## _cr06388 ## Source details **Canonical URL:** [_cr06388](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06388.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06388.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06388.pdf.json) --- ### Clarity of Roles and Responsibilities - General government sector largely consistent with IMF Government Finance Statistics Manual 2001; includes central government, other governments, autonomous units, and nonmarket public corporations. - Budget consolidation excludes a number of entities, particularly social security funds and certain autonomous units. - Annual budget tracks only operating subsidies granted to decentralized and autonomous units; coverage of supplementary budgets is the same as the initial budget law (IBL). - Relationships between government and public financial institutions and nonfinancial enterprises are transparent and clearly defined; government representation within public enterprises defined by law and regulation with supervision by government-appointed board members and financial controllers. ### General Government Coverage, Budget Practice, and Legal Framework - Budget laws and supplementary budgets approved by parliament cover current and capital transactions of national institutions, central offices of ministries, and a special fund. - Road maintenance fund (RMF) included in an annex to the annual budget law; legal form: treasury special account (escrow). - Decentralized and autonomous units: budget does not track all operations; only operating subsidies are included. - Legal provisions cited: Law 015/98 (investment charter); Decree 001140/PR/MEFBP of 2002 on public procurement; Law 3/94 (labor code); Law 1–96 (privatization). - Civil service: Law 001/2005 (GCSR); Law 14/2005 (civil service code of behavior). ### Government Equity Holdings, Quasi-fiscal Activities, and Privatization - Management of government equity holdings: directorate of equity holdings (MEFBP) sole agency. - Holdings: - Financial sector: CFAF 22.20 billion (0.5 percent of GDP). - Nonfinancial sector: CFAF 35.95 billion (0.8 percent of GDP). - Most revenue from holdings (98 percent) generated by oil and natural gas sector in 2004. - Quasi-fiscal activities limited; exception: Gabon Poste provides unremunerated services. - Privatization operations (major examples and amounts reported): - 1997: SEEG — concession, 20 years — CFAF 15 billion: reinvestment - 1999 & 2005: Railroad (OCTRA) — concession, 30 years — CFAF 50 billion: reinvestment over three years - 2000: Ciments du Gabon — Transfer — CFAF 8 billion – Treasury - 2000: SOSUHO (SUCAF GABON) — Transfer — CFAF 4 billion – Treasury - 2000: OPT — Split - 2001: EAULECO — Transfer — CFAF 1.5 billion– Treasury - 2001: SFG (bois) — Transfer — CFAF 3 billion – Treasury - 2002: SIAEB — Transfer — CFAF 10 million – Treasury - 2004: AGROGABON et HEVEGAB et SOGADEL — Transfer — CFAF 3.4 billion – Treasury - 2004: OPRAG — Partial concession, 25 years — CFAF 2.5 billion: reinvestment - 2006: Air Gabon — Transfer — CFAF 7 billion: reinvestment — In progress - 2006: Gabon Telecom; Gabon Poste; Compagnie de Navigation Intérieure; Chemin de Fer — Concession (status noted) ### Central Bank, Public Financial Corporations, and Subsidized Lending - BEAC operationally independent; government banker; statutory advances up to 20 percent of preceding year’s tax revenue. - Interest on statutory advances: 5.75 percent per year up to statutory ceiling; above ceiling 10 percent per year. - End-January 2006 statutory advances: CFAF 171 billion. - Government deposits remunerated at marginal facility rate (currently 1.6 percent per year) only if government does not take statutory advances. - Public financial sector includes BGD, HRA, NRPC. - HRA refinancing activities: CFAF 96 million in 2004. - HRA and NRPC offer subsidized loans backed by the national housing fund. - BGD provides subsidized loans with no compensation. ### Tax System, Administration, and Payroll Tax - Personal income tax: split system limited to six shared parts; 11 brackets from 0 percent to 50 percent. - Corporate tax: - Regular rate: 35 percent. - 20 percent for public corporations and licensed real estate enterprises. - 18 percent for the BGD. - VAT: - Applies at turnover thresholds: CFAF 80 million (all operations), CFAF 60 million (services), CFAF 40 million (enterprises). - Regular rate: 18 percent; reduced rate: 10 percent; zero rate for exports. - Customs duty rates: 5 percent, 10 percent, 20 percent, 30 percent. - Payroll tax: set at 3.08 percent of turnover. - Tax administration modernization: - DGI reorganized in 2002; large taxpayer unit created September 2004 (launch delayed). - DGI currently collects VAT, registration and stamp taxes, tax on securities income, property, mining, and forestry receipts. - Collection breakdown: 82 percent of DGI’s non-oil revenue collected through voluntary compliance and withholding; 18 percent through tax assessments. ### Oil Revenue Management, EITI, and Future Generations Fund (FGF) - Oil in 2005: - More than 80 percent of export revenue. - 50 percent of GDP. - 60 percent of total government revenue. - Transparency shortcomings: - Public access to information on oil reserves and contracts limited; contracts not published. - Responsibility for oil taxation divided among DGH, DGI, ministry of mines, energy, and petroleum, general treasury, and directorate general of customs. - EITI implementation: - Gabon endorsed EITI in May 2004. - 2005: working group and interest group created, chaired by office of the president representative. - 2004 EITI report limitations: - Excludes two components of profit oil: Etat puissance publique and Etat associé. - Covers barely 60 percent of oil revenue. - Scope limited to oil sector; does not cover mining activities such as manganese. - Not all oil companies included. - Social and environmental expenditures and deliveries to SOGARA not included. - Authorities’ planned improvements: enhanced coordination among units managing oil revenue; expand EITI to mining sector. - Future Generations Fund (FGF) (Law 9/98): - Legal allocation rules: - Up to minimum capital of CFAF 500 billion, 10 percent of oil revenue projected in the budget must be allocated to the fund, plus 50 percent of all oil revenue collected in excess of that projected. - Once minimum capital attained, 25 percent of financial earnings generated by the fund must be allocated to the FGF. - Practice: provisions not respected; allocations inconsistent with law. - FGF deposits remunerated at 1.6 percent per year due to BEAC charter constraints. - FGF stock of deposits: - CFAF 70.4 billion at end of fiscal year 2002. - Fell to CFAF 40.4 billion in 2003. - Stood at CFAF 30 billion in December 2003. - For fiscal year 2005: deduction specified by law would have been more than CFAF 150 billion, but stock of deposits at end of fiscal year was less than CFAF 100 billion. - SOGARA received crude oil from the government in 2005 valued at approximately CFAF 72 billion (more than 1.6 percent of GDP) to offset losses. ### Budget Preparation, Classification, Timetable, and Execution - Fiscal year: calendar year. - Budget preparation phases and timetable (key dates preserved as in source): - Primary assessment: January-February. - Internal outline and projections: 1st two weeks of April. - Government seminar: Mid-May to mid-June. - Consideration by administrations: Mid-June to mid-July. - Budget conferences: July. - Drafting budget law and EFR: August. - Final negotiations: End-August. - Forward to economic and social council: 1st two weeks of September. - Council of ministers: 1st week of October. - Forward to national assembly: By October 15. - National assembly adoption on first reading: By end-November. - Senate adoption: By December 20. - Promulgation by the President: By December 31. - Classification: - Two classifications introduced in 2004: administrative and by economic type; functional classification lacking. - Macroeconomic framework and fiscal targets: - Authorities set 2005 fiscal policy target: non-oil primary deficit of 6.7 percent of non-oil GDP (June 2005); adjusted to 8.4 percent in October 2005. - December 2005 TOFE indicates primary non-oil deficit reached 12.1 percent of non-oil GDP for fiscal 2005. - Budget execution performance (fiscal 2003–05 averages): - Average revenue outturn: 98 percent for both oil and non-oil revenue. - Average current expenditure execution: 105 percent. - Average capital expenditure execution: 85 percent. - Execution rate of domestically-financed investment: 91 percent. - Execution rate for external financing: 54 percent on average. - For fiscal year 2003, only 29 percent of projected external financing was used. - Budget review law: - Prepared and examined by audit court; constitutional timetable requires submission by start of first regular session (first business day of March) of second year following fiscal year; 2003 review law adopted in second parliamentary session of 2005 and promulgated December 30, 2005. ### Fiscal Reporting, Accounting Systems, and Controls - Accounting and reporting limitations: - Government accounting system not integrated; DAXE system unstable and unreliable. - Treasury accounting statements delayed; in early April 2006 only end-November 2005 statements available. - Memorandum accounts and pending classification account balance: CFAF 61.6 billion at end-2004. - Treasury arrears during 2000–04 estimated at CFAF 29.4 billion (end-November 2005). - Internal controls: - Multiple, often redundant controls: financial control, payment authorizing officer, public accountants, inspectorate general of services (IGS). - Procurement controls: - DGP controls contracts above CFAF 30 million and below CFAF 500 million; CNMP controls contracts of CFAF 500 million or more. - Procurement practices not strictly observed: contract splitting, single-source contracting, contract revisions common. - Procurement processing (Box 7 highlights, preserved as in source): - Total contracts processed: - 2004: Number 182 (100%); Billions of CFAF 74 (100%) - 2005: Number 403 (100%); Billions of CFAF 148 (100%) - Contracts awarded on a single-source basis: - 2004: 160 (88%) by number; 51 (68%) by %; Billions of CFAF 192 (48%) by amount; 88 (60%) by % - 2005: 160/88% and corresponding amounts as shown in the source table - Contracts awarded by competitive bidding: - 2004: 22 (12%) by number; 23 (32%) by %; Billions of CFAF 187 (46%) by amount; 52 (35%) by % - Renewal of existing contracts: - 2004: 0 (0%) - 2005: 24 (6%) by number; Billions of CFAF 8 (5%) by % - External audit and oversight: - Audit court established by constitution and Organic Law 11/94; produces annual report (most recent for 2003) and audits public accountants and public enterprises. - Audit court comprises 59 judges and 15 audit assistants. - Audit court reports sent to President and supervisory ministers; many recommendations not followed up. - Statistical agency: - "There is no independent national statistics agency." - Directorate general of statistics resides within ministry of planning and development programming; no legal provisions guaranteeing independence. ### Social Funds, Contingent Liabilities, and Fiscal Risks - NSSF: - Managed by Law 6/75 (1975) and Decree 599; described as financially tenuous due to hospital network deficit and contribution arrears. - NSSF prepares actuarial assessment with ILO to examine long-term solvency. - NSGF: - Managed under Law 10/82 (1983) and Decree 1026 (1983); resources include government contributions for contractual employees, contributions from self-employed, and operating subsidies. - Beneficiary composition: indigents 85 percent; government contractual employees 12 percent; self-employed 3 percent. - Estimated debts: - Debt in terms of social benefits 1990–2003: CFAF 8.4 billion. - Benefits not paid to indigents 1983–2005: CFAF 30.9 billion. - Budget allocation recorded in 2005 and 2006 budget laws: CFAF 4.2 billion total, broken down as: - CFAF 1.5 billion for indigent benefits - CFAF 1.6 billion for contractors’ pensions - CFAF 1.2 billion in operating subsidies - Sensitivity analysis and fiscal risk disclosure: budget documents do not contain sensitivity analysis to economic variables and do not identify major financial risks (public enterprises, social funds). ### Implicit Petroleum Product Subsidies (2005) - Method: SOGARA calculates subsidy monthly as (import parity price − current ex-refinery price) × quantity consumed domestically. - Table 1: Cost of Implicit Petroleum Product Subsidies, 2005: - Total cost (in billions of CFAF): 71.9 - (as a percentage of GDP): 1.6 - (as a percentage of non-oil GDP): 3.2 - Memorandum: - Total national education expenditure (in billions of CFAF) 1/: 70.0 - Total health expenditure (in billions of CFAF) 1/: 50.3 - 1/ Payroll, goods and services, transfers, and domestically-financed investment. - SOGARA received crude oil from the government in 2005 valued at approximately CFAF 72 billion (more than 1.6 percent of GDP) to offset losses. ### Key Findings — IMF Staff Commentary (summarized) - Overall assessment: Gabon "partially complies with the principles of the Code of Good Practices on Fiscal Transparency and the Guide on Resource Revenue Transparency." - Main weaknesses: - Fiscal data incomplete and not readily available to the public. - Accounting and information systems unstable; cannot produce comprehensive in-year reports. - Budget lacks medium-term framework, sensitivity analysis, assessment of tax expenditures, and inclusion of implicit petroleum subsidies. - Controls numerous but "primarily formal, redundant, and generally ineffective." - EITI first report (2004, published December 2005) covers only 60 percent of oil revenue and excludes profit oil and mining revenue. ### Priority Recommendations (selected, verbatim phrasing preserved where quoted) A. Public Availability of Information and Assurances of Integrity - "Publish a quarterly summary statement on budget execution within 30 days of the end of each quarter, and provide a semiannual detailed statement on budget execution for parliament to review." - Include legal commitment in the budget law guaranteeing availability of these documents to the public. - "Shorten the deadlines for the production of monthly budget execution reports." - "Produce an official monthly statement for the minister of finance reconciling the budget execution reports of the payment authorizing officers with financial records of the central bank." B. Open Budget Preparation, Execution, and Reporting - Macroeconomic framework and oil revenues: - "Prepare monthly oil revenue projections in a framework that allows the tracking in full of the payment of oil revenues owed to the government, including in-kind payments." - Medium-term planning and fiscal risks: - "Prepare a medium-term expenditure framework with a rolling timeframe covering the period 2007–09 for the 2007 budget, in conformity with the GPRSP." - "Include in the budget documents analyses of fiscal sustainability and of the contingent liabilities of the government, and more specifically, the status of the two funds (NSSF and NSGF)." - "Transparently reflect in the budget both forgone oil revenue and implicit subsidies on the prices of petroleum products." - Tax system: - "Restore its consistency, neutrality, and transparency" by addressing exemptions and exceptional arrangements. - "Assess tax expenditure and disseminate the relevant information." - "Complete the EITI report by including profit oil revenue, as well as mining sector revenue." - Budget execution: - "Enforcing the conditions for procurement and competitive bidding." - "Expediting implementation of the budget: appropriations should be in place no later than January 15 of the new fiscal year." - "Shortening the period for treasury execution operations to a maximum of one month initially..." - "Merging all BEAC accounts into a subaccount of the main treasury account..." - "Budgeting the operations carried out by oil companies on government orders, by charging certain expenditures to provisions for diversified investments." C. Clarity of Roles and Responsibilities - General government activities: - "In an initial stage, expand the scope of the budget by including wholly subsidized government entities." - "Include local government operations in the Economic and Financial Report." - Internal and external controls: - "Establish coordination and complementarity among the various control authorities and shift the focus of control to the effectiveness of expenditure by simplifying formal ex ante controls." - "Ensure that the recommendations of control entities are followed up and that audit court reports, reports on parliamentary investigations, and audits of investment operations (especially fêtes tournantes) are widely disseminated." *Source: IMF staff report excerpt (meetings held in Libreville from March 27 to April 14, 2006).* ### 1. Cost of Implicit Petroleum Product Subsidies, 2005 ......................................................28 ### 1. Cost of Implicit Petroleum Product Subsidies, 2005 ### Clarity of Roles and Responsibilities - General government sector, as defined by the directorate general of statistics and economic studies, is largely consistent with the IMF Government Finance Statistics Manual 2001. - General government includes all operations of the central government, other governments, autonomous units, and nonmarket public corporations (Box 1). - The budget consolidation excludes a number of entities, particularly the social security funds and certain autonomous units. - Annual budget tracks only operating subsidies granted to decentralized and autonomous units; coverage of supplementary budgets is the same as the initial budget law (IBL). - Relationships between government and public financial institutions and nonfinancial enterprises are transparent and clearly defined; government representation within public enterprises is defined by law and regulation and supervision is exercised by government-appointed board members and financial controllers. ### General Government Coverage and Budget Practice - Budget laws and supplementary budgets approved by parliament cover current and capital transactions of national institutions, central offices of ministries, and a special fund. - The road maintenance fund (RMF) is included in an annex to the annual budget law; its legal form is a treasury special account (escrow) for deposit of road usage fees, the government subsidy, tolls, assistance fund paid by local governments, external financing, payment for services, and gifts and bequests. - The budget does not track all operations of decentralized and autonomous units; only operating subsidies are included. ### Government Equity Holdings and Revenues - Management of government equity holdings is clearly defined; the directorate of equity holdings of the ministry of economy, budget, and privatization (MEFBP) is the sole government agency responsible for overseeing management of these assets. - Holdings comprise eight corporations in the financial sector and 56 in the nonfinancial sector. - Financial sector holdings total CFAF 22.20 billion (0.5 percent of GDP); nonfinancial sector holdings total CFAF 35.95 billion (0.8 percent of GDP). - Four corporations in the transportation sector and one in the industrial sector are wholly owned by the government. - Government equity holdings are less than 10 percent in 41 corporations (consequence of Law 8/83). - Most revenue from these holdings (98 percent) was generated by the oil and natural gas sector in 2004. ### Quasi-fiscal Activities and Profit Transfers - Public corporations and enterprises engaged in market activities carry out a very small number of quasi-fiscal activities; exception noted: Gabon Poste provides unremunerated services for the government. - Arrangements regulating profit transfers from state enterprises to the budget are clear: dividend amounts are determined by annual negotiation within boards of directors, estimated dividend payments are clearly identified in the annual budget, and amounts received are shown in the treasury’s accounts. ### Privatization Framework and Operations - Legal framework for privatization is defined by Law 1–96 governing transfer of public sector enterprises to the private sector. - Privatization process is managed by MEFBP and carried out by an interministerial privatization commission assisted by a privatization committee. - Standard