Alexandra Smirnova, Ministry of Finance of the Russian Federation

1. Alexandra Smirnova,Ministry of Finance of the Russian Federation Performance Budgeting APEC FISCAL SPACE SEMINAR REVIEWING, ASSESSING AND PRIORITISING GOVERNMENT EXPENDITURE

2. Fiscal Space: Does Performance Budgeting help • To create it? • To use it properly? • PB is not first and easiest way to create fiscal space; • PB does not create much fiscal space; • PB certainly helps to use fiscal space efficiently; • PB is only helpful at the certain level of fiscal space available

3. PB is not first and easiest way to create fiscal spaceALLAN SCHICK’S PRINCIPLES OF BUDGET REFORM SEQUENCING: • Foster an environment that supports and demands performance before introduction of performance and outcome budgeting • Control inputs before seeking to control outputs • Budget for work to be done before budgeting for results to be achieved • Enforce formal contracts in the market sector before introducing performance contracts in the public sector • Have effective financial auditing before moving to performance auditing • Adopt and implement predictable budgets before insisting that managers efficiently use the resources entrusted to them

4. Russian Budget reforms of 2000s • Results-based medium-term budgeting (from 2008) • Long-term budget stability and sustainability • Revenue and expenditure assignments for federal, regional and local budgets • Meduim-term budget planning • Performance budgeting • Public sector restructuring • Input-based short-term budgeting (1991 - 2000) • establishment of budget procedures and regulation (organic budget law - Budget Code (2000) • cash execution • Federal Treasury • fiscal dicsipline and expenditure control • equalization transfers 2001-2007

5. PB does not create much fiscal space 1. Gain on allocative efficiency Zero-based Budgeting All expenditure items are revised every budget period Incrementalist Approach Only new commitments are discussed (5-10% of total expenditure every budget period, only …% of which is inefficient) VS 2. Gain on technical efficiency Spending bodies’ efficiency gains are usually not more than the inflation rate

6. Factoring of Public Expenditure Commitments into the Mid-term Budget Expenditure limits Resource for new commitments Investment objects Acting commitments Register of the expenditure commitments Long-term Targeted Programs State Arms program(till 2015) Salaries and emoluments, Military pay and allowance Pensions and benefits (Public liabilities) 2015 2007 2008 2009 2010 2011 2012 2013 2014 3-year budget

7. Russia’s case: Structure of Expenditure commitments in 2008

8. Acting and new commitments Acting commitments (90-95%) • public transfers (calculation) • debt service (schedule) • governance, maintenance of the facilities (indexation) • acting programs (plan) New commitments (5-10%) • new legislation • new programs approval inclusion in the budget

9. Russia’s case: Sequence of budget planning

10. Models of Performance Budgeting Expenditure Traditional Economy Inputs Activities Technical efficiency Technical efficiency Efficiency Output budgeting Output Effectiveness Outcome budgeting Intermediate outcome Outcome

11. Expenditure 5 bln. roubles Inputs 88 regional commissions, 2 000 employees Activities Control and supervision of competition law adherence Output Decrease in number of competition law violations Outcome Place of Russia in international rating of efficiency of competition authority Goal 1 Promoting competition by means of prevention and control of anticompetitive behavior Russia’s case: Policy area - Competition policy Implementation Results

12. Russia’s case: Performance budgeting tools

13. Russia’s case: Performance budgeting tools Budget programs, Justifications of budget appropriations (public, assessed by MoF) Traditional budget supporting documents (confidential, presented to MoF) Expenditure Inputs Activities Line Ministries’ Results and Activities Reports (public, approved by Government) Output Intermediate outcome Long-term Economic Program (public, approved by Parliament) Outcome

14. Performance Budgeting on all the stages of budget cycle: Medium-term planning Revenue policy Macroeconomic Planning Debt policy Performance audit Outcome planning Oversight Budget Preparation Internal audit Delegation and accountability Accounting and Reporting Outcome reporting Budget implementation Management accounting Budget programs

15. Platforms of Performance Budgeting implementation

16. PB is only helpful at the certain level of fiscal space available During last budget cycle Russian Federal Budget expenditure been raised by 28% without any efficiency assessment

17. So the question is: Whether to implement Performance Budgeting? Yes Because if you don’t set the rules you could not use it when the time comes

18. Russia’s case: Budget Reform Matrix3 waves for decentralization of public finance management

19. Russia’s place in World’s Budget Reform Medium-term Budgeting • Australia • New Zealand, Great Britain, • Nederland, Sweden Russia (2008) France 2006 • USA Vietnam 2006 Russia (2006) • Bulgaria • Russia(2003) Performance Budgeting • Ukraine

20. Alexandra Smirnovaasmirnova@minfin.ru Thank you for your attention APEC FISCAL SPACE SEMINAR REVIEWING, ASSESSING AND PRIORITISING GOVERNMENT EXPENDITURE