May 1, 2016

Myanmar - First Public Expenditure Review delves into state-spending

Myanmar's government has published its first ever Public Expenditure Review, which details recent ramp-ups in health and education spending and outlines a range of challenges to improving public spending.

The Ministry of Planning and Finance and World Bank Group presented the report, which analyses spending policies between 2009 and 2013, in Nay Pyi Taw yesterday.

It shows large changes in the Union budget’s composition in recent years. Between 2009 and 2015, general public services spending fell from 45 percent of the budget to 11pc, social services rose from 10pc to 33pc, and defence from 21pc to 33pc, the report said. Military spending still remains high and limits the “expansion of other public services”, according to the analysis.

Data from the Ministry of Defence indicates that military spending of 4.2pc of GDP was planned for 2013-14, which is well above the 2.3pc average for countries at the bottom of the middle-income range, the report said.

Defence also consumed the largest portion of government spending on goods and services between 2010-11 and 2013-14 and its consumption also grew faster than other sectors – although the report notes large gains were also made in health and education.

Government revenue between 2009 and 2014, meanwhile, rose from 6pc of GDP to 11pc – thanks to one-off measures like telecom licence sales and exchange rate devaluation, and a wider tax base. General government expenditure nearly doubled over the same period to 13pc of GDP, the report said.

The period under examination also covers a fundamental shift in government budget policy starting in 2011, as part of an effort to improve essential public services, according to the report, which focused on education and health spending.

U Kyaw Win, minister for planning and finance, told media yesterday that the new government will focus on improving education, health and social infrastructure. “We will try to meet people’s social and economic needs in order to reduce poverty in the country as much as possible,” he said.

Habib Rab, senior country economist for the World Bank in Myanmar said the review, which was finalised in September last year, had already informed budget policies including on health and education, as the World Bank shared chapters of it with the government even before June 2015.

The country has historically spent less on education as a share of GDP than its regional peers. Education spending fell to 0.7pc of GDP in the 2011-12 fiscal year, the report said. Although this rose from 1.6pc in 2012-13 to 2.1pc in 2013-14, the ASEAN ex-Myanmar average is 3.6pc.

Weak education spending has led to poor outcomes – only 460,000 out of 1.2 million students starting in grade 1 eventually make it to grade 11, and over one quarter of children at the end of grade 1 cannot read a single word, the report said.

Another result of low spending is that an unusually high share of total education financing in Myanmar has come from households – around 63pc, according to a one-off Integrated Household Living Conditions Survey carried out in 2009-10 by the United Nations Development Programme.

But public spending on education is rising fast, and quadrupled – from a low base – between 2011-12 and 2013-14, according to the report. As a result, starting in 2012-13 the Union government “has likely replaced” private households as the source of financing for education, although updated information on household spending will only become available as part of household survey data collected in 2015.

Measures to ease the burden on households included abolishing primary school fees in 2013-14 and secondary school fees in 2014-15. The government also started to provide free textbooks in 2014-15, and began improved stipend programs for the poor and disadvantaged in 2015-16, the report said.

Meanwhile, the increase in government spending has helped hire 79,000 more teachers, and the Union government has delegated some spending authority to district and township education officers and school heads through block grants.

But new initiatives will require more spending. Myanmar’s basic education system consists of only 11 years of schooling compared with 12 or 13 in the rest of ASEAN, the report said. Adding an extra year of pre-school would cost an extra K91 billion a year – a 12pc increase in the education budget – to hire the necessary teachers and build new kindergartens. Keeping 322,000 students in high schools for one more year would cost K58 billion a year, according to the review.

The volume of required spending is likely to be even higher if the government focuses on higher-quality education, which in turn is unlikely to be achieved without retraining teachers and equipping them with better textbooks and teacher guides, the report said. The Ministry of Education will have to grapple with delivering more despite a limited administrative budget, limited data to inform spending priorities and fledgling capacity to analyse the links between policy and budget priorities, the review concluded.

The report tells a similar story for health spending, which was only $1.6 per person in 2012, when out-of-pocket expenses accounted for almost 80pc of total health spending. This has resulted in some of the lowest health outcomes among ASEAN countries, but as with education, government spending has risen sharply.

Government spending in the health sector increased nine-fold in the five years between 2009-10 and 2013-14, the review said. Ministry of Health spending on programs with “public good” characteristics like nutrition, water and sanitation have risen.

Beginning in 2012-13, essential drugs and selected healthcare services were provided free of charge to children, pregnant mothers and patients needing emergency surgery under “certain circumstances in some facilities”.

The early signs are that these steps are reducing prohibitive out-of-pocket payments by households, said the review. The share of out-of-pocket payments fell from 82pc to an estimated 60pc over the same period as the nine-fold rise in government spending, the report said.

But a lack of data still makes policy making and monitoring difficult, and inefficient spending remains an issue, the review said. Even with the sharp increase in spending, the country is failing to meet health targets.

The fact that Myanmar is unlikely to hit Millennium Development Goals on child and maternal mortality suggests that it “may want to consider increasing significantly public funding of programs aimed at improving maternal and child health”, the report said.

U Maung Maung Win, permanent secretary at the planning and finance ministry, said the report will support the government’s efforts to distribute the budget for the benefit of the people.

“It will help us to make systematic reforms where necessary and to budget efficiently,” he told media at the report’s launch yesterday.

Mr Rab said Myanmar would not produce a public expenditure review every year, but that the Bank was due to start on a second review in July.

“We hope it [the inaugural review] triggers more regular analysis of spending policies,” he said, adding that the World Bank is encouraging the Ministry of Finance to make public a database of fiscal spending that it built specially for the review.

“You see a huge shift in the culture of budgeting and public finance management,” said Mr Rab.

“The budget changed from being an administrative tool to an instrument to prioritise and implement development policy.”

Htoo Thant and Steve Gilmore

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

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