procedures and international competitive bidding are the basic principles; appraisal and determination of transfer prices are the responsibility of the privatization committee; transfer documents are published. - Proceeds from privatization are paid into the treasury or reinvested in the new company. - Major privatization operations between 1997 and 2006 (Box 2) include: - 1997: Société d’énergie et d’eau du Gabon (SEEG) — Awarded as a concession, 20 years — CFAF 15 billion: reinvestment - 1999 & 2005: Railroad (OCTRA) — Awarded as a concession, 30 years — CFAF 50 billion: reinvestment over three years - 2000: Ciments du Gabon — Transfer — CFAF 8 billion – Treasury - 2000: SOSUHO (SUCAF GABON) — Transfer — CFAF 4 billion – Treasury - 2000: Office des Postes et Télécommunications (OPT) — Split - 2001: EAULECO — Transfer — CFAF 1.5 billion– Treasury - 2001: SFG (bois) — Transfer — CFAF 3 billion – Treasury - 2002: SIAEB (agriculture et élevage) — Transfer — CFAF 10 million – Treasury - 2004: AGROGABON et HEVEGAB et SOGADEL — Transfer — CFAF 3.4 billion – Treasury - 2004: Office des Ports (OPRAG) — Partial concession, 25 years — CFAF 2.5 billion: reinvestment for rehabilitation of the port - 2006: Air Gabon — Transfer — CFAF 7 billion: reinvestment of Air Gabon International — In progress - 2006: Gabon Telecom; Gabon Poste; Compagnie de Navigation Intérieure; Chemin de Fer — Concession (status noted) - Annual privatization program is adopted by decree of the council of ministers and is attached to annual budget documents. ### Legal and Regulatory Environment for the Private Sector - Institutional and regulatory environment for business is relatively stable and based primarily on the rules established by the Organization for the Harmonization in Africa of Business Law (OHADA). - Legal provisions governing relations between government and private sector include: Law 015/98 of July 23, 1998 (investment charter), Decree 001140/PR/MEFBP of 2002 on public procurement, Law 3/94 of November 21, 1994 (labor code). - Investment charter principles: equal treatment for domestic and foreign enterprises, equitable and transparent application of OHADA business law, labor code, and social security legislation in accordance with CIPRES. - Private investment promotion agency (PIPA), instituted by Order of February 12, 2000 and Law 003/2000 of 2000, houses a one-stop window for business start-ups. ### Central Bank Independence and Fiscal Interaction - Bank of Central African States (BEAC) is operationally independent and is responsible for conduct of monetary policy; primary fiscal role is government banker. - BEAC can grant statutory advances up to 20 percent of the preceding year’s tax revenue; interest rate on statutory advances is 5.75 percent per year up to statutory ceiling; above ceiling interest rate is 10 percent per year. - At end-January 2006, statutory advances totaled CFAF 171 billion, well below the ceiling of 20 percent of the previous year’s total revenue. - Government deposits with the BEAC are remunerated at the marginal facility rate (currently 1.6 percent per year) only if the government does not take statutory advances. ### Public Financial Corporations and Subsidized Lending - Public financial institutions carry out limited quasi-fiscal activities; public financial sector comprises Banque gabonaise de développement (BGD), financial institutions, the Gabon Housing Refinance Account (HRA), and the national real property corporation (NRPC). - HRA refinancing activities totaled CFAF 96 million in 2004. - HRA and NRPC offer loans at subsidized rates backed by the national housing fund. - BGD carries out quasi-fiscal activity by offering subsidized loans for which it receives no compensation. *Source: IMF staff report excerpt (meetings held in Libreville from March 27 to April 14, 2006).* ### 10. The fiscal roles of the executive, legislative, and judicial branches are clearly ### 10. The fiscal roles of the executive, legislative, and judicial branches are clearly defined in the constitution and in law. ### Fiscal roles and budget process - The constitution states that parliament shall pass laws, approve taxes, and monitor the activities of the executive branch, and sets out the rules for adopting and reviewing the budget, with audit court assistance. - Laws related to the budget and establishing general government accounting regulations clearly define roles in the budget process: - The executive drafts the budget law and executes it. - The legislature (parliament) adopts the budget and monitors its execution, assisted by the judicial branch, represented by the audit court. - The constitutional council, whose responsibilities are set out in an organic law, may verify the conformity of budget laws to the constitution. - The constitution allows the government, in urgent cases and for purposes of implementing its program, to petition parliament for authorization to issue an order during the parliamentary recess to carry out measures normally the province of law, including supplementary budgets (Article 29 of Law 4/85). ### Decentralization, subnational responsibilities, and fiscal autonomy - Responsibilities of different levels of government are clearly defined in law (Law 15/96 on decentralization), but local governments’ autonomy remains limited. - Structure of decentralized units: - Decentralized government units in provinces and departments; local government units within departments (districts (arrondissements), and communes). - Decentralized units have administrative and financial autonomy; managed by an elected departmental, municipal, or district council; headed by a president in departments and by a mayor in communes and districts. - These units are supervised by the central government (administrative supervision by the ministry of the interior and financial supervision by the MEFBP, i.e., the directorate general of the treasury). - Implementation and resource constraints: - No implementing decrees were issued for the 1996 law on decentralization; legislation concerning powers and competence has not been promulgated. - Financial resources allocated to these units make it very difficult for them to function and to make necessary investments. - Local governments may borrow up to the equivalent of 30 percent of their revenues; beyond that, decisions to borrow are subject to prior authorization from the central government, which guarantees such borrowing. - Local government revenues (fiscal year 2004): - Totaled CFAF 25.65 billion for 97 government units. - The communes of Libreville and Port-Gentil account for 75 percent of that amount. - Law 15/96 states that the operating portion cannot exceed 60 percent of the budget, although this limit does not seem to be observed. ### Legal and administrative framework for budget management - The management of public funds is defined by a clear legal framework, with strict separation between the payment authorizing officer and the accountant. - Legal instruments and roles: - The constitution and various laws (Laws 4/85, 5/85, 5/94, 6/2002, 11/2005; Decrees 481/2002, 484/2002) and annual budget law establish general rules on adopting the budget and monitoring its execution. - The budget framework law establishes the annual basis of the budget, its comprehensiveness, and its unity, and specifies content and presentation procedure. - The law establishing general government accounting regulations defines procedures for budget execution, the accounting system for recording operations, and the controls to be applied. - The legal framework includes presidential decrees for which implementing orders are issued; these laws are currently being revised. - Separation of duties: - Distinct identification of individuals responsible for budget execution; clear distinction between administrative personnel (the sole principal payment authorizing officer, the minister of finance, budget appropriations managers who are members of government, and the presidents of official entities) and public accountants (government accountants authorized to carry out revenue, expenditure, and cash transactions and to keep accounting records). ### Transparency and extrabudgetary activities - Mechanisms for coordination and management of budgetary and extrabudgetary activities are not totally transparent. - Earmarking and special funds: - Earmarking of revenues is not presented in the annual budget, with the exception of the RMF. - Other earmarked revenues are not shown clearly in government accounts; they are included under the heading “treasury special accounts” and recorded in deposit accounts at the treasury. - The 1985 budget framework law specifically mentions the RMF, the national housing fund (NHF), the national water fund, and the national electricity fund. - The national housing fund is sustained by a “national housing fund” tax. The RMF and the NHF are granted management autonomy and are managed by public accountants. - Expenditures from treasury deposit accounts are made in a nontransparent manner: - Some budgetized activities are managed outside normal treasury accounting procedures using deposit accounts classified as treasury correspondents: subsidies or regular operating appropriations are recorded in the budget, transferred to a treasury correspondent account, and operations are paid from that treasury account, creating management irregularities and nontransparent data. - Examples: - The audit court indicated that security and sovereignty funds had been used to contribute to the construction of a Central African Banking Commission building. - Capital expenditure on regional independence day celebrations (fêtes tournantes) is channeled through a correspondent account, the “August 17 Fund,” and although the budget appropriation was used in its entirety, a credit balance of CFAF 17 billion remained in the correspondent account at end-2003. ### Legal and administrative framework for tax policy and administration - Legislative basis and complexity: - The legislative basis for taxation is clear; tax legislation is modern but complex and subject to frequent amendments. - The tax and customs reform carried out in the 1990s modernized the tax system, but progress was not sustained primarily because of proliferation