CI-NEWS

2020 state budget suffers 11 percent cut over Covid-19 pandemic!

2020-06-16

No: 504

2020 state budget suffers 11 percent cut over Covid-19 pandemic!

The 2020 state budget has been trimmed by 11 percent to meet current realities imposed by the Covid-19 pandemic.

The adjustment is contained in a Presidential Ordinance, signed last Wednesday June 3, 2020, by which the 2020 Finance Law has been reduced from the initial budget. According to the document, the new budget now stands at FCFA 4 409.1 billion, down from the FCFA 4 951.7 billion established in December 2019. This represents a reduction of CFA F 542.7 billion, corresponding to a variation rate of -11%, a press memo from the Ministry of Finance (MINFI) notes.

The adjustments also make provisions for “Special National Solidarity Fund to fight the coronavirus and its economic and social repercussions” created by the Head of State, President Paul Biya. For the last six months of the 2020 fiscal year, the special fund has been allocated some FCFA 180 billion.

Shortly after the ordinance was signed, the Minister of Finance, Louis Paul Motaze, in a press memo, said three major things provoked the readjustment of the budget. First, the Minister said the budget is often established, based on the realities the country faces at the time. In December 2020, when the budget was voted, the devastating impact of the Coronavirus had not been felt. Given that the economy has been affected, income will be far lower than what was initially anticipated. A lot of expenses have already been incurred fighting the pandemic, whereas, it never even featured in the budget, he said. Continuing business as usual would have led the country into a devastating situation, the Minister explained. It thus became incumbent for the budget to be touched so it could reflect the new realities.

The second motive, the Minister said, is for accountability and honesty. Minister Motaze said the new budget clearly communicates present day realities and it increases the State’s credibility to its partners. He also said it was necessary for the budget to be readjusted to redirect resources where the needs are higher. The adjusted budget calls for more stringency at the level of the different Ministerial Departments as envelopes allocated to them will also have to shrink. To avoid any possible shocks, the Minister explained that it is crucial for Ministries and other implementing partners to scale down expenditure and give priority to most important projects. The ordinance gives clear directives on the management of the recently created solidarity fund, indicating that it will cover expenses incurred by the State in its Covid-19 response strategy. Other components of the fund will feature social safety nets, the expansion of online classes for those not yet back in the classroom, and the acquisition of more materials needed in the fight against Covid-19.

The third objective, notes the memo, seeks the legislation of tax reduction measures announced at the end of April by the Prime Minister, Head of Government.

The memo says as a result of the Covid-19 pandemic, “Cameroon is facing recession during this financial year.”

“In this light, following the economic projection of the Government and partners, notably the IMF, the economic growth will drop by approximately 5 points. Initially projected at 4%, it stands henceforth at -11%.”

The adjustment of the budget became necessary due to a reduction of public resources projected drop by CFA F 768 billion. This drop affects all revenue components: tax, customs and non-fiscal revenue. Oil revenue in particular dropped by almost 70%. This may be explained by the fact that initially projected at 54.54 dollars in the finance law, the price of crude oil now stands practically at 35 dollars. A month ago, it stood at a ceiling of 0 dollar.
The MINFI memo explains that as a result of a fall in revenue “expenditure cannot remain static.”

“ Consequently, all public entities have witnessed a drop of about 20% in their budgetary allocation, excluding the social ministries (health, education, women’s empowerment and the family, MINFOP, MINESUP and MINAS),” the press memo explains.

It is worth recalling that this is not the first time the budget is readjusted. In 2018 alone it was modified twice and in 2019, it was modified after the SONARA fire incident.

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2020 state budget suffers 11 percent cut over Covid-19 pandemic!