Al-Mashat and the budget leak...a Houthi lie and cross-border deception (information check)
English - Sunday 24 September 2023 الساعة 09:37 am
Sanaa, NewsYemen monitoring team:
The Houthi leader and head of the Supreme Political Council in Sanaa, Mahdi Al-Mashat, acknowledged that the (unrecognized) executive authority has abstained from submitting the state’s general budget to the House of Representatives since 2020, claiming that what he considered to be a leak of the 2019 budget to the Security Council’s Sanctions Committee had occurred.
In a speech in Saada Governorate, Thursday, August 31, 2023, Al-Mashat considered the budget leak a sufficient reason to withhold the state’s general budget and violate the constitution, Yemeni laws, principles of good governance, principles of integrity and transparency, and the public’s right to view the state’s general budget.
The Information Verification Unit at (NewsYemen) conducted research into the truth of Al-Mashat’s allegations regarding the justifications for secrecy about the state’s general budget in Sana’a, as follows, arriving at the following results:
Tab and what the budget is
Financial Law No. (5) of 1990 in Yemen defines public budgets as the digital translation of the financial program for a future fiscal year to achieve certain objectives within the framework of the state’s general plan for economic and social development and in accordance with the state’s financial, monetary, economic and social policies.
The general budgets consist of (the general budget of the state, including the budgets of administrative units and local councils, the budget of economic units - general and mixed - and the budgets of independent and attached units).
In more detail, the law defines general budgets as comprehensive tables of all revenues estimated to be collected and all expenditures expected to be spent during the fiscal year, while general state budgets are defined as the budgets of ministries and their equivalents, public departments and bodies, and various agencies and their branches, which are included in the budgets of administrative units and local councils, and it is known as the budget of economic units. They are the planning budgets of public sector units whose capital is entirely owned by the state, as well as mixed units whose capital the government contributes.
The law requires that public budgets include estimates of all types of revenues, including all aid, in-kind and cash donations, and withdrawals from in-kind and cash loans that are likely to be collected or obtained during the estimated fiscal year. The law also requires that the budget include all types of expenditures expected to be spent during the estimated fiscal year. Including allocations for debt service or local and foreign loans.
Expected expenses and revenues
According to the executive regulations of the financial law, public budgets are divided into two main tables, one for revenues and the other for expenditures. The state’s general budget is prepared on the basis of the administrative organization of administrative agencies, units, and local councils, and the economic and functional classification of aspects of state activity. The state’s general budget is classified into chapters, chapters, items, and types.
The revenue table in the 2019 budget shows the division of total resources into 5 sections: tax revenues, grants, property income revenues, sales of goods and services, and various transfers, in addition to the disposal of non-financial assets, the disposal of financial assets, and the assumption of liabilities.
Likewise, the table of uses (expenditures) in the state’s general budget estimates is divided into 5 sections: wages and workers’ compensation, expenditures on goods, services and property, subsidies, grants and social benefits, and unclassified expenditures, in addition to the acquisition of non-financial assets, the acquisition of financial assets and settlements of liabilities.
In more detail, the table for Chapter One (Workers’ Wages and Compensations) Chapter One (Salaries, wages, and the like, at the item level and type, in the 2019 budget estimates) appears (Table No. 2) showing the distribution of data for this chapter into basic salaries, temporary contractual wages, overtime wages, and bonus wages. And wages for the nature of work, wages for appearance allowance, rural allowance, and housing allowance, which according to the table were paid to employees of the Ministry of Education and teachers.
Given the nature and division of the budget, and the data on the division tables and classification of the state’s general budget, nothing justifies the fears of the head of the Supreme Political Council in Sana’a, Mahdi Al-Mashat, about submitting the budget to the House of Representatives in Sana’a and displaying it publicly.
Assuming that the Security Council Sanctions Committee is informed of the data and contents of the budget, no harm will befall the Yemenis from this. It is not the function of the Security Council or the Sanctions Committees to punish employees of the Ministry of Education in Yemen for receiving a rural allowance (for example), and it is not the function of the Security Council to punish the Yemenis or their government or One of their officials because of collecting tax revenues (for example), which means that Al-Mashat’s arguments for withholding the state’s general budget and not submitting it to the House of Representatives are inaccurate and incorrect.
Unclassified credits
Assuming that Al-Mashat was afraid to draw the attention of the Security Council Sanctions Committee to the emergence of large and huge revenues/expenditures in an item in the state’s general budget, Article (27) of the Financial Law Regulations allowed “for considerations approved by the House of Representatives to include appropriations in the state’s general budget as a whole without restriction.” “By budget divisions,” provided that “by decision of the Minister of Finance and upon the request of the competent authority, the chapters, items, and types that were not mentioned within the budget expenditures shall be created in exchange for savings in the other appropriations for the chapters, items, and types of the relevant section,” just as the regulations stipulate that it is permissible to “amend the internal divisions of revenue chapters.” And create new chapters, clauses and types therein upon the request of the competent authority in accordance with the requirements of the circumstances by decision of the Minister of Finance.”
From this legal loophole, the invalidity of Mahdi Al-Mashat’s arguments is strengthened, and his justifications for withholding the state’s general budget are considered merely misleading justifications and half-truths that deceive the public and mislead public opinion. There is no justification for withholding the state’s budget from Parliament and the public in light of the possibility of including appropriations in the general budget as a whole without adhering to the budget divisions and the possibility of creating New chapters, items and types in the budget tab and divisions.
