Ministry of Finance and Economic Development

1. Ministry of Finance and Economic Development Presentation Prepared by: Mr. A.K. Kokil (Assistant Director )Mr. R.C. Khushiram (Ag. Principal Economist) Central MTEF Unit

2. The Current Budgeting System How does the national budget perform in terms of the three core outcomes ? (i) aggregate fiscal discipline (ii) allocative efficiency and (iii) effective service delivery.

3. The Strengths Some of the foundations of the MTEF and RBB are already present Financial monitoring systems and compliance to existing rules are strong The Limitations Trade-offs between different priorities are difficult Ill-equipped for strategic planning A shopping list of projects by line Ministries, not necessarily in line with genuine needs

4. A road map for Budgetary Reform RBB MTEF programme-based budgeting linking required resources to desired outputs Expenditure ceilings with a three-year horizon incremental but programme-based budgeting Develop a sector expenditure Framework Estimating the costs of implementing priority programmes and achieving agreed outputs Identify measures to improve efficiency and effectiveness(M&E )and prioritize programmes Full fledged performance Budgeting

5. Introduction of MTEF An annual project approach A rolling 3-year budgeting Emphasis on allocative choices and trade offs An in-built Input focus

6. Setting up a Macro-economic Technical Committee • A Medium Term Fiscal Framework • Targets for total revenue, spending and the deficit for the forthcoming budget and successive framework years

7. Introduction of MTEF • Government agrees on • Medium term fiscal targets • Aggregate expenditure limitand • Sectoral allocations

8. Introduction of MTEF • The budget estimates of line-ministries are reviewed at the Ministry of Finance and Economic Development • Bilateral discussions with line ministries on their spending proposals • Arbitrary cuts and limited scope for contestability • Review sectoral policies and priorities of line-ministries

9. Implementation of the top-down approach The top-downresource envelope Macroeconomic Framework Medium term fiscal targets Aggregate expenditure limit A bottom-up estimation of the costs of policies Sectoral spending demands - prioritise activities to fit within the sectoral resource ceiling Sectoral plans - programmes/sub-programmes to achieve agreed objectives and determine required resources to achieve the desired results Sectoral spending policies - review sectoral objectives, policies and strategies, and identify outputs

10. Introduction of Results-Based Budgeting RBB was introduced (i) on a phased basis over a longer time frame and (ii) on a pilot basis in five sectors namely Education and Training, Health, Social Security, Environment (including Waste water) and Public Infrastructure (including Transport).

11. Introduction of Results-Based Budgeting • An elementary RBB implemented in Education and Training • A recasting of the present line budgeting to a three-year rolling integrated budget within an incremental budgeting framework • Allocation of resources on a programme basis • Activities linked to outputs and outcomes • Developing a Monitoring and Evaluation mechanism

12. Introduction of Results-Based Budgeting Institutional Structure CABINET Decide on policies and priorities and finalise expenditure ceilings and sectoral allocations Macroeconomic Technical Committee Work out macroeconomic framework ; Derive total expenditure envelope, sectoral ceilingsand allocations Central MTEF Unit Review sectoral policies and priorities ,and formulate 3-year programmes in collaboration with Sectoral MTEF Units Sectoral MTEF Units Develop qualitative and quantitative monitorable indicators Determine required resources to achieve the desired results Undertake monitoring and evaluation of programmes

13. Lessons learnt • Budget reform is a long term process • A harmonised and phased approach • First the building blocks - a consistent macroeconomic framework and strategic allocation of resources • Gradual implementation of the different stages of results-based budgeting

14. Lessons learnt • Establish and strengthen the causal links between activities and outputs and between outputs and policy outcomes. • Objectives and targets and responsibilities have to be properly disaggregated and cascaded down to smallest operating units.

15. Lessons learnt • The budgetary reform programme should not remain a top-down approach • The degree of success in implementing the budgetary reform programme is higher when the whole process is driven and owned by implementing agencies. • Implementation decisions should be devolved to the lowest feasible level in the hierarchy.

16. Lessons learnt Appropriate institutional mechanisms and structures should be put in place to support the budget reform programme

17. Lessons learnt Line ministries are restructured Strategic planning and analytical capabilities for assessing and appraising programmes and policies are reinforced in line-ministries. The Ministry of Finance is redesigned Processes for deciding on sectoral priorities and allocations are devised and strengthened Political will to carry forward the budget reform programme reinforced

18. Thank You