The MTEF in Practice - Reconciling Conflicting Claims Malcolm Holmes.
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Transcript of The MTEF in Practice - Reconciling Conflicting Claims Malcolm Holmes.
The MTEF in Practice - The MTEF in Practice - Reconciling Conflicting ClaimsReconciling Conflicting Claims
Malcolm HolmesMalcolm Holmes
Implementing an MTEFImplementing an MTEFImplementing an MTEFImplementing an MTEF Pilot or whole of GovernmentPilot or whole of Government Budget unification (PIP elimination)Budget unification (PIP elimination) Reduction of the number of budget Reduction of the number of budget
line itemsline items Link between line items and Link between line items and
objectives and impactobjectives and impact Introduction of a 3 year perspectiveIntroduction of a 3 year perspective Mission statements and strategic Mission statements and strategic
plans for sectorsplans for sectors
Implementing an MTEF Implementing an MTEF (Cont.)(Cont.)
Implementing an MTEF Implementing an MTEF (Cont.)(Cont.)
Use of strategic plans for budget Use of strategic plans for budget preparationpreparation
Emphasize costs of activitiesEmphasize costs of activities Merging of external and domestic Merging of external and domestic
financing financing Withdrawal of MoF from details of budget Withdrawal of MoF from details of budget
allocations in LMallocations in LM Engaging cabinetEngaging cabinet Focus on performanceFocus on performance
Ghana: Explaining progressGhana: Explaining progressGhana: Explaining progressGhana: Explaining progress Commitment from Minister and Commitment from Minister and
Ministry of Finance, line ministers Ministry of Finance, line ministers and donors and donors
MTEF based on GOG-led PERMTEF based on GOG-led PER Consensus building efforts (losers Consensus building efforts (losers
and winners)and winners) MTEF becomes budget processMTEF becomes budget process
Ghana: Explaining Progress Ghana: Explaining Progress (Cont.)(Cont.)
Ghana: Explaining Progress Ghana: Explaining Progress (Cont.)(Cont.)
Consistency between MTEF Consistency between MTEF and sector approaches and sector approaches
Link to other reformsLink to other reforms Performance focus - matching Performance focus - matching
authority and accountabilityauthority and accountability
Ghana: Sustainability TestsGhana: Sustainability TestsGhana: Sustainability TestsGhana: Sustainability Tests
Predictability of funding (domestic and Predictability of funding (domestic and external) external) – predictable macro/fiscal frameworkpredictable macro/fiscal framework– cash flow estimatescash flow estimates– cash available on timecash available on time– budget voted on time by parliamentbudget voted on time by parliament
Predictability of policiesPredictability of policies
- Cabinet Engaged- Cabinet Engaged Controlling expenditureControlling expenditure Focus on outcomesFocus on outcomes
Ghana: Sustainability Tests Ghana: Sustainability Tests (Cont.)(Cont.)
Ghana: Sustainability Tests Ghana: Sustainability Tests (Cont.)(Cont.)
Dynamic process of evaluation Dynamic process of evaluation of policiesof policies
Autonomy and accountability Autonomy and accountability of LMof LM
Civil service management - Civil service management - pay policy, authoritypay policy, authority
DecentralizationDecentralization
UgandaUganda Sequential progression through 3 levelsSequential progression through 3 levels Using MTEF-style approach since early Using MTEF-style approach since early
1990’s1990’s– Fiscal disciplineFiscal discipline– Predictable sectoral expenditures that reflect Predictable sectoral expenditures that reflect
stated strategic policies stated strategic policies MTEF reinforcing goalsMTEF reinforcing goals Provides framework for implementing Provides framework for implementing
Poverty Eradication Action PlanPoverty Eradication Action Plan
Sequencing the MTEF in UgandaSequencing the MTEF in Uganda
1992/93: Medium-term expenditure 1992/93: Medium-term expenditure planning with goal of fiscal disciplineplanning with goal of fiscal discipline– Cash-flow management with monthly Cash-flow management with monthly
expendituresexpenditures 1996/97 Linking sectoral allocations 1996/97 Linking sectoral allocations
to policiesto policies Linking policy and funding Linking policy and funding
predictability to technical efficiencypredictability to technical efficiency
Reforming the budget processReforming the budget process
Annual budget framework process:Annual budget framework process:– Identifies medium-term priorities, Identifies medium-term priorities,
resource constraints and sectoral resource constraints and sectoral ceilingsceilings
– Consultation with line Ministries and Consultation with line Ministries and external stakeholdersexternal stakeholders
– Links with civil society through more Links with civil society through more transparent budgeting documentstransparent budgeting documents
Extending the MTEFExtending the MTEF
Extending MTEF to district governmentExtending MTEF to district government– Provision of technical expertise from Provision of technical expertise from
central Ministriescentral Ministries Defining roles in budgetingDefining roles in budgeting