of exemptions. - Measures adopted in connection with VAT (scope and rate structure, sectoral exemptions, special arrangements) affected consistency, simplification, and stability of the VAT withholding system, resulting in less transparency. - Tax measures introduced in the 2001–06 budget laws have not yet been codified; a draft code aimed at unifying, harmonizing, and updating the legislation is being finalized. - Tax system features (Box 3): - Personal income tax: - Levied on the total net income of the tax household; assessment based on split system limited to six shared parts; graduated schedule includes 11 brackets ranging from 0 percent to 50 percent. - Corporate tax: - Regular rate is 35 percent. - Rate of 20 percent for public corporations and licensed real estate enterprises. - Rate of 18 percent for the BGD. - A minimum presumptive tax is levied when tax liability is below the minimum collectible amount. - VAT: - Applied to imports and to economic activities when turnover is CFAF 80 million or more for all operations, CFAF 60 million for services provided, and CFAF 40 million for enterprises. - Regular rate of 18 percent; reduced rate of 10 percent for major consumer goods; zero rate for exports. - Many exemptions and numerous rates make the system unstable and compromise neutrality and simplicity. - Excises: - Levied on imports and on domestic sales of alcoholic and nonalcoholic beverages, tobacco, and fuels. - A reduction of 30 percent is granted for locally manufactured products subject to the tax. - Customs duties: - Gabon applies four customs duty rates: 5 percent for staples, 10 percent for capital goods, 20 percent for intermediate goods, and 30 percent for basic consumer goods. - Exemptions and suspended duties are granted under conventions or by government decision, or in connection with investment incentives. - Sugar imports are effectively prohibited. - Exports of natural-state timber are subject to a duty of 17 percent and manganese to a duty of 3.05 percent. - Tax exemptions and tax expenditures: - Tax exemptions and reductions are provided for in the tax code, but other tax benefits not included in the code can be approved by government authorities, including in agreements not subject to legislative approval (e.g., conventions granting exemption from corporate tax and the minimum presumptive tax for OPRAG, PMO, the NRPC, SOVOG, and hotel corporations). - Tax expenditures are not calculated; only the cost of new measures is estimated when tax projections are evaluated in preparing draft budgets. - Tax administration and modernization: - Tax administration units and procedures are well defined but their modernization, still at an early stage, should be accelerated. - The directorate general of inland revenue (DGI) procedures are clearly defined; DGI was reorganized in 2002 in an effort to merge tax services (organization defined by Decree 01139/PR/MEFBP of 12/18/2002 amended by Decree 000720; external services governed by MEEF Order 0011 of December 6, 2005). - Implementation status: - New organization is not yet fully operational; tax collection powers are only partially exercised. - DGI currently collects VAT, registration and stamp taxes, tax on securities income, property, mining, and forestry receipts. - Collection of corporate and individual income tax, currently the responsibility of the general treasury, is being transferred to the DGI. - Movement toward creation of a single taxpayers’ file; launch of the large taxpayer unit (created in September 2004) has been delayed. - Effective implementation of administrative reforms is slow and not well managed; wide disparity between measures adopted and actual implementation. - There is a single tax identification number used by DGI, customs, general treasury, budget, financial control, and payroll; registration procedure needs reexamination to make the tax identification number more reliable and to determine taxpayers’ locations more readily. - Collection modes: - The tax system is based largely on voluntary compliance, which is the predominant method of payment. - Withholding is also used for income tax payments to improve enforcement and timely collection. - From a legal perspective, the administration’s discretionary power is limited and exercised within the framework of presumptive assessment for taxpayers below a certain threshold. - Collection breakdown: - Eighty-two percent of the DGI’s non-oil revenue is collected through voluntary compliance and withholding, and 18 percent through the issuance of tax assessments. ### Oil revenue management and transparency - Economic importance of oil (calculations based on data for 2005): - More than 80 percent of export revenue. - 50 percent of GDP. - 60 percent of total government revenue. - Transparency shortcomings: - Public access to information about the size of oil reserves and the use of resources generated by oil remains limited. - Contracts between the government and oil companies are not published. - Relations between oil companies and various government institutions lack coordination and clarity. - Responsibility for management of oil taxation is divided among the directorate general of hydrocarbons (DGH), the DGI, the ministry of mines, energy, and petroleum, the general treasury, and the directorate general of customs. - Recommended institutional measures (authorities’ commitments and identified needs): - Improve and institutionalize coordination among these units to ensure better monitoring, more effective supervision, and greater control over oil revenue. - Coordination would be particularly useful in implementing the Extractive Industries Transparency Initiative (EITI). - Management of oil revenue through the Future Generations Fund (FGF): - FGF established in 1998 at the BEAC to facilitate management of oil revenue (Law 9/98). - Legal allocation rules (pursuant to Law 9/98): - Up to the minimum capital of CFAF 500 billion, 10 percent of the oil revenue projected in the budget must be allocated to the fund, plus 50 percent of all oil revenue collected in excess to that projected in the annual budget. - Once the minimum capital is attained, 25 percent of the financial earnings generated by the fund must be allocated to the FGF. - In practice, these provisions are not respected and the level of allocations to the fund is not consistent with the law. *Source: _cr06388 - 10. The fiscal roles of the executive, legislative, and judicial branches are clearly defined in the constitution and in law.* ### 3.08 percent of turnover for payroll tax. ### _cr06388 - 3.08 percent of turnover for payroll tax. ### Payroll tax - Payroll tax set at 3.08 percent of turnover. ### Implementation of the EITI (Box 5) - Purpose: Enhance transparency of reporting income from extractive activities and improve management of revenue generated by natural resources. - Gabon timeline and institutional arrangements: - Gabon endorsed the EITI in May 2004. - In 2005, a working group was created and an interest group was established, chaired by a representative of the office of the president and including representatives from the prime minister’s office, ministerial departments, civil society, the oil sector, and the mining sector. - Major limitations of the 2004 EITI report: - Excludes the two components of profit oil: Etat puissance publique and Etat associé because flows of profit oil are not broken down by type and by oil company; lack of disaggregated data prevents compilation in accordance with the International Standard on Related Services (ISRS) standards. - The 2004 EITI report barely covers 60 percent of oil revenue. - Scope limited to the oil sector; does not cover mining activities such as manganese. - Not all oil companies were included in the EITI. - No precise information on authorized provisions (provisions for diversified investments and provisions in hydrocarbons) held by oil companies or rules governing their use. - Social and environmental expenditures financed by oil companies lack accurate and comprehensive data. - Revenue flows related to deliveries to the Gabonese Refining Corporation (SOGARA) are not included. - Authorities’ response and planned improvements: - Engaged since early 2006 in enhanced coordination among units managing oil revenue to better identify payments made by oil companies. - Plan to expand EITI coverage to include the mining sector. - Identify problems from lack of coordination among the DGH, the DGI, and the general treasury, and from payment-by-check practices that generated substantial “pending amounts” causing delays and identification problems. *italic*Source: _cr06388 - 3.08 percent of turnover for payroll tax.*italic* ### Fiscal governance and the FGF (Heritage of oil revenue management) - Legal and practice gaps: - Fund deposits remunerated at 1.6 percent per year because BEAC’s charter does not allow investment in currencies of States outside the monetary union. - The fund’s minimum capital was legally prohibited from being used to pay government expenses but withdrawals were made in 2003. - Indicative figures and shortfalls: - For fiscal year 2005, although the deduction specified by law would have been more than CFAF 150 billion, the stock of deposits in this account at the end of the fiscal year was less than CFAF 100 billion. - Stock of deposits in the FGF: CFAF 70.4 billion at end of fiscal year 2002; fell to CFAF 40.4 billion in 2003; stood at only CFAF 30 billion in December 2003. ### Taxpayers’ legal rights and tax administration - Rights and appeal procedures: - Taxpayers’ rights are defined in clear laws or regulations. - Assessment errors can be corrected automatically. - For disputes concerning the basis of assessment, taxpayers have the right to file a preliminary appeal and the administration must issue a decision within six months. - If no response within the specified time limit or response is unsatisfactory, taxpayers can lodge an appeal with the administrative court. - Required guarantees must be furnished with petitions to suspend tax payments. - Appeals concerning duties, fines, and penalties follow tax legislation; in practice appeals proceed from assessment offices to the director general of taxes and finally to the minister of finance. ### Public