Practitioners in Economic Policy

Profile of Maria Ramos;

Maria Ramos and her Finance Department colleagues were charged with putting in front of South Africa’s ministers and cabinet viable options for reaching economic targets without jeopardizing financial stability. Ramos says nothing was sugar coated.

“In 1996 we had to put a fiscal policy in place that had to say to the nation that if we wanted to achieve a sustainable economic growth path of 6 percent, this was how we would get there. That was our starting point. People often think that the program of growth, employment, and redistribution was about cutting the deficit. That’s not the question we asked. We asked: ‘If we want 6 percent growth, what do we need to have in place to achieve it?’

“Very quickly, we came to the conclusion that you can’t get to 6 percent growth when you have a position of fiscal instability, because you can’t borrow your way out of a crisis. We didn’t want to go to the IMF—we didn’t think that was going to be a sustainable solution—and we were very close to that. South Africa had no reserves—in fact we had a negative reserve position because we had a net open forward position at that point of about $26 billion. We had debt-to-GDP ratios of around 50 percent, we had debt-servicing costs reaching the point where they were unsustainably high. So the fiscal position was pretty precarious: the metrics didn’t add up.

“So if you want to get growth there, you have to fix the base. And fiscal sustainability is hard to achieve and it’s easy to lose. That’s what we placed before policymakers, before the cabinet. And I have to say that, as hard as it was, when faced with that, I never came across a politician from the president down who said: ‘No, we can’t do this because it’s going to be unpopular for me.’ What’s been remarkable for me as a civil servant to see was that politicians from the top down were able to say ‘What is in the best interests of our country? It’s going to be painful, it’s going to be hard.’ Those investments continue to pay off today.”

Getting Economic Reforms done- Uganda Experience

My six-year reform experience was like driving a reform bus on a long journey, eliciting passengers along the way to a shared destination

-Florence Kuteesa

An interesting book on Ugandan Economic Reforms;
Uganda's Economic Reforms -Insider Accounts;

1. Overview of Ugandan Economic Reform since 1986
This synthesis chapter draws out the main findings from the individual chapters. After much agonizing over the direction of economic policy, three fundamental reforms between 1990 and 1992 —legalization of the parallel foreign exchange market, liberalization of coffee marketing, and the establishment of fiscal discipline — brought macroeconomic stability. Together with trade liberalization and privatization, Uganda was set on the road to a liberal, capitalist economy. Concern that growth was bypassing the poor led to a focus on poverty reduction between the mid 1990s and early 2000s. Measures such as decentralization, the Poverty Eradication Action Plan, the Medium Term Expenditure Framework, the Poverty Action Fund, and Sector Working Groups succeeded in attracting increased aid and channeling it into poverty reduction. Sound economic management and a clear commitment to poverty reduction together explain why Uganda was the first beneficiary of both HIPC debt relief and the shift from project aid to budget support. The resulting increase in public service delivery contributed to rapid poverty reduction. The pace of reform has eased since 2002. The chapter concludes by emphasizing the crucial importance of political support for successful economic reform.

2. Institutional and Political Dimensions of Economic Reform
This chapter provides the institutional and political context for the technical reforms discussed in subsequent chapters. It summarizes the abortive attempts at reform of the Obote II government and discusses changes made by the NRM to the economic institutions it inherited in 1986. The long, heated debate over the direction of economic policy was resolved with the merger of the finance and planning ministries and the establishment of fiscal discipline in 1992. The critical role of the President in key economic decisions such as fiscal discipline, the commitment to poverty reduction, and the sale of Uganda Commercial Bank is highlighted. The role of Parliament has increased with the restoration of democracy. The chapter also examines how the finance and planning ministry became one of the strongest in Africa.

3. Exchange Rate, Fiscal, and Monetary Policy
This chapter identifies three phases in Uganda's transformation from a war-torn economy into one that has sustained rapid growth and low inflation since 1992. There were two major reforms in the early 1990s. First the parallel foreign exchange market was legalized in 1990. Following the merger of the finance and planning ministries in 1992, a sharp fiscal adjustment established fiscal discipline and reduced inflation to single figures. The second phase was one of unconventional macro policy for the rest of the 1990s. With little scope for monetary policy, low inflation was sustained largely by tight, short-term fiscal control. In the 2000s, financial deepening and budget reforms have provided a foundation for a more orthodox mix of fiscal and monetary policy.

4. Public Service Restructuring and Pay Reform
This chapter discusses two elements of Public Service reform of particular relevance to the overall economic reform programme the restructuring of the Public Service and pay reform. It highlights the halving of the size of the Public Service between 1990 and 1995 and the subsequent increase following the Poverty Eradication Action Plan commitment to increased provision of basic public services. It also looks at the collapse in real wages during the 1980s and examines progress towards paying public servants a ‘living wage’.