– Budget administrators propose envelopesBudget administrators propose envelopes– Sectors propose policy choices and Sectors propose policy choices and
allocationsallocations– Cabinet and parliament make political Cabinet and parliament make political
choiceschoices
Uganda: Sustainability TestsUganda: Sustainability Tests
Implementation of strategic allocationsImplementation of strategic allocations– Deviation between budgeted expenditure Deviation between budgeted expenditure
and actual spending 25% and actual spending 25% – Line Ministries overspending MTEF ceilingsLine Ministries overspending MTEF ceilings
Revenue unpredictabilityRevenue unpredictability– Shortfall of tax revenuesShortfall of tax revenues– Inability of donors to provide medium-term Inability of donors to provide medium-term
commitmentscommitments– Impacts on expenditure disbursement Impacts on expenditure disbursement
Uganda: Sustainability Tests Uganda: Sustainability Tests (contd)(contd)
Limited flexibility with expenditure Limited flexibility with expenditure readjustmentsreadjustments– Statutory expendituresStatutory expenditures– Politically important areasPolitically important areas– Areas with donor conditionsAreas with donor conditions
Continued separation of donor-funded Continued separation of donor-funded project from Consolidated Fundproject from Consolidated Fund
Uganda: Sustainability Tests Uganda: Sustainability Tests (contd)(contd)
Sectoral planning issuesSectoral planning issues– Little clarity of goalsLittle clarity of goals– Little quantitative analysisLittle quantitative analysis– Failure to link expenditure estimates Failure to link expenditure estimates
to prioritiesto priorities– Few performance measuresFew performance measures
Monitoring and evaluation of Monitoring and evaluation of sectoral efforts is weaksectoral efforts is weak
Uganda: Sustainability Tests Uganda: Sustainability Tests (contd)(contd)
Improving the quality and Improving the quality and efficiency of service provisionefficiency of service provision
Hard Budget ConstraintHard Budget Constraint Cohesive political executiveCohesive political executive Sector StrategiesSector Strategies Forum within which decisions Forum within which decisions
constrained by resource availability over constrained by resource availability over medium term and policies competemedium term and policies compete
Programmatic decisions devolved to line Programmatic decisions devolved to line ministers (within hard sector ceilings)ministers (within hard sector ceilings)
PRIORITIZATIONPRIORITIZATIONInstitutional ArrangementsInstitutional Arrangements
PRIORITIZATIONPRIORITIZATIONInstitutional ArrangementsInstitutional Arrangements
PRIORITIZATIONPRIORITIZATIONInstitutional Arrangements Institutional Arrangements
(Cont.)(Cont.)
PRIORITIZATIONPRIORITIZATIONInstitutional Arrangements Institutional Arrangements
(Cont.)(Cont.)
Strategic priorities and Strategic priorities and sustainability drive aidsustainability drive aid
Information - Costs, PerformanceInformation - Costs, Performance
Mechanisms for Mechanisms for PrioritizationPrioritization
Mechanisms for Mechanisms for PrioritizationPrioritization
Case: AustraliaCase: Australia Aggregate Fiscal Targets and Aggregate Fiscal Targets and
Strategic ObjectivesStrategic Objectives Medium-term Costs of Medium-term Costs of
Competing PoliciesCompeting Policies
0
5
10
15
82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93
Australia: Medium-term Costs of PoliciesAustralia: Medium-term Costs of Policies
Mar 84
May 85
Nov 85Dec 86
Aug 89
Real growth rate
Projection dates
Mechanisms for Mechanisms for PrioritizationPrioritization
Mechanisms for Mechanisms for PrioritizationPrioritization Case: AustraliaCase: Australia
Aggregate Fiscal Targets and Strategic ObjectivesAggregate Fiscal Targets and Strategic Objectives Medium-term Costs of Competing PoliciesMedium-term Costs of Competing Policies Arena for Contesting and Coordinating Policies Arena for Contesting and Coordinating Policies
- Cabinet: Strategic Priorities- Cabinet: Strategic Priorities
- Line: Spending-Savings within Hard Budgets- Line: Spending-Savings within Hard Budgets Ex-post EvaluationEx-post Evaluation
OutcomesOutcomes: :
- Deficit 4% GDP to surplus of 2% GDP- Deficit 4% GDP to surplus of 2% GDP
- Shifts in intra and intersectoral composition- Shifts in intra and intersectoral composition
- Greater funding predictability- Greater funding predictability
Australia: Changes in Expenditure Composition, 1983-94
Australia: Changes in Expenditure Composition, 1983-94
-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
Defense Educ Health Socsec Transp. Other
Spending
Saving
Net change
Source: Dixon, 1993 : 32
$ Millions
Net change
New spending
Savings from existing policy
Sector-wideSector-wide Clear Strategy and Policy FrameworkClear Strategy and Policy Framework Program FocusProgram Focus Sector Expenditure ProgramSector Expenditure Program Medium-term PerspectiveMedium-term Perspective Consistent with Macroeconomic Consistent with Macroeconomic
FrameworkFramework Donor CoordinationDonor Coordination
Sector-wide Approaches as Sector-wide Approaches as Performance Based BudgetingPerformance Based Budgeting
Sector-wide Approaches as Sector-wide Approaches as Performance Based BudgetingPerformance Based Budgeting