…insists critical ratios formed basis for budget revision
… budget revised to enhance performance, it says
The Government of Oyo State has declared that there is no evidence of padding in the 2021 Budget, which was revised and passed by the House of Assembly last week.
The state government noted that the downward review of the N273.7 Billion Budget earlier approved by the House of Assembly to N268.8 Billion only became imperative due to the need to achieve the fiscal sustainability of the Budget.
It maintained that contrary to the insinuation in a section of the media that the Budget was rejected by the Executive because the House of Assembly padded it to the tune of N7.1 Billion, the revision to N268.8 billion was aimed at enhancing overall budget performance.
A statement by Mr. Taiwo Adisa, Chief Press Secretary to Governor Seyi Makinde, quoted the Commissioner for Budget and Planning, Barrister Adeniyi Farinto, as saying that the Executive Arm of government only called the attention of the House of Assembly to consider a downward review of the N273.7 Billion Budget, which it passed into law earlier, based on a set of critical ratios required for the 2021 Budget to be sustainable.
The statement explained that though the House of Assembly justified the need for the upward review of the Budget proposal to accommodate more developmental projects for the state, the need to ensure adequate budget performance in the face of of the COVID-19-induced recession led to the advice to the House to revise in order to enhance budget performance.
According to the Government, if the earlier approved Budget of N273.7 Billion was not revised, the state will likely experience lower savings and income and higher interest payments on loans that will likely lead to large tax hikes and spending cuts as well as a decrease in the state’s ability to respond to economic challenges.
It added that the Ministry of Budget and Economic Planning had promptly gone ahead to advise the Appropriation Committee of the House of Assembly to revisit the budget in order to have a realistic budget, which implementation can achieve an impressive budget performance in the year 2021.
It further stated that the loan components allocated in the N273.7 billion earlier approved have since been reduced and the Budget was passed in the sum of N268.8 Billion on December 18, 2020, representing an increase of N2.2 Billion on the Budget proposal submitted by the governor on November 24, 2020.
The statement added that the increment was made to further reflect development at the grassroots level in Oyo State.
The Government expressed satisfaction with the good working relationship between the House of Assembly and the Executive, stating that there is a cordial and amiable relationship among all Arms of Government in the state in demonstration of the commitment to good governance, growth and development of the state.
The statement read: “Contrary to the news making the round, there was no evidence of “budget padding” in the revised 2021 Budget.
“There was never a time the Government rejected the Budget based on the addition of the N7.1b. The Executive only called the attention of the Legislative Arm of Government to the need to achieve fiscal sustainability of the proposed 2021 appropriation bill.
“The House of Assembly was notified by the Ministry of Budget and Economic Planning to consider revising the budget based on a set of critical ratios required for the 2021 Appropriation Bill to be sustainable.
“These ratios include: Capital Expenditure as percentage of Non-Debt Revenue; Recurrent Expenditure as percentage of Non-Debt Revenue; Capital Expenditure as percentage of Total Revenue; and the Recurrent Expenditure as percentage of Total Revenue. These indices were used as the benchmark for the fiscal sustainability of the 2021 Budget.
“Consequently, the final Budget was revised downward based on these indicators from the N273.7 Billion earlier passed to N268 Billion.
“Fiscal sustainability is the ability of a government to sustain its current spending, tax and other policies in the long run without threatening government solvency or defaulting on some of its liabilities or promised expenditures.
“While the House of Assembly saw the need for upward review of the budget to accommodate more developmental projects for the state, the need to also ensure adequate budget performance in the presence of the current pandemic-induced recession also contributed to the necessity to give further consideration to the budget.
“The current macroeconomic fundamentals at the national level (Inflation Rate: 14.89 per cent; Exchange Rate (USD): ₦379; Monetary Policy Rate, MPR: 11.5 per cent; Crude Oil Price in USD: $51.1) required that the budget should be revised downward to achieve a realistic outlook in the year 2021.”
The statement added: “In addition, the pervading economic uncertainty due to the second wave of the pandemic has justified the need to tread more cautiously towards revenue and expenditure projections for the year 2021.
“The Executive arm is currently making substantial effort to avoid a loan-driven budget that will further increase the level of fiscal deficit of Oyo State in the year 2021 through the adoption of strategies that will increase the revenue base of the State’s economy.”