Estimated data, not actual data
Likewise, the state’s general budget data remains estimated data, unlike the final accounts of the general budgets, which include the actual revenues and expenditures of the general budgets, distributed into chapters, chapters, items, types, groups, and accounts, which, according to Article (29) of the regulations, are presented “to the Council of Ministers and then presented to the House of Representatives.” Within a period not exceeding nine months from the end of the fiscal year to ratify it by laws.” Did Al-Mashat direct that the final accounts data be withheld from the Council of Ministers as well? Who is the party that discussed the final account then?
According to the economic expert, Ali Al-Hamdani, withholding the state’s general budget harms the country and the national economy and indicates practices of financial and administrative corruption and improper use of public funds in Sana’a, noting the importance of activating the principles of good governance, integrity and transparency and involving existing state institutions to supervise the distribution of public funds, including It enhances trust and supports transparency between different levels of government, donors and international community organizations in Yemen.
Al-Hamdani believes that such steps will help “encourage international donors to provide financial aid and direct international support to the general budget in a way that enhances long-term socio-economic development.”
A record budget deficit and a significant increase in debt
In its report on financial developments in 2016, the Sana’a Center for Studies and Research notes that the net public budget deficit ratio exceeded safe limits (-15.4 of GDP) in 2015, noting that there is difficulty in financing the budget deficit with real resources due to the loss of more than half of public revenues. The state and the decline in demand for treasury bills and government bonds.
The Center considered resorting to financing the budget deficit through direct borrowing from the Central Bank of Yemen at a rate amounting to 84% of the total value of the budget deficit in 2015. This would entail many risks, “the most important of which are: increasing pressures on the balance of payments, weakening the national currency, high inflation rates, and low levels of livelihood, and the high burden of domestic public debt.”
The Sana'a Center pointed out the increase in the burden of public debt in the state's general budget, with an increase in "the total stock of public debt from 22.1 billion dollars in 2014, to 25.9 billion dollars in 2015, representing 65.5% and 94.4% of the gross domestic product for the same years respectively," and an increase in The absolute value of domestic debt and its ratio to GDP increased significantly in 2015, as well as the rise in the burden of debt to alarming levels.
According to the economic developments report issued by the Ministry of Finance in March 2016, public finances in Yemen suffer from chronic imbalances that have weakened its ability to carry out its desired developmental and social function.
The report indicated that public finances were exposed in 2015 to strong and unprecedented shocks on both revenues and expenditures, including a decline in the state’s total public revenues by about 53.7% in 2015 compared to what they were in 2014. The report explained that total revenues have become unable to cover salaries and wages since June 2015, according to the report, was due to the deterioration of most components of the state’s public revenues.
For its part, these statements refute the allegations/fears of the Houthi leader Mahdi Al-Mashat about withholding the state’s general budget, and the dangers of it falling into the hands of the Security Council Sanctions Committee. What will tempt the Security Council or its Sanctions Committee to budget a poor country whose annual financial budget deficit exceeds safe limits? And its debt burdens have reached alarming levels?!
Budget in the Constitution and Parliament
In its Article No. (88), the Constitution of the Republic of Yemen requires that the draft general budget be presented to the House of Representatives at least two months before the start of the fiscal year, and the draft budget shall be voted on chapter by chapter and promulgated by law. In Article (89), the Constitution requires that the House of Representatives must approve the transfer of any An amount from one section of the general budget to another, and every expense not included in it or in excess of its revenues must be determined by law.
Article (90) of the Constitution stipulates that the final account of the state budget must be presented to the House of Representatives within a period not exceeding nine months from the end of the fiscal year, and that it must be voted on chapter by chapter and the Council’s approval must be issued by law. “The annual report must also be presented to the competent body.” Accounting oversight and his comments to the House of Representatives.”
According to the internal regulations of the House of Representatives, Chapter Three, Article 165, the draft general budget must be presented to the House of Representatives at least two months before the start of the fiscal year, and the draft budget is voted on section by section and issued by law.
According to these regulations, the House of Representatives may not amend the draft budget except with the approval of the government, “and it is not permissible to allocate any revenue from revenues to a specific purpose or direction of expenditure except by law.” The House of Representatives regulations stated: “If the government does not present the budget on the specified date, the House has the right to The right to request accountability for the causes of delay.”
It is noteworthy that the internationally recognized government had approved in February 2019 the draft state general budget for the fiscal year 2019, with total estimates of public resources in all governorates of the Republic two trillion and one hundred and fifty-nine billion and two hundred and seventy-one million riyals, and total estimates of expenditures at the national level about three trillion one hundred and eleven billion. One hundred and fifty-three million riyals, with a financial deficit of about 30 percent.
Estimates of government revenues in the budget in non-liberated areas (Houthi areas) included 692 billion riyals, while expected expenditures for these areas were 298 billion riyals.
Sources and references:
- Data on the state’s general budget for the fiscal year 2019
- Ministry of Finance website
- House of Representatives data - House of Representatives website
- Financial Law - Public Prosecution website
- The Ministry of Planning and International Cooperation
- Ministry of Finance, March 2016 bulletin
- Ministry of Foreign Affairs and Expatriate Affairs website - Aden
- Sana'a Center for Strategic Studies