servants’ code of behavior and anti-corruption activity - Legal framework and codes: - Civil servant status governed by Law 001/2005 setting forth the General Civil Service Regulation (GCSR). - Civil service code of behavior in force since August 2005 (Law 14/2005 of August 8, 2005). - Anti-corruption efforts governed by Law 010/2002 (prevention and suppression of unlawful enrichment) and Law 011/2002 establishing the National Commission Against Unlawful Enrichment (NCAUE). - NCAUE activity and compliance: - NCAUE charged with collecting declarations of assets, investigating unlawful enrichment, and taking precautionary measures. - NCAUE has received 1,702 asset declarations from a target population of 3,000. - An outreach campaign is under way to remind the individuals concerned of their obligation. - Asset declarations: - Declaration of assets also includes those of the filer’s spouse(s) when the latter is (are) engaged in a private, for-profit activity. - If no declaration of assets is submitted, penalties incurred are those provided for in Article 125 of the Criminal Code. ### Budget preparation, presentation, and classifications - Fiscal year and process: - Fiscal year is the calendar year. - Budget preparation procedures include four phases: administrative preparation (MEFBP and MDP), examination by the Economic and Social Council and the Council of State, budget adoption by parliament, and promulgation by the President of the Republic. - The process is not homogeneous: dichotomy between operating budget and capital budget; budget operations are not generalized by ministry. - Presentation issues: - Explanatory annexes present operating budget, capital budget, and the RMF. - Budget law annexes include only expenditure; revenue is summarized but not broken down. - Budget law makes no mention of treasury special accounts and the social security and national social guarantee funds (NSSF and NSGF). - No summary for each ministry and for all ministries; capital budget mixes development and capital operations in a single chapter. - Classification: - Two budget classifications introduced with the 2004 budget: by administrative unit and by economic type. - Classification by economic type is partially consistent with international standards for current expenditure; capital expenditure classification is an amalgam of type and sectoral classification and lacks functional classification. ### Budget preparation timetable (Box 6) - Primary assessment of revenue and expenditure based on the macroeconomic assumptions for year n-1 and year n: January-February. - Preparation of an internal budgetary outline of sectoral policy and macroeconomic projections: 1st two weeks of April. - Compilation of fiscal outlook data for government seminar and organization of government seminar: Mid-May to mid-June. - Consideration by administrations; meeting with administrations: Mid-June to mid-July. - Budget conferences: July. - Drafting of budget law for year n+1 and budget review law for year n-1; drafting of the economic and financial report: August. - Formulation and negotiation of the budget; final negotiations between the prime minister and the President of the Republic: End-August. - Forwarding draft budget to the economic and social council; examination: 1st two weeks of September. - Examination and adoption by the council of ministers: 1st week of October. - Submission of the draft to the national assembly: By October 15. - Adoption on first reading by national assembly: By end-November. - Submission to the senate and adoption by the senate: By December 20. - Promulgation by the President of the Republic: By December 31. ### Macroeconomic framework and fiscal targets - Main fiscal indicator: non-oil primary balance of the central government (not included in the budget law but shown in the fiscal operations table (TOFE)). - Fiscal targets and outcomes: - Authorities set the fiscal policy target for 2005 at a non-oil primary deficit of 6.7 percent of non-oil GDP (June 2005). - In October 2005, the government adjusted this target to 8.4 percent. - The December 2005 TOFE indicates the primary non-oil deficit reached 12.1 percent of non-oil GDP for fiscal 2005. - Macroeconomic forecasting process: - Directorate General of Economy (DGE) uses the model of the Gabonese economy (MEGA) in consultation with the DGH for oil production forecasts. - The economic and financial report (EFR) includes assumptions for the international environment and national economic variables, broken down by economic sector. - Weaknesses: DGE does not check consistency between its macroeconomic assumptions and DGI’s revenue estimates; MEGA does not account for seasonal fluctuations and cannot be used for quarterly or monthly forecasts; regular projections of monthly oil and non-oil revenue are not possible. - The authorities are strengthening capacity by increasing resources allocated to the DGI to manage all oil-related revenue flows. ### Medium-term planning and fiscal risk analysis - Growth and Poverty Reduction Strategy Paper (GPRSP): - Completed in March 2006. - Sets a multiyear strategy for accelerating growth and reducing poverty. - Criticisms: does not take account of the DGE’s macroeconomic forecasts, downplays likely decline in oil revenues, projects very high growth rates for public investment but only a slight increase in operating expenses (suggests undervaluation of recurrent costs), and the projected surge in capital expenditure is not based on an analysis of implementation capacity. - Medium-term expenditure framework (MTEF): - No MTEF used in preparation of the annual budget. - Authorities plan to develop an MTEF with a rolling timeframe; the 2005 EFR included a general discussion of the MTEF concept. - The planned MTEF would incorporate both operating and capital expenditure. - Budgetary rules: - No clear budgetary rules for determining the non-oil balance and the amount of debt. - The budget framework law requires the draft budget to show financial balance, but the concept of financial balance is not clearly defined. - Government commitment in 2005 to limit the non-oil primary deficit to 6.7 percent of GDP was not fulfilled by end-2005. - New initiatives: - Estimates of new initiatives are not clearly distinguished in budget documents. - The economic and financial report provides only an overview of new expenditure, with no breakdown; no explanation is given for differences between current year appropriations and projected appropriations for the new fiscal year. *italic*Source: _cr06388 - 3.08 percent of turnover for payroll tax.*italic* ### 33. The sensitivity of budget estimates to changes in economic variables is not ### 33. The sensitivity of budget estimates to changes in economic variables is not assessed and the major fiscal risks are not discussed in the budget. ### Sensitivity analysis and fiscal risk disclosure - The budget documents do not contain an analysis of the sensitivity of budget aggregates to economic variables. - The budget documents do not identify major financial risks that could result from, for example, a weakening of the financial position of public enterprises or the social funds (NSSF and NSGF). ### Social security: NSSF (National Social Security Fund) - Management of the social security system is instituted by Law 6/75 of 1975 and Decree 599/Office of the President of the Republic and is entrusted to the NSSF, a private agency managing a public service with legal personality and financial autonomy, subject to government supervision. - The NSSF’s financial position is described as tenuous because of: - A deficit involved in running a network of hospitals. - Accumulation of contribution arrears. - The condition of guaranteed financing for the administrative and technical reorganization of hospitals has not been met, while the NSSF remains responsible for managing health units, making its financial viability more precarious. - Footnote: The NSSF, in cooperation with the International Labor Office, prepares an actuarial assessment used to examine long-term solvency. ### National Social Guarantee Fund (NSGF) risk - Management of the social guarantee system is instituted by Law 10/82 of 1983 and Decree 1026 of 1983 and is entrusted to the NSGF, a national public corporation of a social nature with legal personality and financial autonomy, subject to government supervision. - NSGF resources include government contributions for contractual employees, contributions from self-employed workers, and operating subsidies from the government. - Beneficiary composition: - Indigents: 85 percent - Government contractual employees: 12 percent - Self-employed workers: 3 percent - The government has accumulated contribution arrears for contractual employees and major payment arrears for indigent benefits. - NSGF estimated debts: - Debt in terms of social benefits from 1990 to 2003 amounted to CFAF 8.4 billion. - Benefits not paid to indigents from 1983 to 2005 amounted to CFAF 30.9 billion. - A budget allocation of CFAF 4.2 billion was recorded in the 2005 and 2006 budget laws, broken down as: - CFAF 1.5 billion for indigent benefits - CFAF 1.6 billion for contractors’ pensions - CFAF 1.2 billion in operating subsidies ### Budget implementation procedures and timing - The budget framework law states financing operations reflect the balance of budgetary operations (either government financing requirement or net lending). - Although the timetable for adoption of the budget law is observed and the budget review law is submitted within a reasonable time, promulgation delay causes the budget to be implemented after a long lag. - This results in budget execution over a maximum period of eight months, particularly affecting investment. - As of April 1, 2006, implementation of the 2006 budget had not yet begun. - The lack of a multiyear sectoral estimates law (loi-programme) and the absence of the possibility of carrying forward capital expenditure appropriations hinder rational management. - Supplementary budgets often adopted at the end of the fiscal year modify budget line item appropriations unilaterally before legislative involvement, undermining transparency. ### Clarity of control of budget execution — Accounting and internal controls - The