5. Tax Reform
By 1990 tax revenue in Uganda had declined to 5% of GDP. Revenue was heavily dependent on export taxes, which discouraged exports. This chapter discusses the policy and administrative measures taken during the 1990s to make the tax system more transparent and productive. Export taxes were replaced by import taxes, which were progressively reduced to relatively low levels. The most significant single reform was the introduction of Value Added Tax in 1996. Despite initial resistance by traders, strong political support enabled VAT to take root. The Uganda Revenue Authority has spearheaded revenue administration reform since 1991. This chapter discusses the key drivers in setting up an autonomous revenue agency, the successes and challenges in revenue administration, and what could have been done better. It also looks at the challenges and lessons of implementing VAT in an environment of low tax compliance.

6. Planning and Development Budget Reform, 1990–1995
The NRA victory triggered substantial aid flows, accounting for over half of public expenditure. However, the planning and budgeting systems had collapsed,; so donors largely did their own thing and much aid was ineffective. This chapter describes the measures adopted to establish some order and bring government policy priorities to bear on donor allocations and public expenditure generally. It discusses the key reforms, designed to attract increased aid and improve the effectiveness of all public expenditure: the merger of the finance and planning ministries; consolidating responsibility for sector policy, planning, and budgeting in a single division; capturing aid in the plan and budget; integration of the plan and development budget; establishment of internal review processes and the challenge function; and management of counterpart funding. Aspects of Uganda's ‘legacy’ are highlighted, such as: the Paris Declaration principle that aid should align behind government plans; the PIP as the forerunner of the Poverty Eradication Action Plan and poverty reduction strategies; linking plan and budget; and Public Expenditure Tracking Surveys.

7. The Poverty Eradication Action Plan
Uganda was a pioneer in designing a holistic, comprehensive development plan targeted at poverty eradication. The 1997 Poverty Eradication Action Plan was the original prototype ‘poverty reduction strategy’, which is now a prerequisite for countries wishing to access HIPC, World Bank, IMF, and other donor support. This chapter shows how the PEAP developed from the Public Investment Plan of the early 1990s through an extensive consultative process. It discusses the influence of the PEAP on resource allocation and sector policies. It describes how the PEAP has evolved during subsequent revisions, the changes in the institutional framework for planning and monitoring, and the efforts to maintain the relevance of the PEAP over time.

8. Budget Reform and the Medium Term Expenditure Framework
The initial budget reforms from 1992, aimed at establishing macroeconomic stability and credibility of the budget, focused on the short term. This chapter shows how, once these immediate targets were achieved, the finance and planning ministry gradually implemented a Medium Term Expenditure Framework. This was intended to facilitate a realignment of public expenditure in line with the political priorities set out in the Poverty Eradication Action Plan and to improve the predictability of public funds, while adhering to the aggregate resource envelope. The chapter examines trends in sector allocations, to assess whether the MTEF facilitated significant shifts, and looks at progress towards improving the predictability of the budget. It also discusses the pioneering measures taken to promote public and political consultation on the budget. Other reforms discussed include the virtual Poverty Action Fund, output oriented budgeting, fiscal transfers to local government, and public expenditure reviews.

9. Sector Wide Approach and Sector Working Groups
Once fiscal discipline had been restored and basic expenditure management systems established at the central level, the finance and planning ministry increasingly turned its attention to expenditure at the sector level. This chapter discusses the evolution of Sector Working Groups and Sector Wide Approaches. It shows how responsibility for drawing up sector policy and expenditure priorities was increasingly delegated to SWGs. These were led by sector ministries but included representatives from other government institutions in the sector, the finance ministry, donors, and civil society. They assumed an increasingly important formal role in determining sector allocations in the budget process. The chapter shows how SWAps emerged as a mechanism which fused the policy, planning and budget processes through the development of inclusive sector investment plans, budgets to implement those plans, and joint monitoring mechanisms. They helped develop common donor approaches within sectors, improving alignment to government policies, and promoting the use of government systems.

10. Poverty Monitoring
Political concern that rapid economic growth did not appear to be benefiting the poor led to an increased focus in the mid-1990s on ensuring public expenditure was pro-poor and on monitoring poverty trends. This chapter discusses the measures adopted to increase the poverty focus of the budget. It also looks at the institutional arrangements and the methods used to monitor poverty trends. Household survey data shows that between 1992 and 2006 Uganda experienced one of the largest and fastest reductions in income poverty recorded anywhere in modern times. Participatory Poverty Assessments, which were pioneered in Uganda, and other non-quantitative methods illustrate the multi-dimensional nature of poverty and the unevenness of progress towards poverty reduction.

