turkish Lira, increased the risk premium, lowered the maturity of the domestic debt and slowed down access to foreign borrowing. The sharp increase in the real interest rates accelerated the accumulation of the debt stock. By the end of 2001, Turkey had a public debt which was 110 percent of the Gross National Product, which placed it at the top most indebted countries in the world.

In 2001, with the help of the IMF and World Bank, Turkey had undergone significant restructuring of the financial sector and the public accounts to provide answers to the problems created by the public sector. The programs required sound fiscal policies aimed at reducing expenditures and increasing revenues. In order to create budget surpluses to pay off the debt gradually.

However, they did not take the future fiscal problems into consideration, i.e. higher budget deficits in the future due to an aging population that results in an increase in social security payments, lower income taxes due to a reduction in the labor force or an increase in women’s participation in the labor force which will increase the receipts from income taxes and social security contributions,

distortions of contractionary fiscal policy in terms of lower output, etc. The calculations that we will be presenting show that the portion of the population that is joining the labor force in the near future will create higher revenues which will easily offset the burden that the aging population creates in terms of

payments to pension funds. The methodology that we follow in this paper for projecting revenues and

expenditures is closely related to Baker, Basendorfer and Kotlikoff (1999). Incorporating the population projections for Turkey, which we obtained from

the World Bank, and relative expenditure and revenue profiles in different age and gender groups, we calculate the average expenditure made to each age and gender group. Accommodating elasticities into calculations provides the responses of budgetary items to the growth rate of the economy. After projecting expenditures and revenues into the future and discounting the net receipts we calculate the

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present value of the budget balance to construct the time path of the GAP over different terminal years. For baseline growth rate we will be using 3.3 and for discount factor we will use the ex – post real return on Treasury Bills, which is 25.3 percent.

The two components (population dynamics along with elasticities) by themselves underestimate the stance of the fiscal policy. Taking the pre – crises year 2000 as the base year, population dynamics reports 2.3 billion dollars of GAP. Using only the elasticity measure for forecasts, we calculate an GAP of 1.2 billion dollars (dollars). However, these figures are well below the negative 14 billion dollar GAP which is calculated by bringing these two components together. The new definition of budget gap presents a significant improvement over the earlier ones. Overall, the GAP presents an improvement equal to approximately 11 to 13 billion dollars over each component.

When we conduct the same calculations using 2001 as the base year, in which the financial crises took place, we observe a GAP of 57 billion dollars. The major determinant of the GAP is due to the sharp increase in the dollar value of the net debt. The devaluation of Turkish Lira (TL) against dollar accounts to 50 billion dollars of the GAP.

4. Results on Foreign Direct Investments Like is evident since this few lines above there are the conditions to develop a

lot of foreigner investments in Turkey but there isn’t confidence in the Turkish market. Considering the need to allow to make long period investments by the foreigner investors Turkey must give the sense of a during stability in which democratic reforms, economic reforms will build a new state in the next 15th/20th years. In the past, lack of policy stability in Turkey has often been cited as an important impediment to FDI.

The Under-secretariat is a new agency to realize the reforms stated by the new Turkish laws and regulations on FDI. This new agency could have the objective to control that each economic reforms or changes in Turkish law is compatible with the foreigner investment targets, valuing the effects of the reforms or changes on the FDI climate and suggesting the acceptable alternative policies exist that are more favourable to the attraction of FDI. If the Under-secretariat will work effectively the faith of investors will grew in a short time because it will signify that Turkey has chosen an enduring policy to favourite the foreigner investment.

In the next years Turkey had to demonstrate its will to enter in the European union through several reforms, until the moment in which Turkey will be a formal member of the European Union, it will be important to demonstrate, in each international agreements, the will to develop an environment according to the growth of the FDI. Maybe in the next years we will see several reforms they will try to transform their FDI commitments in its WTO obligations. The World Bank suggest, for example, that even if the GATS covers only services, it provides an

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opportunity to assure investors that national treatment will be given to foreign-invested entities with a commercial presence in a variety of areas, such as distribution services and product servicing, that are relevant to a wide range of investments. It will be better if Turkey will send a strong signal by taking an aggressive leadership role in calling for strong measures to protect investors’ rights in appropriate international, regional, and bilateral agreements. The international investors must have confidence in Turkey not only for the next months but for the next years. The Turkish Government has taken steps to promote foreign direct investment in Turkey, including establishment of the General Directorate on Foreign Investment within the Secretariat of the Treasury.

5. Conclusion-Fiscal Labelling Fiscal labeling is irrelevant in explaining the stance of the fiscal policy. A

more comprehensive method is needed to determine the net budgetary position of the government in the infinite horizon. However, estimation of such a budget requires strong assumptions about the future. The dynamics are tractable given the assumptions of the model. This paper attempted to construct an GAP for the government and described the fiscal policy options that the government is facing.

Construction of an GAP necessitates a stable relationship between the budgetary items and the output growth. Assuming a growth rate and requiring that this stable relationship will be constant for the projection period we are all set with the first component of the GAP. The second component is the population – profile dynamics. One needs to know, ceteris paribus, how much expenditures (revenues) will be made (received) to (from) different age groups during the projection period.

By using the information generated by elasticity estimates and population – profile dynamics we find out that the modified GAP is a better measure than using the two components individually. The choice for the discount rate influences the results significantly. For an aging society population – profile dynamics are important in the longer term. Therefore, a high discount rate leads to the loss of information in the longer horizon. Lowering the discount rate introduces the future population developments into the estimates. Based on this result, we examined the case of Turkey before and after the financial crisis in 2001 with different assumptions for discount and growth rates.

It is clear that the financial crisis worsen the debt position of the government. This in turn results in a lower initial point for the government’s cumulative GAP. In the infinite horizon we can observe a significant deterioration of the GAP for the baseline case. If the baseline case is prevail in the economy, the government has to tighten fiscal policy to eliminate GAP. On the other hand, The government can take measures to lower the real interest rate that is paid to the debt. We found that with lower discount rates GAP presents improvement and in some growth – discount rate pairs a fiscal loosening would be needed. One suggestion would be the substitution for domestic debt with foreign debt. By eliminating risks associated with domestic currency (such as inflation and devaluation), Turkish government

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can borrow at a lower rate in terms of foreign currency. However, we are aware that a devaluation of the domestic currency would increase the Turkish Lira size of the domestic debt. Although results are promising, they have to be interpreted carefully. One needs to re – estimate profiles and elasticities and incorporate population projections in every new information arrival. Therefore, a more realistic estimate can be constructed. In this respect, the GAP will be a very powerful tool for a policy maker. It will allow the policy maker to observe implications of changes in the expenditure and revenue policies today over the longer horizon of fiscal stance.

Also, even though the government is not willing to change the fiscal policy, it can take other measures to achieve different interest and growth rates which will ultimately affect the GAP.