government accounting system is not integrated. - Administrative operations are processed by a DAXE computer system that is unstable and unreliable for users. - Data from DAXE must be reprocessed manually before final budget execution reports, causing delays. - Data on outstanding payment orders are forwarded to the treasury, which uses a different system; treasury prepares accounting statements after more than three months’ delay and includes arrears recorded by the treasury. - Data on payment arrears is incomplete because the report does not include upstream government operations not reported to the Treasury. - The time limit of 120 days set by the treasury to pay government creditors complicated assessment of payment arrears; the amount of treasury arrears during 2000–04 was estimated at end-November 2005 at CFAF 29.4 billion. - Internal controls are numerous but redundant: - Four types of internal controls in the expenditure process: financial control, control by the payment authorizing officer, control by public accountants, and control by the inspectorate general of services (IGS). - For procurement expenditure in excess of CFAF 30 million, the directorate general of procurement (DGP) exercises control prior to the start of the expenditure process and issues a certificate of non-objection. - At payment authorization the central accounting office performs another financial control; accountants check legality before payment. - IGS focuses on operation of units and procedures. - Control of services provided is rarely carried out. - Higher control agencies assess internal control as ineffective with uncertain value added. - Cash management and financial coordination are weak: - Cash management (responsibility of the directorate general of the treasury, DGT) is not aligned with commitment planning or consultation with budget managers. - Practice of executing payment orders with a lag of four months and use of correspondent accounts for budget execution even without financing constraints indicate unsatisfactory cash management. - No consolidated cash management: besides the treasury current account at the BEAC, there are other bank accounts at the BEAC and in commercial banks. ### Internal audits and oversight agencies - Ex post administrative control is carried out by the state control office which oversees inspectorates of ministries and other internal inspectorates. - Governed by Decree 501 of August 1, 2002, the state control office comprises six controllers assisted by approximately 40 employees. - Its reports are not published and are sent to the President of the Republic, the supervisory ministers concerned, and the audit court. - Small staff and lack of professional training explain current ineffectiveness. - Ministries’ internal inspectorates are recently created and currently under-resourced (example: services inspectorate of the ministry of economy and finance includes an inspector general, two assistants, and two research specialists). - Some networked directorates (DGI, directorate general of customs, general treasury) have internal inspectorates responsible for internal audits. - The DGP is an oversight agency that participates in internal control, issues prior formal notices, conducts ex post control to ensure effectiveness of public expenditure. ### Procurement practices - A procurement code was instituted by decree in 2002 (Decree 001140/PR/MEFBP of December 18, 2002) and a procedures manual is being prepared. - The DGP (created by Decree 1102/PR/MEFBP of October 4, 2003) controls government contracts above CFAF 30 million and below CFAF 500 million; a national procurement commission (CNMP) (Decree 10/44/PR/MEFBP of September 1, 2003) controls contracts of CFAF 500 million or more. - Ex ante control is exercised by the directorate general of financial control and the DGP; issuance of a “certificate of non-objection” by the DGP is a prior condition for approval. - In practice, procurement procedures are not strictly observed: - Physical control of certain contracts began only in 2006 and significant deficiencies have been observed. - Contracts are split to avoid procurement controls; single-source contracting and contract revisions during execution are common. - A procurement database is being established; implementation will require strengthening human and material capacities of the DGP. - Sectoral ministries lack specialized technical units to draw up specifications and monitor contract performance. - Box 7 data on procurement contracts processed by the DGP (2004 and 2005): - Total contracts processed: - 2004: Number 182 (100%); Billions of CFAF 74 (100%) - 2005: Number 403 (100%); Billions of CFAF 148 (100%) - Contracts awarded on a single-source basis: - 2004: 160 (88%) by number; 51 (68%) by %; Billions of CFAF 192 (48%) by amount; 88 (60%) by % - 2005: 160/88% and corresponding amounts as shown in the source table - Contracts awarded by competitive bidding: - 2004: 22 (12%) by number; 23 (32%) by %; Billions of CFAF 187 (46%) by amount; 52 (35%) by % - Renewal of existing contracts: - 2004: 0 (0%) - 2005: 24 (6%) by number; Billions of CFAF 8 (5%) by % ### Civil service employment procedures - The law of 2005 setting forth the GCSR establishes general principles for civil service careers (recruitment, compensation, promotion, mobility, leave, disciplinary sanctions, termination). - The law establishes five components in the Gabonese civil service and ten categories of employees. - The law specifies public competition as the sole method of recruitment to fill vacant positions; advancement is based on seniority and limited to available positions; promotions are through competitions subject to training and available positions. ### Tax administration internal controls - Tax and customs administrations have inspection, control, and monitoring units which contribute to improved fiscal management and tax administration, but lack of resources and small staff limit their effectiveness. ### Accounting and reporting on budget execution - The accounting system is not capable of producing comprehensive in-year reports on central government budget execution. - Government accounting is based on single-entry administrative accounting (records appropriations, commitments, payment order issuance) and double-entry general government accounting (records financial execution in payment phases and other cash transactions). - The DAXE system seems unable to produce regular budget execution reports; in April 2006, records of commitments and payment orders issued for the 2005 budget were still unavailable. - Treasury accounting statements are available only after long delays; in early April 2006, only the end-November 2005 accounting statements were available. - Many revenue and expenditure operations are recorded in memorandum accounts and not regularized until the end of the fiscal year; at end-2004, the balance of the expenditure pending classification and regularization account was CFAF 61.6 billion. - Some outstanding balances in accounts are not cleared regularly, reducing data reliability. - Treasury general accounting provides data on all local government operations, but discrepancies exist between centralized data and data compiled locally (example: municipality of Owendo). ### Coverage of fiscal reporting and legislative oversight - Fiscal reporting covers only part of general government: - End-year fiscal data cover institutions, ministries, the RMF, and externally financed expenditure. - Data on local governments are consolidated by the general treasurer. - For other general government entities (such as hospitals subsidized from the government budget), data are incomplete because they include only transfers from the government and not entities’ own resources; these own resources increase spending but are not consolidated. - Available data do not cover the NSSF; NSGF operating subsidies and other transfers from the government budget are included in fiscal data. - The legislature does not receive in-year reports on the fiscal position: - Legislation does not require parliament (Senate and National Assembly) to receive in-year reports on budget execution. - If a supplementary budget is presented, parliament receives information in the report submitted with the supplementary budget explaining the reasons for amending the approved budget. - Constitutionally, parliament may request any information on budget execution from the minister of finance. *Source: IMF staff report content (sections 33–46, related footnotes, and annexed tables and boxes).* ### 47. The budget review law is adopted within 24 months of the end of the fiscal year. ### 47. The budget review law is adopted within 24 months of the end of the fiscal year. ### Adoption and legal/timetable context - The budget review law formally closes the fiscal year; it authorizes changes in budget appropriations and certifies execution of the annual budget. - Preparation of the budget review law is a new event; only the budget review laws for fiscal years 2001, 2002, and 2003 have been submitted and voted on by parliament. - The draft law is examined by the audit court, which prepares a report on the proper execution of the budget and issues a certificate of conformity between: - the budget execution account (prepared by the principal payment authorizing officer), and - the end-year treasury account (prepared by general treasurer). - Constitutional timetable: the budget review law must be submitted to parliament by the start of the first regular session (first business day of March) of the second year following the fiscal year in question; the second session begins on the first business day of September. - Timetable exceeded for fiscal 2003: the 2003 budget review law was adopted in the second parliamentary session of 2005 and promulgated by the President of the Republic on December 30, 2005. ### Results-oriented budgeting and planning - Objectives and expected results from government activities are defined in: - the economic and financial report (EFR) attached to the budget, and - the GPRSP. - The EFR presents general government objectives; reduction of poverty is a major objective with priorities in employment, education, national solidarity, the family, and public