The Public Budget

What do we mean by Public BudgetPublic Budget in Palestine: a designed program that shows the expected Public earnings and expenditures in Palestine for a specific fiscal year.

The Fiscal year usually starts from January and ends on the next December.

The Form of public budgetA. Public Expenditure

Current expenditureCapital expenditure

B. Public earnings Local earnings Aid & GrantsCapital earnings Money printing

Public Expenditure The Palestinian public expenditure can be categorized in:

Current expenditureCurrent expenditure is expenditure on goods and services consumed within the current year, which needs to be made recurrently to sustain the production of educational services. Minor expenditure on items of equipment, below a certain cost threshold, is also reported as current spending.

Current expenditure includes final consumption expenditure, property income paid, subsidies and other current transfers (e.g., social security, social assistance, pensions and other welfare benefits).

payroll expenditure [wages and salaries]Non-payroll expenditure [allowances, internal and external work tasks fees ..etc.]Net loan expenditure [the collected amounts of money from local governorates and electricity co. which deducted from the Palestinian-Israeli tax clearance]Others

Capital expenditure [ the governmental spending on activities which doesn’t executed in an ordinary biases, such as high way establishments, sometimes they refer to as development expenditures]

Financed from the treasury.Financed from grants and donations.

Public Expenditures in Palestine 2009-2015 in million dollar

2009 2010 2011 2012 2013 2014 2015 Items

3,375.9 3,200.1 3,254.6 3,258.2 3,419.1 3,606.9 3,621.4 Total expenditures and net lending

3,190.0 2,927.3 2,960.1 3,047.1 3,250.7 3,445.9 3,445.0 Current expenditures

1,467.0 1,563.1 1,677.9 1,557.7 1,813.8 1,899.6 1,759.5 Gross wages and salaries

1,349.0 1,120.9 1,142.3 1,212.2 1,225.7 1,259.0 1,352.3 Nonwage expenditures

374.0 243.3 139.9 277.2 211.2 287.4 300.5 Net lending

_ _ _ _ _ _ 32.8 Earmarked Payments*

185.9 272.8 294.5 211.0 168.4 160.9 176.4 Capital Or Development expenditures

139.1 194.0 125.5 56.0 61.6 -40.1 86.8 Financed from treasury

46.8 78.8 169.0 155.0 106.8 201.0 89.7 Financed from grants and donations

Source: Palestinian monetary authority, 2015

Public earnings

The Palestinian Public earnings categorized as follow :Local earnings

Taxed earnings Direct tax

Tax on incomeTax on CapitalTax on real state

Indirect taxValue added taxTariffs & customs

Non-Taxed earnings [e.g the governmental charges](tax refunds) [the financial settlement between Public and private sector].Earnings from chargesEarnings from Public loans

Public earnings (Cont.)Gross tax clearance revenues [the Palestinian-Israeli tax settlements, taxes that collected by Israel instead of the Palestinian authority; then these amounts should be transferred to the Palestinian budget]Aid & Grants [local and foreign aids for budgetary support and development expenditures]Capital earnings [earnings from gov. assets]Money printing [the process of issuing new money]

Public earnings in Palestine 2009-2015 in million dollar

2009 2010 2011 2012 2013 2014 2015 Items2,950.4 3,055.7 3,160.3 3,172.3 3,677.9 4,021.7 3,688.2 Total net revenues and grants

1,548.6 1,845.4 2,177.0 2,240.1 2,319.9 2,791.2 2,891.4 Total net revenues

458.6 611.2 688.0 665.7 629.4 736.9 844.5 Gross domestic revenues

301.5 439.0 482.3 483.2 597.2 604.0 606.6 Tax revenues

283.6 254.5 219.2 232.1 254.4 270.5 249.8 Nontax revenues

_ _ _ _ _ _ 56.4 Earmarked Collections*

(126.5) (82.3) (13.5) (49.6) (222.1) (137.6) (68.2) Tax refunds

1,090.0 1,234.2 1,488.9 1,574.4 1,690.5 2,054.3 2,046.9 Gross clearance revenues

1,401.8 1,210.3 983.3 932.1 1,358.0 1,230.4 796.8 Grants and donations

1,355.0 1,131.5 814.3 777.1 1,251.2 1,029.4 707.1 External budgetary support

46.8 78.8 169.0 155.0 106.8 201.0 89.7 External financing for development expenditures

Source: Palestinian monetary authority, 2015

Public Budget BalanceThe difference between Public earnings and Public expenditures, we call the Public Budget is in a surplus when the earnings exceed the expenditures, and call the Public Budget is in a deficit when the earnings less than the expenditures.

