Developing Medium Term Budget Framework: Bangladesh Experience

1. Developing Medium Term Budget Framework: Bangladesh Experience Md Zahidul Haque Budget Wing Finance Division Ministry of Finance People’s Republic of Bangladesh

2. Overview • In 2004, the Government of Bangladesh introduced MTBF and the budgets for four ministries for fiscal year 2005-06 were prepared under the MTBF. • In fiscal year 2010-11, all the ministries came under MTBF in phases.

3. Aims and Objectives of MTBF • Establishing linkage between strategic objectives stated in the policy documents of the Government and resource allocation • Delegating more responsibility and authority to the line ministries • Institutionalizing a system for measuring outputs/ results from the resources allocated • Improving budget discipline and predictability • Achieving greater budget effectiveness

4. Basics of Bangladesh MTBF • Government budget is prepared within a medium-term context and include estimates and projections of revenues, financing and expenditures for the coming fiscal year and four outer years. • Line ministries are allowed to plan their programmes in the knowledge of expected future funding levels. • MTBF provides for more explicit linkage between government spending plans and its strategic policy objectives.

5. Basics of Bangladesh MTBF(Contd.) • Line ministries are being given greater authority over the allocation and management of budgetary resources in order that they can manage their programme more effectively and efficiently. • Resource allocation is linked to performance criteria through MTBF frameworks

6. Building Blocks of MTBF • A macroeconomic and fiscal framework • An analysis of key strategies and choices • Ministry level budget strategy frameworks • Resource ceilings and expenditure plans • Strengthened budget implementation procedures

7. Results Achieved • Introduction of a strategic phase to budget planning before the detailed annual budget is prepared. • A more integrated and unified approach to budget planning. • A single resource ceiling covering both development and non-development expenditure • Establishing performance indicators

8. MTBF Implementation Strategy • Building capability of the Finance Division, Planning Commission and line ministries • Deepen and institutionalize the MTBF process

9. Roles and Responsibilities Played by the Key Actors

10. Key Challenges Encountered • Capacity constraints in line ministries • Frequent transfer of trained and experienced personnel • Separate non-development and development budget and lack of a single unit responsible for integrated budget management in each line ministry • Non-existence of Management Information System in most ministries necessary for setting and monitoring KPIs appropriately • Less participation of senior policy makers of line ministries in budget processes;

11. Measures taken to Resolve the Issues Encountered • Public Moneys and Budget Management Act 2009 requires to arrange necessary education and training to establish sound and effective financial management and utilize experience and services of the trained and educated manpower; • Above mentioned Act also requires establishment of a Budget Management Wing/Branch in each line ministry

12. Measures taken to Resolve the Issues Encountered (Contd.) • All line ministries have been advised to establish an MIS; • It has been made compulsory to form a Budget Management Committee headed by the Secretary of the ministry to ensure participation of senior policy makers in budget management processes • Steps are underway to unify the non-development and development budget.