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Moving Key Ministry Functions to Palace is 'Bad for Governance'

The US Institute of Peace (USIP) in a report released on Tuesday said that moving key ministry functions to the president’s office is bad for governance, development, and the sustainability of peace.

In Afghanistan, where corruption and ineffective government have hampered efforts to build a functioning state, the Ministry of Finance has been a standout performer, according to the report.

“Competently run since as early as 2002, the ministry collects substantial revenue, manages aid inflows, pays public employees, funds key public services and has won the confidence of donors. Now, all that is threatened,” it said.

The Afghan government is "eviscerating the ministry—carving out key constituent parts, putting them directly under the presidential palace, and gravely weakening one of the country’s most effective institutions," said USIP.

“It’s a move that’s bad for Afghanistan’s governance and financial viability. It will harm the country’s development and jeopardizes the sustainability of peace if an agreement is reached with the Taliban,” it said.

The report said that the ministry’s dismemberment began on February 19 when—amid the ongoing dispute over the results of the presidential election—President Ashraf Ghani issued a decree instituting major changes in its administrative structure and reporting arrangements.

“Under this order, three core functional areas of the Ministry of Finance (MoF)—revenue, customs, and treasury and budget—are to be carved out as independent units, reporting directly to the President’s Office (via the Administrative Affairs Office of the President), completely bypassing the minister of finance and deputy minister,” it said.

“In these critical functions, MoF will be relegated to providing administrative and logistical support, with no supervisory authority and presumably no accountability. Instead, an unclearly defined “advisory board,” probably located in the palace and led by a senior presidential advisor, will be in charge, likely with direct oversight by the president,” it added.

The rationale given in the decree is that these changes will promote “effective management and transparency in finance and budgeting.” But it is entirely unclear how this centralization and fragmentation—and involving the president and his office so directly—would achieve these objectives. On the contrary, it risks politicizing key fiscal functions and weakens accountability, the USIP report said.

"The fragmentation of core fiscal functions risks undermining budget coherence and smooth, effective fiscal management. Moreover, putting key revenue collection functions directly under presidential authority risks centralizing—not curbing—corruption, with associated revenue losses," said the report.

Aside from these negative effects, now is a "terrible time" to implement such a "drastic restructuring":

"Afghanistan is in the midst of multiple crises: the presidential election whose outcome continues to be disputed; the US-Taliban agreement with concerns about whether it will be implemented and how the peace process will move forward; continuing violent conflict and incidents perpetrated by the protagonists and/or other spoilers; and not least the coronavirus pandemic which could ravage Afghanistan, a country particularly ill-equipped to cope with it."

The timing of the moves, made without any prior consultation, gives rise to suspicions: 

"For example, is it intended sidestep ministerial accountability to parliament, which has been critical of the acting finance minister for not showing up at mandated parliamentary hearings and for not answering questions, among other issues?"

USIP describes critical role of ministry:

"Ministry of Finance plays a linchpin role in Afghanistan’s public sector. It raises well over $2 billion in government revenues annually; mobilizes and manages close to $3 billion of on-budget international aid per year; pays the salaries of some 400,000 Afghan civil servants (including more than 200,000 teachers) and over 300,000 soldiers and police; and is responsible for budgeting, spending, and accounting for the annual national budget of more than $5 billion."

Also:

"It is a critical hub of the government, interacting with other ministries, parliament, aid donors, international institutions, audit agencies, and the private sector as well as the Afghan people. MoF pays for and financially oversees delivery of key services—directly in the case of education, and indirectly in the case of basic public health, the report mentioned."

Click here for whole report.

Moving Key Ministry Functions to Palace is 'Bad for Governance'

USIP report criticizes the Ministry of Finance’s "dismemberment," which began on February 19.

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The US Institute of Peace (USIP) in a report released on Tuesday said that moving key ministry functions to the president’s office is bad for governance, development, and the sustainability of peace.

In Afghanistan, where corruption and ineffective government have hampered efforts to build a functioning state, the Ministry of Finance has been a standout performer, according to the report.

“Competently run since as early as 2002, the ministry collects substantial revenue, manages aid inflows, pays public employees, funds key public services and has won the confidence of donors. Now, all that is threatened,” it said.

The Afghan government is "eviscerating the ministry—carving out key constituent parts, putting them directly under the presidential palace, and gravely weakening one of the country’s most effective institutions," said USIP.

“It’s a move that’s bad for Afghanistan’s governance and financial viability. It will harm the country’s development and jeopardizes the sustainability of peace if an agreement is reached with the Taliban,” it said.

The report said that the ministry’s dismemberment began on February 19 when—amid the ongoing dispute over the results of the presidential election—President Ashraf Ghani issued a decree instituting major changes in its administrative structure and reporting arrangements.

“Under this order, three core functional areas of the Ministry of Finance (MoF)—revenue, customs, and treasury and budget—are to be carved out as independent units, reporting directly to the President’s Office (via the Administrative Affairs Office of the President), completely bypassing the minister of finance and deputy minister,” it said.

“In these critical functions, MoF will be relegated to providing administrative and logistical support, with no supervisory authority and presumably no accountability. Instead, an unclearly defined “advisory board,” probably located in the palace and led by a senior presidential advisor, will be in charge, likely with direct oversight by the president,” it added.

The rationale given in the decree is that these changes will promote “effective management and transparency in finance and budgeting.” But it is entirely unclear how this centralization and fragmentation—and involving the president and his office so directly—would achieve these objectives. On the contrary, it risks politicizing key fiscal functions and weakens accountability, the USIP report said.

"The fragmentation of core fiscal functions risks undermining budget coherence and smooth, effective fiscal management. Moreover, putting key revenue collection functions directly under presidential authority risks centralizing—not curbing—corruption, with associated revenue losses," said the report.

Aside from these negative effects, now is a "terrible time" to implement such a "drastic restructuring":

"Afghanistan is in the midst of multiple crises: the presidential election whose outcome continues to be disputed; the US-Taliban agreement with concerns about whether it will be implemented and how the peace process will move forward; continuing violent conflict and incidents perpetrated by the protagonists and/or other spoilers; and not least the coronavirus pandemic which could ravage Afghanistan, a country particularly ill-equipped to cope with it."

The timing of the moves, made without any prior consultation, gives rise to suspicions: 

"For example, is it intended sidestep ministerial accountability to parliament, which has been critical of the acting finance minister for not showing up at mandated parliamentary hearings and for not answering questions, among other issues?"

USIP describes critical role of ministry:

"Ministry of Finance plays a linchpin role in Afghanistan’s public sector. It raises well over $2 billion in government revenues annually; mobilizes and manages close to $3 billion of on-budget international aid per year; pays the salaries of some 400,000 Afghan civil servants (including more than 200,000 teachers) and over 300,000 soldiers and police; and is responsible for budgeting, spending, and accounting for the annual national budget of more than $5 billion."

Also:

"It is a critical hub of the government, interacting with other ministries, parliament, aid donors, international institutions, audit agencies, and the private sector as well as the Afghan people. MoF pays for and financially oversees delivery of key services—directly in the case of education, and indirectly in the case of basic public health, the report mentioned."

Click here for whole report.

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