11. Statistics Reform
Many of the economic reforms were dependent on reliable statistics. Like many other government systems, statistics collection virtually collapsed during the 1970s. This chapter shows how systems for collecting, analysing, and disseminating official statistics have been rebuilt since the late 1980s. It starts with a historical review of statistics institutional development before going on to look at the main categories of statistics currently collected, and at their analysis and dissemination.

12. Debt Management and Debt Relief
This chapter shows how the rapid accumulation of debt from 1986 led to a debt crisis in 1990. It discusses the debt management strategies adopted following the crisis to ensure that it would not recur. Paris Club rescheduling and commercial debt buy-back helped reduce the stock of arrears. However, this increased the share of multilateral debt, which could not be rescheduled, to 75%. Uganda was in the vanguard of the debt relief movement of the 1990s, which culminated in the Highly Indebted Poor Countries initiative, and was the first country to benefit from HIPC. This chapter shows how sound economic management and a strong commitment to poverty reduction underpinned the case for multilateral debt relief in a country where debt was vividly crowding out social expenditure. It also looks at Uganda's role in the HIPC initiative and shows the impact of debt relief on debt service costs.

13. Aligning Aid with Government Fiscal Objectives
This chapter evaluates efforts by the government to encourage donors to shift their aid into budget support and to ensure that aid flows were consistent with the government's macroeconomic objectives for fiscal policy and its strategic expenditure priorities. Aid to Uganda rose sharply in the second half of the 1990s, funding a major expansion of public expenditure. This was accompanied by a shift in aid modalities, from projects to budget support, in line with government preferences. Uganda was in the forefront of the rapid growth in budget support, which has been one of the most profound developments in the aid business in recent years. The chapter examines the key institutional reforms intended to encourage the shift towards budget support and looks at some of the problems encountered with aligning budget support with the Medium Term Expenditure Framework. It also examines the reasons for government's strategic objective of reducing the budget's dependence on donor aid.

14. Fiscal Decentralization
In the 1990s Uganda embarked on an ambitious programme of political, fiscal, and administrative decentralisationization reforms as a means of rebuilding and expanding the delivery of basic services, and fostering local democracy and accountability. This chapter examines the roots and evolution of the reforms, focusing on the fiscal side of decentralisationization. It examines how a rapid expansion in central grants helped support the expansion of basic services, the tension between centralised funding and local autonomy, the stagnation of local taxation, the incentives for and establishment of public financial management capacity, and the evolution of planning and budgeting systems. It concludes by asking whether the decentralisationization process was managed in a way that helped or hindered the expansion of basic services.

15. Financial Management and Accountability Reform
Macroeconomic stability and increased growth were achieved in the early 1990s despite very weak financial management and accountability systems. This chapter shows how these weaknesses became even more pronounced following the adoption of the 1995 Constitution, decentralization, expanding budgetary demands, and the requirements of the Poverty Eradication Acton Plan, among others. Strengthening public financial management and accountability was critical if progress was to be sustained and if donors were to be persuaded to channel more aid through government systems. Yet in 1998 the entire government had just two professional accountants. The chapter presents the key reforms adopted to strengthen financial management and accountability, looking at changes in the areas of the legal and policy framework, institutional capacity building, and processes and systems, particularly the introduction of the Integrated Financial Management System.

16. Privatization and Parastatal Reform
By the late 1980s Uganda's large public enterprise sector had become a major drain on the Treasury and a bottleneck to economic growth. To address this situation the government embarked on a major privatization and public enterprise reform programme in 1993. By 2005 the programme was largely complete and most public enterprises had been privatized, reformed, or closed down. This chapter discusses the key issues, reforms, and institutions that were central to the divestiture and reform of public enterprises. The implementation process is discussed along with the various methods adopted, the numbers that were divested and the proceeds from the process. The chapter identifies the key challenges faced during the process and assesses the impact of the reforms on issues such as government finances and post-divestiture performance. It concludes with an appendix on utility reform.

Does talking about ownership and capacity makes sense?

An informative piece on the PFM technical assistance provided to Burundi- one of the poorest countries in the world.

A PFM strategy and its corresponding action plan for the period 2009–11, was adopted by the Council of Ministers in May 2009. It has been designed to address PFM weaknesses identified in particular through FAD diagnostic work since 2005, the Public Expenditure Management and Financial Accountability Review (PEMFAR) finalized by the World Bank in February 2008, and a Public Expenditure and Financial Accountability (PEFA) assessment performed by the European Commission (EC) in December 2008....

While promising initiatives have been recently implemented, including the installation of a Steering Committee chaired by the Minister of Finance, and of nine technical groups to implement the PFM reforms, the leadership of the reforms process within the MoF and to coordinate TA provided by donors will need to remain a point of attention....

