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Siera-Leone-PEFA-Report-12-07

Siera-Leone-PEFA-Report-12-07

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Table 3 presents the aggregate budget and fiscal position for central government sector in
Sierra Leone from 2000 to 2005. The coverage of central government includes all
expenditure made by MDAs, as well as transfers to subvented agencies. It includes also

Republic of Sierra Leone: PFM Performance Assessment Report
Final Draft 18 June 2007

9

transfers to local councils7

and contribution payments (as part of salaries) made by central
government to National Social Security Insurance Trust (NASSIT) to cover pension payment,
survivor grant and invalidity grant to qualifying beneficiaries.8

With respect to expenditures, there was a major decline in total expenditure caused by the fall
in recurrent expenditure, from a peak of 34 per cent of GDP in 2002 to 23.5 per cent in 2005.
It is noted, however, that (real) GDP has changed very rapidly from 2003 to 2005 which
makes inter temporal comparison difficult. Thus, a decline in expenditure and revenue
relative to GDP ratios may well be explained by a large increase in nominal GDP rather than
a large decrease in nominal expenditure and revenue.

With respect to revenue, grants have become a more important source of funding over time as
tax revenue fell as a share of GDP. By 2005 grants and tax contributed virtually equally to
the country’s revenue mobilisation.

The budget deficit declined from 17.3 per cent of GDP in 2000 to 11.7 per cent in 2005.
Including grants, the budget deficit was less than 2 per cent of GDP in 2005. The primary
balance was negative in all years signifying the inability to raise domestic revenue to fund
non-debt expenditure. There was a switch from foreign to domestic as the main source of
deficit financing over the period.

Table 3: Sierra Leone: Budget and Fiscal Indicators (as % of GDP)

2000 2001 2002 2003 2004

2005

Domestic Revenue

11.4 14.0 14.5 15.4 12.5

11.8

Tax

10.2 12.9 13.4 14.4 11.2

10.0

Non Tax

1.3

1.0

0.9

1.1

1.3

1.9

Grants

8.0

6.4

9.7

9.6

9.1

10.0

Expenditure

28.7 29.8 34.2 32.1 24.1

23.5

Recurrent

22.7 24.9 28.9 26.1 19.4

17.6

Development and net lending

6.1

4.8

5.3

6.0

4.7

5.9

Overall Deficit (Commitment Basis)
Excluding Grants

-17.3 -15.8 -19.7 -16.7 -11.6

-11.7

Including Grants

-9.3

-9.4

-9.9

-7.0

-2.5

-1.7

Primary Deficit

-5.5

-5.4

-4.5

-7.3

-2.9

-3.1

Changes in arrears

3.3 -35.8

-0.2

-0.7

-1.1

-0.2

Overall deficit (cash basis)

-6.1 -45.3 -10.1

-7.8

-3.7

-1.9

Financing
Net External Financing

6.1 42.0

8.7

3.0

3.4

0.8

Net Domestic Financing

0.1

3.5

1.1

5.4

-0.1

1.2

Float (unaccounted)

-0.1

-0.4

0.2

-0.7

-0.6

-0.1

Source: Ministry of Finance

Table 4 shows recurrent spending on services as a percent of GDP. The salient features are:

• General Public Services and Education have been the largest recipients of public
expenditure with education peaking at 5.5 per cent of GDP in 2003 and then declining.

7

Central Government transfers to Local Councils accounts for roughly 95% of local council revenue.

8

NASSIT was formed by the passing of the Social Security Act of 2001 mandating a compulsory
contribution pension and social security scheme for all formal sector employment. It started operations
in 2002. Employees contribute 5% of earnings and employers contribute 10% of an employee’s
earnings. In addition Government pays an additional contribution at the rate of 2.5% of civil service
payroll for 20 years for crediting past service. The scheme covers both the public and private sectors
and private sector contributions exceeded that of the public sector in 2006. NASSIT accounts are
audited via the Auditor General and reports to Ministry Finance though the Other Government
Accounts system of reporting. NASSIT also administers government pension payments not covered
by the scheme for a fee and both the fee and pensions are included in central government expenditure.

Republic of Sierra Leone: PFM Performance Assessment Report
Final Draft 18 June 2007

10

• There was a declining trend in defence expenditure.

• Health Care expenditures increased until 2003 when it declined thereafter to 1.1 percent
of GDP in 2005.

• Spending on Economic Services fluctuated in relative importance.

Table 4: Sierra Leone Expenditure (recurrent) on Services (as % of GDP)

2000 2001 2002 2003 2004 2005

General Public Services

3.7 4.9 5.9 5.7 4.2 3.9

Defence

3.7 4.0 3.4 3.6 2.2 1.9

Education

4.4 4.6 5.2 5.5 3.9 3.9

Health

1.1 1.6 2.0 2.2 1.2 1.1

Social Security and Welfare

0.5 0.6 1.2 1.1 0.7 0.7

Housing and Community Amenities

0.1 0.1 0.1 0.1 0.0 0.0

Other Community and Social Services

0.4 0.3 0.5 0.3 0.3 0.2

Economic Services

1.2 1.9 2.0 2.1 1.6 1.4

Other purposes

1.5 1.5 2.2 1.1 0.8 1.0

Total non debt Recurrent

16.6 19.5 22.5 21.7 14.9 14.1

Source: Ministry of Finance

Table 5 presents recurrent expenditure by economic category. The wage bill grew annually
from 2000 to 2003 but declined to 6.5 per cent of GDP in 2005.as a percentage of GDP.
Expenditure on goods and services peaked in 2002 and fell to 5.8 per cent of GDP in 2005.
Interest payments have been on a declining trend with foreign interest payments falling from
3.2 per cent of GDP in 2002 to 0.9 per cent in 2005.

Table 5: Sierra Leone Public Expenditure by Economic Category (as % of GDP)
2000 2001 2002 2003 2004 2005

Wages and Salaries

6.7

7.5

7.5

8.2 6.3 6.5

Goods and Services

8.8

11.0

12.7

11.9 6.7 5.8

o/w emergency defence

2.2

2.5

2.0

2.2 1.2 1.0

Subsidies and Transfers

0.9

1.0

1.8

1.5 1.9 1.9

o/w Education

0.9

0.9

0.8

1.0 0.7 0.6

o/w Local Government

0.0

0.1

0.1

0.0 0.0 0.4

o/w Pensions/Others

0.0

0.0

0.9

0.5 1.2 0.9

Interest

6.3

4.9

6.2

4.5 4.5 3.6

o/w Domestic

3.8

3.0

3.0

3.5 3.6 2.7

o/w Foreign

2.5

1.9

3.2

1.0 0.9 0.9

Total Recurrent

22.7

24.4

28.2

26.1 19.4 17.8

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