Public Budget Balance in Palestine 2009-2015 in million dollar

2009 2010 2011 2012 2013 2014 2015 Items

2,950.4 3,055.7 3,160.3 3,172.3 3,677.9 4,021.7 3,688.2 Total net revenues and grants

3,375.9 3,200.1 3,254.6 3,258.2 3,419.1 3,606.9 3,621.4 Total expenditures and net lending

(425.50) (144.40) (94.30) (85.90) 258.80 414.80 66.80 Public Budget Balance

Source: Palestinian monetary authority, 2015

The Budget Public Cycle• The Budget Public Cycle can be defined as the continued process that

the public budget has to pass through its lifetime.

The Budget Public Cycle passes through four levels as follow:Preparation level

Endorsement level.

Executing level.

Monitoring level.

Public Budget Preparation level.The executive authorities are responsible about preparing the Public Budget, in Palestine the government is the legal entity that responsible about preparing and implementing the Public Budget.The Government supposed to acquire the required abilities and experiences in order to prepare the Budget.

Public Budget Preparation steps1. During the ministers counsel meeting; the member (the ministers) were asked to

prepare a separated budgets for each ministry.2. Each minister design an internal committees in order to discuss their expected

earnings and expenditures for the next year.3. Each ministry send its estimation to the ministry of finance.4. The ministry of finance has the right to discuss other ministry’s budget before the

acceptance.5. The minister of finance combine each ministry budget in order to design the Public

budget; this Public Budget should reflect the government's goals for the next year.6. The projected Public Budget handled to the ministers counsel to be discussed

before Presenting it to the legislative counsel.

Public Budget Endorsement levelBefore endorsing the Public Budget; it should pass Four steps:1. The ministers counsel handle the designed Public Budget to the legislative

counsel before two months of the fiscal year end.2. The legislative counsel pass the handled Public Budget to committee of

Budget and financial affairs (an internal committee) in order to study it and provide recommendations.

3. The legislative counsel held a session to discus the handled Public Budget, after the discussion the ministers counsel has to apply the discussed edits through a period of time doesn’t exceed two weeks.

4. The legislative counsel vote for each item mentioned in the Public budget.

Execution levelThe government is the responsible entity to implement the Public Budget through collecting earnings and allocating expenditures as designed in details in the Public Budget.• Once authorized by parliament, the budget allocations should be

implemented fully and faithfully by the agencies of government, with oversight throughout the year.• Parliamentary authorizations should allow ministries and agencies

some limited flexibility to reallocate funds throughout the year in the interests of effective management and value-for- money.

Monitoring levelThe monitoring level works side by side with the execution level, the purpose for Monitoring level is to be sure that the designed Public Budget is performed in an efficient and effective way or not.There are three monitoring types:- Managerial monitoring: an internal monitoring through the

government- Legislative monitoring: the legislative council held sessions to

interrogates any party of the executives.- Independent monitoring: NGOs, media .. Etc.

The fundamental national role of the budget • The budget is a central policy document of government, showing how

it will priorities and achieve its annual and multi-annual objectives. • The budget is the primary instrument for implementing fiscal policy,

and thereby influencing the economy as a whole. • the budget is a contract between citizens and state, showing how

resources are raised and allocated for the delivery of public services. • External stakeholders also look to the quality of the budget

document, and of the budgeting process, in assessing the soundness and reliability of a state.

Four types of Public BudgetsThere is no one acceptable type to prepare a public budget, there are common sense but each type of public budget has different characteristics according to the nature of the involved party.These types as follow:1. The traditional public budget.2. Performance and programmed public budget.3. Planned public budget.4. Zero-based public budget.

The traditional public budget.It is the first used public budget in the world, UK was the first country to use that type of public budget, nowadays its commonly used in developing countries.The traditional public budget usually combine the governmental earnings and expenditures in one sheet, each item listed in that sheet should be classified in details.

Performance and programmed public budgetThe main purpose for this type of public budget is to direct the public earnings into achieving previously designed programs; thus the goal there is to achieve the goals without considering the budget constrains.According to Performance and programmed public budget the governmental activities should be split into programs, for each program there is a separated goal, each program splits into sub-programs, for each sub-program there are several objectives to be achieved in order to fulfill the main goal.Performance and programmed public budget mostly used by ministers rather than governments.

Planned public budgetThis type of public budget used for long term planning in order to achieve the sustainable and long-term goals Highly developed countries mostly use planned public budget.

Zero-based public budget.Mainly this type of public budget concentrate on financing the designed programs without looking for past data; by using this kind of budget we have to assume that previous projects were not existed before.

Zero-based public budget mostly used by small or local governments, also it could be suitable for NGO’s budgets.

In Palestine the most common used type of public budget is the traditional public budget, as it suites the nature of the economy as a developing country.