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Home > Issue 23: Democratic Formation in Palestine Periodic Reports (8) & (9) >

General Principles for Formulating the State General Budget

2006-02-11
by Adnan Amr

General principles and basic rules were laid down for the authority in charge of formulating the general budget to follow. As is clear in the Law Regulating the General Budget, Palestinian legislature, just like legislature in other countries, has provided legal rules to guarantee that the set principles are abided by. These rules are as follows:

  • The principle of annual budget:

Each budget should have a time span as decided by legislation regulating the general budget or by the constitution, as is the case in most countries. A Palestinian law defining and regulating the general budget was issued and the period of the budget set at one year. This was considered suitable for the following reasons:

    • It would ensure that there is periodical and effective parliamentarian control over the financial performance of the government.
    • The period of one year covers the four seasons.
    • When the government prepares the budget draft in a reasonable period of time, it can make an accurate estimation of expenditure and revenues.
    • The period of one year is an agreed upon standard for measuring human needs.

The principle of annual budget, however, was faced with developments that proved that it was difficult to adhere to it in a rigid manner, particularly in light of the state interventionist policies in economic and social affairs that prevailed for a long period in the past. States therefore had to deal with this principle in a flexible manner.

In order to guarantee adherence to the principle, the Palestinian legislator provided several rules:

  • Program budget:

Article 33 of the law regulated this. It indicates that the budget of some projects may extend over several years. The text of the article, however, did not clarify whether the Council s endorsement of these projects should be for one year or for the entire period.

  • Law modifying the General Budget Law:

This was referred to in Article 36 of the law. The law modifying the general budget allows for adhering to the principle of annual budget.

  • Emergency expenditure:

Referred to in Article 37, it also guarantees respect for the principle of annual budget.

  • System of credits:

Referred to in Article Four of the law.

  • Cancellation of unused allocations and entering revenues collected after the end of the year as part of the next year s budget.

Referred to in Articles 53 and 54 of the law.

II . The principle of budget consolidation:

This principle means that one document must include the estimations of public expenditure and revenues so that the financial situation can be surveyed quickly and precisely. The principle guarantees clarity, honesty, and simplicity in demonstrating the total financial position of the state. It also makes it easier for parliament to supervise the financial and administrative activity of the state and to make a comparison in relation to the various possible aspects of expenditure. This can help parliament judge if the government s policies are sound or not and follow up their implementation.

The Palestinian legislator left some exclusions, which are referred to in Article 19 of the law. Among these exclusions are the following:

  • Exclusion by law:

Budgets of local council, public institutions, professional unions, pension funds and social security, and private accounts.

  • Exclusion by international agreements:

Budgets of projects funded by foreign aid or loans.

  • Exclusion by legal contract:

Budgets of national and mixed companies.

  • Exceptional and emergency budgets.

III. The principle of budget comprehensiveness

This means that the general budget should include all general revenues that are supposed to be collected and all general expenditure without making any clearance between revenues and expenditure. All items should be recorded in the chapters of the budget without any exceptions. This principle is based on two basic rules:

  • The rule of gross product, according to which the revenues are recorded without collection expenses being deducted.
  • The rule of common use, which means that public revenues are used for all public expenditure and that no specific revenue should be allocated for a certain expenditure, even if that is done in the budget.

Not abiding by these rules can have serious consequences in respect to political, social, economic, and accountancy consequences. The exclusions from this principle in the Palestinian budget, however, are many, and include the budgets of local councils, professional unions, public institutions like universities and many others.

IV. The principle of balanced budget

This means that the estimations of public expenditure and public revenues in the budget should be equal without there being any surplus or deficit. The Palestinian legislator did not stipulate that there should be a balance of accounts in the budgets and pointed, in Article Five, to the possibility of having a surplus or deficit. Budget deficits, however, have become the norm in contemporary states. The serious effects of deficits, however, have become evident through the increase in lending and the collapse of currencies.

  • The principle of allocations in the budget

Defined allocations should be set for each item of expenditure so that parliament can study and control them accurately. Article 32 of the law dealt with this principle in general.

In sum, legal texts are meant to protect public money from wastage and loss. They also allow the Legislative Council to control revenues and expenditure. A failure to abide by the provisions regulating the public money in general and the law regulating the general budget in particular would lead to chaos and the absence of stability in regard to administrative and financial transactions.

As such it is recommended that the Palestinian Executive Authority should abide by and implement the General Budget Low to insure a timely revision by the Palestinian Legislative Council (PLC). This would also guarantee that the PLC has sufficient control mechanisms over the functions of the government as covered in the budget law.

Source: ATF Shu‘un Tanmawyyeh Issue 23


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