Building Budget Credibility

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Oct 28, 2013 (3 years and 11 months ago)

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1

Building Budget Credibility

Collaborative Africa
Budget Reform Seminar.

1
st

to 3
rd

December 2004




FARM INN, Pretoria,
South Africa

2

Outline


Background


Ownership of

Priorities


Predictability of
R
esources


Budget Should Deliver

with Minimum
deviations


Lessons Learnt


3

Background


PEAP defines government macroeconomic and
poverty policy objectives
: Economic
Management, Enhancing production,
Competitiveness, and Incomes, Security, Conflict
resolution and Disaster Management, Good
Governance, Human development


A credible budget should be consistent with
agreed PEAP priorities

and deliver projected
targets

.


4

Building budget credibility


Institutionalisation of a harmonised
framework to sustain a credible budget
through:


Identification and consensus and priorities
(Ownership)


Link Budget with agreed priorities(Assurance)


Predictability of resources (Trust)


Deliverance of budget with minimum deviation.


A framework that promotes synergy
between policies, legislation and processes

5

Ownership of
Priorities



Participatory approach: strategic role by stake
holders thru SWAP, working groups


National consultations take 18 months at
national , sectoral and local government levels


Action oriented research, studies on sector
specific,institutional and cross cutting issues
(operational efficiency, equity)


Outcomes of studies inform the decision making
process


Revision of PEAP ever three years


6

Trust level 1: Linking National
Budget to Agreed Priorities


Poverty focused & equity concern in
policies and programmes


Outcome & Output Orientation


MTEF


Budget
Consultations at national
,

local
government and sector level
s



Parliamentary involvement
(
Budget Act

2001)



Donor sub groups and PER

7

Se
ctor Wide Approach (SWAP)


Identification and agreement of Priorities
,
targets and monitorable indicators by all stake
hol
ders


Promotes intra
-
sectoral linkages and synergy
within the sector


Strategic allocation of resources


Facilitates monitoring and minimizes transaction
cost on behalf of the donors


Minimize on duplications and wastage




8

MTEF


The MTEF resource envelope is consistent with
macroeconomic objectives


The MTEF is three year rolling expenditure framework,
it prioritizing the expenditures within constrained
resources.


It enhances fiscal discipline and provides strategic
allocation of resources.


The MTEF operationalises the PEAP and SWAP at both
center and local government levels.


MTEF provides sectors with predictable and stable
projection of budget resources.


9

The Consultative Budget Process

Parliament

Cabinet

Line Ministries/

Spending Agencies/

SWGs/Donors

MFPED

National Budget Workshop

-
Indicative Sector Ceilings

-
Budget & SWG Guidelines

Preparation of Sector

BFP and Revised

MTEF Allocations

within the Ceiling

Cabinet Approval

of BFP/MTEF


Inter
-
ministerial

Consultations

Compilation of National BFP

And Updated MTEF

Submission of Indicative

Plan/MTEF

Finalisation of Budget

Allocations/MTEF

Final Budget

Approval

Budget

Speech

Preparation of Detailed

Budget Estimates

Oct
-

Dec

Jan
-

Mar

Apr
-

June

PER

April 1

June 15

May 15

10

Sectoral Shares in the MTEF: 1994/5
-
2005/6

Education

Health

Security

PA

Interest

JLO

Agric.

Water

11

PAF Expenditures 1997/98
-
2005/6

0

100

200

300

400

500

600

700

800

900

1997/98

(Pre
-
PAF)

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

Shs Bn

Other (Land Reform, Adult

Literacy, Restocking, LGDP)

Accountability

Rural Roads

Agricultural Extension and

Exports

Safe Water and Sanitation

PHC

Universal Primary Education

12

Trust Level 2:
Predictability of
Resources


Fiscal

Policy Objectives


Forecasting Resource envelope


Improving resource predictab
ility


Execution of the Budget

with minimum
deviations



13

Fiscal

policy objectives


Economic growth (7%). To fund the public goods and
services needed to run a modern state and meet the
objectives identified in the PEAP


Low inflation (no more than 5%). To maintain a fiscal
stance which is consistent with macroeconomic
objectives. To avoid unsustainable public debt


Competitive exchange rate


Foreign exchange reserves at least 5 months of imports


Growth in private sector credit. To raise domestic
revenues in a manner which does not distort incentives
for the private sector or discourage work and investment



14

Resource envelope


MTEF = Total Inflows (Tax and non tax
revenues + donor inflows)


Total
outflows ( external debt servicing)
-

(domestic arrears payments) .


MTEF
distributes

the resources into
secto
ral and institutional
allocations


Improving resource predictability



15

Composition of Resource Envelope

16

Domestic Revenues: % of GDP

1992/3
-
2003/04 (stagnating growth)

17

Enhance
Non Tax revenues as % of Domestic
Revenue and %GDP

18

Donor Commitment verses outturn


(
Budget Support

in
US$ millions)

19

20

Budget should Deliver

(Financial front)


F
iscal discipline by maintaining the agreed
budget domestic deficit

thru:


Manage expenditures within realized resources

(cash
budgeting)
.


Cut expenditures to match underperformance of domestic
revenues.


Reduce foreign reserves to match under disbursements of
donor funds


Supplementary expenditures are approved by
parliament


Ring fencing of priority expenditures


Enhance financial management, monitoring and
accountability


21

Budget should Deliver

(physical performance front)


Periodic monitoring of the PEAP (Poverty
assessment; House hold integrated
surveys, demographic survey, integrity
survey,National Service Delivery Survey)


Annual Budget Performance Report


District and sector reports on PEAP targets


National Integrated Monitoring and
Evaluation System

22

Lessons learnt


Homegrown responding to Emerging Issues


Substantial investment in awareness raising and
capacity and institutional b
uilding
or restructring


Budget

a Potential but Not sustainable Means
to All Political Aspirations: role of Govt
Intervention and Balancing spending between
social and productive sectors.


Targeted and Cost effective consultations versus
bottom up approach.


Measures to counter political interference
(
necessity for ring fencing the poverty priority
programmes
)


Clarity on Principles of collaboration

23

THANK YOU