2014 budget: Why recurrent expenditure ballooned to 76 % - Okonjo-Iweala
The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has defended herself on the allegations and assertions against her on the 2014 budget by National Assembly members.
The minister said those allegations were not based on facts.
According to her, the allegations made by the lawmakers that she is responsible for rising recurrent expenditure are unfounded.
The minister's defence came in a statement by her Special Adviser, Mr. Paul Nwabuikwu.
Okonjo-Iweala debunked several personalised remarks made by some senators during the recent debate on the budget by the senate.
While thanking majority of the senators who understand the issues at stake, she regretted that a few made allegations that were not based on facts.
'Though government is continuous and the minister has no desire to shirk her responsibilities, the effort to personalise these issues on the basis of inaccurate information is unfortunate and must be roundly refuted,' she said.
The minister also debunked the claim by some lawmakers that the minister was responsible for the rising recurrent expenditure profile, which, according to them, rose 'from 69 per cent in the 2013 budget to 76 per cent in the 2014'.
She said that what actually happened was that in 2010, the federal government awarded salary increases of 53 per cent across the board to the public service, which increased the wage bill from N856.9 billion in 2009 to N1.36 trillion in 2010.
Oknojo-Iweala said that at the time, finances were inadequate to back this award, prompting the government to increase domestic borrowing significantly to cover the shortfall.
According to her, this rise in government domestic borrowing from N524 billion in 2009 to N1.36 trillion in 2010 is also the singular cause of the country's rising domestic debt profile, from 14.83 per cent of Gross Domestic Product (GDP) in 2009 to 17.98 per cent of GDP in 2010.
The rise in salaries is also reflected by the sharp increase in the recurrent expenditure to 74.4 per cent in 2011, she pointed out. 'The Minister of Finance, Dr. Ngozi Okonjo-Iweala, was not in government when these events took place. Please note that President Goodluck Jonathan has focused on reversing this trend.
'Since 2011, various measures have been introduced, leading to a steady decline in recurrent expenditure from 74.4 per cent in 2011, to 71.47 per cent in 2012, and then to 67.5 per cent in 2013. 'However, it is important to note that under the proposed 2014 budget, recurrent expenditure will rise to 74%, for two reasons,' the statement said, listing them as the decline in the budget base and payment of pensions,' the statement added.
On the decline in the budget base, the minister noted that the total expenditure of N4.64 trillion in the proposed 2014 is about a 7 per cent decline from the 2013 budget level of N4.98 trillion. 'From a mathematical standpoint, this reduction in the budget base will result in a slight increase in the weight of the recurrent expenditure in the budget, which in absolute terms, has increased from 2013 levels,' she said.
On the payment of pensions, the minister observed that it was also important to note that the country was yet to fully absorb the pension implications of the 2010 wage increases.
'Starting in the 2013 budget, this administration commenced tackling the payment of outstanding military pensions, and budget 2014 will further address civilian pensions.
'We have been under pressure from many quarters, including senators, to integrate the civilian component of pensions, and doing so will further increase the recurrent budget. Will the senators blame Okonjo-Iweala for this?' she queried.
On their observation on excessive borrowing, the minister said it was imperative to mention that the flow of domestic borrowing has actually reduced, from N852 billion in 2011 to N588 billion in 2013 and N572 billion proposed in the 2014 budget.
'For the first time in the history of the nation's domestic debt, Okonjo-Iweala ensured the repayment of N75 billion of domestic bonds as well as set up a sinking fund of N25 billion per annum to support the retirement of maturing bonds, rather than roll them over.
'This is directly contrary to the allegation that she is responsible for excessive borrowing within the economy. To also help the country lower the cost of debt service, DMO (Debt Management Office) has made a minor switch in debt strategy to external borrowing (from multilateral finance organisations like the African Development Bank, China EXIM Bank, and the World Bank) at zero per cent or very concessionary interest rates.
'While it is important for us to debate the budget, it also behoves us not to misinform Nigerians, demonise individuals based on false information and mis-characterise the nature of budget development in the country.
'A large number of lies are being told against the budget by those who do not care about the impact of their falsehood on the economy and the image of the country. 'While acknowledging that the budget has some imperfections which we are working hard to fix, the large number of positives in terms of policies and resources must not be forgotten,' she added.
The minister further drew attention to the N18.5 billion budgeted for the housing sector, saying: 'Budget 2014 will leverage over N100 billion for a new mortgage refinance company that will create millions of jobs and provide affordable homes for millions of Nigerians.
'The budget will leverage considerable resources from internal and external sources to support the agricultural sector.
'The budget will support the ongoing massive repairs and reinvigoration of infrastructure in roads, rail, power and aviation. This is the truth that no amount of contrived allegations can conceal,' she added.