health. - The GPRSP (finalized February 2006) includes a public investment program (PIP) for 2006–08 to diversify the economy and promote poverty-reducing growth and sets priorities including attainment of the millennium development goals. - Weaknesses in programming process: - The PIP for 2006–08 does not rank priorities; if fewer resources were available it is unclear which programs would be retained or eliminated. - Projects in GPRSP programs are not defined in terms of measurable indicators of expected results. - No detailed estimates of their overall cost in terms of investments and recurrent expenditure are provided. ### Public availability and coverage of fiscal information - Fiscal information is not comprehensive and not readily available to the public; no clear commitment to provide fiscal data to the public. - Monthly budget execution statements and the government’s accounting statements are considered confidential. - For certain budget execution operations, the government’s creditors can view on the DGT website: - status of their claims, - payment authorizations in progress at the directorate of expenditure, - payments pending and payments executed in the last three months. - Budget documents cover central government fiscal activities with limitations and provide limited data on general government: - Covered: national institutions, ministries, and the RMF. - Included documents: budget law, EFR, annexes (itemized operating budget, itemized capital budget, RMF, operating subsidies to local governments, other operating subsidies). - Not covered: public corporations, treasury special accounts, and local governments. - Defense expenditures are comprehensively reported; the ministry of defense operating and investment appropriations are presented with the same detail as other ministries. Some specific grants come from a confidential security fund. - The EFR presents data on the current year’s budget compared with revenue and expenditure forecasts for the next fiscal year and the preceding year’s budget law, with exceptions: - Oil revenue data are presented as projections covering two years. - No account is taken of changes effected by the current year’s supplementary budgets, introducing bias. - No outturns are presented except a table showing results for the first six months of the current year. - No projection for future years is mentioned in the budget document. ### Off-budget activities, tax expenditures, and implicit subsidies - Contingent liabilities excluded from purview of the public include: - liabilities of public enterprises vis-à-vis the NSSF assumed by the government until end-2004; - government contributions to civil service pensions; - contingent liabilities associated with the social security system. - Tax expenditures are not included in the budget documents. Numerous tax exemptions, reductions, and preferential rates exist but are not assessed for foregone revenues and are therefore not reported. - Implicit subsidies on petroleum products are extensive and their estimated cost is not included in the budget documents: - Subsidies result from administrative below-market pricing of petroleum products; the freezing of ex-refinery prices since 2002 plus sharp international oil price increases has led to growing implicit subsidies. - The subsidy is calculated monthly by SOGARA as: (import parity price − current ex-refinery price) × quantity consumed on the domestic market. - SOGARA received crude oil from the government in 2005 valued at approximately CFAF 72 billion (more than 1.6 percent of GDP) to offset losses it would have otherwise sustained. - Table 1: Cost of Implicit Petroleum Product Subsidies, 2005 (as reported) - Total cost (in billions of CFAF): 71.9 - (as a percentage of GDP): 1.6 - (as a percentage of non-oil GDP): 3.2 - Memorandum: - Total national education expenditure (in billions of CFAF) 1/: 70.0 - Total health expenditure (in billions of CFAF) 1/: 50.3 - 1/ Payroll, goods and services, transfers, and domestically-financed investment. ### Debt data and publication commitments - Data on gross public debt are available upon request to the authorities and parliament but are not published. - The directorate general of government accounting uses the DMFAS system (UNCTAD) since 2001; data are comprehensive but not regularly published. - Formal commitments for regular publication of fiscal data have not been made; publication of fiscal data is not required by law. - When the draft budget is adopted, the data are available to the public; otherwise budget data remains confidential and no information on budget execution is disseminated. - The DGE’s Tableau de bord de l’Économie provides summary information on the government budget (projected and actual data) and information on public debt. - Gabon participates in the General Data Dissemination System (GDDS); the Dissemination Standards Bulletin Board is available on the IMF website. ### Integrity of data processes, execution, and reconciliation - Budget data revised in supplementary budgets are generally close to actual outturn but often exceed authorized appropriations. - Reported execution statistics (fiscal 2003–05 averages and execution observations): - Average revenue outturn in fiscal 2003–05 amounted to 98 percent for both oil revenue and non-oil revenue. - Average level of current expenditure execution: 105 percent. - Average level of capital expenditure execution: 85 percent. - Execution rate of domestically-financed investment: 91 percent (very high). - Execution rate for external financing: 54 percent on average and varies widely year to year. - For fiscal year 2003, only 29 percent of projected external financing was used. - The audit court report attached to the budget review law analyzes and explains these spreads and reveals anomalies in execution. - Statements on accounting policy are not included in budget and final accounts. The general government accounts are based on the chart of accounts established for the member states of the Central African Customs and Economic Union (dating to 1974) and should be replaced with the OHADA accounting system. - The chart of accounts currently records operations on a modified cash basis: expenditure recorded when the accountant initials the payment order and revenue recorded when received. - Implementation of new budget classifications (January 2006) revealed a significant problem: correspondence between these classifications and the chart of accounts nomenclature. - The process of accounts reconciliation and fiscal reporting is not satisfactory: - Major differences were noted on the expenditure side when comparing the government’s general budget execution account and the final balance of the treasury accounts for the fiscal 2003 budget review law. - Budget data and treasury data were not properly reconciled during the fiscal year. - Reconciliation requires stable data at the directorate general of the budget and the DGT; the current computerized data management system at the directorate general of the budget is unreliable. ### External audit, oversight, and forecast scrutiny - The audit court: - Is established by the constitution and governed by Organic Law 11/94; defines powers, composition, organization, operation, procedures. - Audits accounts of public accountants, monitors budget execution, audits accounts and management of public enterprises and social security agencies, and assists parliament and the government. - Is headed by a judge appointed by the President of the Republic; comprises 59 judges and 15 audit assistants. - Proceedings are written; judgments rendered after parties heard; rule of double arrêt applies; rules by provisional order which becomes final only if third party produces necessary evidence. - Produces an annual report on the budget execution law including a statement of consistency between public accountants and budget execution managers (most recent report for 2003). - Produces reports on observations of various audits forwarded to the President and made public as required by Law 11/94 (most recent such report dates to 1989). - Has detected cases of work not done or done improperly despite internal controls and certified service delivery; recommendations are often not effectively followed up. - The legislature: - Discusses external audit reports and systematically follows up on audit findings. - The national assembly and the senate question the government in writing and orally and form parliamentary investigative commissions; reports of investigative commissions are not published. - Macroeconomic assumptions and projections: - Discussed primarily with the IMF, not with other outside organizations. - Internal and external control of the quality of the DGE’s economic forecasts is limited. - Macroeconomic forecasts are not regularly subjected to parliamentary examination with independent experts. - Oil revenue forecasts, based on a highly complex tax system, are not subject to internal examination apart from the DGI and the DGH. - The only external control of forecasts of macroeconomic fiscal revenue activity is provided by IMF staff during consultation and negotiation missions. *Source: _cr06388 - 47. The budget review law is adopted within 24 months of the end of the fiscal year.* ### 65. There is no independent national statistics agency. ### _cr06388 - 65. There is no independent national statistics agency. ### Statistical institutional setup and independence - "There is no independent national statistics agency." - Statistical work is performed by the directorate general of statistics, within the ministry of planning and development programming. - An interministerial statistics committee may check the data. - "There are no legal provisions guaranteeing the independence of the directorate general of statistics." - "Finally, there is no legal provision ensuring the independence of the directorate of statistics of the ministry of planning." ### IMF STAFF COMMENTARY — overall assessment of fiscal transparency - Gabon "partially complies with the principles of the Code of Good Practices on Fiscal Transparency and the Guide on Resource Revenue Transparency." - Clarity of roles and responsibilities (Section I of the Code): - Legal framework governing fiscal management is comprehensive; some texts are outdated. - Roles and responsibilities of various levels of government and budgetary roles of the executive, legislature, and judiciary are clearly defined in law, but "they are not always properly applied" and practices often diverge from laws and regulations. - Tax legislation is modern but complex and subject to frequent amendments detrimental to consistency and transparency. - Taxation of oil and natural gas is "especially complicated" and management of oil revenue flows "suffers from lack of coordination among the departments concerned." - Gabon participates in the EITI; the first report, published in December 2005 on oil revenue in 2004, "covers only 60 percent of such revenue" and "excludes profit oil and revenue from mining products." - Public availability of information (Section II of the Code): - Fiscal data are "far from complete and are not readily available to the public." - There is "no inclination to share information" and available information is often regarded as confidential. - Information systems used for fiscal management are "not stable" and cannot be used for information sharing. - Accounting system cannot produce comprehensive in-year reports on budget execution; monthly treasury accounts are available only after long delays. - Openness of budget preparation, execution, and reporting (Section III of the Code): - Annual budget process is broadly transparent but deviates from international standards. - Budget is strictly annual; current and capital budgets are drafted separately and "are not prepared within a medium-term framework" linked with the poverty reduction strategy. - Budget lacks sensitivity analysis of projections to economic variable changes and to oil price risks; does not take into account potential risks linked to social security and pensions. - Budget does not include implicit subsidies on petroleum products or an assessment of tax expenditures. - Budget documents lack clarity and transparency due to absence of summary statements by ministry or government function. - Assurances of integrity (Section IV of the Code): - Control system is extensive with a good legal and regulatory framework for internal, external, ex ante, and ex post controls, but controls are "primarily formal, redundant, and generally ineffective." - Procurement regulations are well defined but "are not strictly observed and penalties are not applied." - Doubts exist concerning credibility of control agencies. - Audit court exercises independent external control and its mandate covers all government units and public sector agencies, but its controls focus largely on conformity and do not address effectiveness or performance. - Audit court annual reports are submitted to parliament but "they are not published." Recommendations and orders from the audit court are not followed up. - Parliament examines audit court reports, questions members of government, and sometimes forms investigative committees; reports of such investigations are not published. ### Key findings and priority recommendations - General priority: "Much remains to be done to ensure that government finances are managed transparently, in conformity with international best practices." - Resource sector transparency (oil and natural gas): - Publish information on size of reserves; content of contracts with oil companies; quantities produced; amounts transiting via the government; prices applied; financial flows; actual taxes, profit oil, and in-kind payments by oil companies; implicit subsidies; and any quasi-fiscal operations by oil companies on the government’s behalf. - Information should be "published promptly and regularly" and be accurate. - Strengthen coordination among units and departments responsible for these aspects. - "The second EITI report should be more complete, covering both profit oil and mining revenue." - Budget preparation and presentation: - Prepare a rolling, medium-term budget framework in coordination with planning, finance, and sectoral ministries; revise annually when budget is drafted. - Integrate current and capital budgets and rank priority investment programs. - Assess and incorporate fiscal risks linked to debt sustainability, oil and natural gas prices, civil service reform, and contingent liabilities of social security and pension system sectors. - Accounting system should provide comprehensive and reliable in-year information on budget execution at various phases. - Improve parliamentary information on budget execution; address time limits for submission of budget review laws and lack of in-year and end-year information. - Transparency of budget execution: - Budget operations are effectively carried out within eight months due to delays in promulgation of the budget law. - Spending commitments are not tracked; investment projects are not monitored physically and financially. ### Detailed recommended actions (ordered by priority headings in source) A. Public Availability of Information and Assurances of Integrity (references: 2.2.1,2.1.2,4.1.3) - "Publish a quarterly summary statement on budget execution within 30 days of the end of each quarter, and provide a semiannual detailed statement on budget execution for parliament to review." - Include a legal commitment in the budget law guaranteeing availability of these documents to the public. - "Shorten the deadlines for the production of monthly budget execution reports." - "Produce an official monthly statement for the minister of finance reconciling the budget execution reports of the payment authorizing officers with financial records of the central bank." - "Ensure that the legal and regulatory framework allows for the improvement of transparency, by making amendments where necessary." B. Open Budget Preparation, Execution, and Reporting - Budget preparation (reference: 3.2.1) - Macroeconomic framework and oil revenues (3.1.3): - "Prepare monthly oil revenue projections in a framework that allows the tracking in full of the payment of oil revenues owed to the government, including in-kind payments." - Medium-term planning and analysis of fiscal risks (2.1.3, 3.1.1, 3.1.5): - "Prepare a medium-term expenditure framework with a rolling timeframe covering the period 2007–09 for the 2007 budget, in conformity with the GPRSP." - "Rank the priorities of the diversified investment program and ensure that the GPRSP is consistent with the framework of sustainable economic policies." - "Include in the budget documents analyses of fiscal sustainability and of the contingent liabilities of the government, and more specifically, the status of the two funds (NSSF and NSGF)." - "Adopt action plans to ensure their long-term sustainability, as well as the financial implications of civil service reforms, before they are actually implemented." - "Transparently reflect in the budget both forgone oil revenue and implicit subsidies on the prices of petroleum products." - Presentation of the budget (3.2.1, 2.1.2): - "Include in the budget documentation the budget outturns for the last three fiscal years, by major category, and forecasts for the next two fiscal years." - "Show revenue more transparently by specifying the types of revenue." - "Clearly indicate in the Economic and Financial Report the new measures presented in the budget for at least each ministry, and by major expenditure category." - "Improve the clarity of the budget presentation by including revenue and expenditure summaries." - "In the 2007 budget, introduce a functional classification as an integral part of the classification of budget line items." - The tax system (1.2.2): - "Restore its consistency, neutrality, and transparency" currently compromised by many exemptions and exceptional arrangements. - "Assess tax expenditure and disseminate the relevant information." - "Accelerate the implementation of measures to modernize tax and customs management and bring practices into line with measures already adopted." - "Ensure greater transparency in the management and monitoring of oil revenue flows by enhancing coordination among the departments concerned." - "Complete the EITI report by including profit oil revenue, as well as mining sector revenue." - Budget execution (3.3.1, 3.3.2, 2.1.3): - "Enforcing the conditions for procurement and competitive bidding." - "Expediting implementation of the budget: appropriations should be in place no later than January 15 of the new fiscal year." - "Shortening the period for treasury execution operations to a maximum of one month initially, based on the realistic programming of commitments in coordination with appropriations managers, as well as a cash flow plan." - "Merging all BEAC accounts into a subaccount of the main treasury account, in order to gain a clearer view of the government’s financial assets and limit the use of statutory advances." - "Budgeting the operations carried out by oil companies on government orders, by charging certain expenditures to provisions for diversified investments." C. Clarity of Roles and Responsibilities - General government activities (1.1.1): - "In an initial stage, expand the scope of the budget by including wholly subsidized government entities." - "Include local government operations in the Economic and Financial Report." - Civil service (1.2.2): - "Disseminate the new law setting forth the GCSR and make it available to all interested parties." - "Develop initiatives related to the observance of ethical standards for public sector employees and the fight against corruption, particularly in respect of declarations of assets." - Internal and external controls (4.2.1, 3.3.3): - "Establish coordination and complementarity among the various control authorities and shift the focus of control to the effectiveness of expenditure by simplifying formal ex ante controls." - "Ensure that the recommendations of control entities are followed up and that audit court reports, reports on parliamentary investigations, and audits of investment operations (especially fêtes tournantes) are widely disseminated." - "Eventually supplement the controls of legitimacy and conformity with evaluations and performance audits." *IMF staff commentary as presented in the source document.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06388.pdf_