Because of the slow pace of progress, signs of discouragement (from the experts), de-motivation (from the staff), and impatience (from the donors) are appearing, especially if it is considered that the “easiest” part of the reform has been done—strategy, action plan, laws, and decree in particular—and that the next step being a full and consistent implementation of all the provisions and actions developed in these various documents.

My tentative thoughts on the piece-

-IMF and World Bank needs to run the show, rhetoric of ownership is important, but when there is acute capacity constraints, lets face it, IMF should be the demanding advocate.

-What's an effective central finance agency? Their finance minister needs to have clarity on this important issue.

-PEMFAR of the World Bank appears a decent standard document- on MTEF they recommend Tajkistan approach which may not be the best approach. If any one can provide a link to their PEFA please do so,

-Most importantly we encourage the Fund to write more similar pieces on country case studies.

Related:
Managing Public Finance in Burundi- USAID;

The Ministry of Finance currently comprises some 250 employees (not including customs). Its workforce is thin and unmotivated at higher levels (except for some of the top officials), and drifting and underskilled at lower levels. The general erosion of staff and skills in the Burundi government, not only because of the conflict but because of the much higher compensation offered in Rwanda more recently as well, is well known and has affected the Ministry of Finance as much as the rest of the government. Issues of capacity building in the Ministry of Finance are thus no different than systemic capacity building and civil service issues in general.

Burundi, Economic Reform and Financial Transparency Assessment Program (2005-2006)

The Greeks of Burundi

EU Relations with Burundi

Burundi- Country Statistics

Assorted on Burundi Economics

Some items about the economy of Burundi from recent IMF reports and Government's letters of intents;

Fiscal policy is also geared to addressing debt sustainability concerns. Given Burundi’s debt burden, external financing of the budget should be strictly limited to grants and highly concessional loans.

The ratio of the government wage bill to GDP will decline less than anticipated in the medium term owing to higher payroll in the priority sectors, which are key for achieving progress toward the Millennium Development Goals. The ratio should remain below 11 percent of GDP toward the end of the program in 2011.

To contain the wage bill, the government will continue to draw on the findings of the Public Expenditure Management and Financial Accountability Review (PEMFAR) prepared jointly by the World Bank and the government of Burundi. In particular, with the census of civil servants having been completed and payroll management transferred to the Ministry of Finance, the government will proceed with the audit of the payroll to ensure that the calculated wages are indeed on a sound legal basis and that there are no abuses. This audit should precede the exercise to harmonize wages. To increase spending in the priority sectors, the government will implement a rationalization plan for nonpriority spending, in accordance with the PFM strategy.

Burundi will seek only concessional external financing or grants. The government will not contract nonconcessional foreign debt and will ensure that all loans contracted have a grant element of at least 50 percent. To make certain that the concessionality threshold is respected, the government will ensure compliance with the provision that the Ministry of Finance has the exclusive right to negotiate and sign external loans.

National Accounts
Serious deficiencies in real sector data handicap analysis and economic management. National accounts are compiled infrequently. Source data on agriculture, the most important activity, is inadequate. The Statistical Office (ISTEEBU) responsible for producing economic statistics and preparing national accounts has weak capacity. Since 1998 Burundi has reported annual national accounts estimates to the Fund with about a three-month lag, which are derived from a macroeconomic projection model maintained by the Ministry of Planning and Reconstruction. Recently, ISTEEBU has developed, with AFRISTAT’s help, a set of provisional national accounts for 2005, the new base year. This is a major effort because the last national accounts data were from 1998.

For Discussion: How reliable are their national accounts estimates and other statistics?

Burundi Fact of the Day

GDP per capita is about $139, and only 18 percent of the population has food security. The IMF and World Bank have cancelled more than 90 percent of Burundi's debt, worth about $1.4 billion.

-Burundi's Debt Relief Savings to Go to Food, Health, Schools

Who is Chalmers Johnson?

The idea of the Developmental State is most closely associated with Chalmers Johnson and his seminal analysis of Japan’s very rapid, highly successful post-war reconstruction and reindustrialization. Johnson’s central contention was that Japan’s quite remarkable and historically unparalleled industrial renaissance was neither a fluke nor inevitable, but a consequence of the efforts of a Developmental State. A developmental state was one that was determined to influence the direction and pace of economic development by directly intervening in the development process, rather than relying on the uncoordinated influence of market forces to allocate resources. The developmental state took it upon itself the task of establishing substantive social and economic goals with which to guide the process of development and social mobilization. The most important of these goals, in Japan’s case, of course was the reconstruction of its industrial capacity, a process made easier by widespread consensus about the importance of industrial development.
The emphasis has to be placed on the influence over the direction and pace of development by directly intervening in the development process, rather than relying on the uncoordinated influence of market forces.

- Address by the Minister in The Presidency: National Planning Commission, Trevor Manuel, at the Wits Graduate School of Public Development Management

For Discussion: Where's South Africa heading?

More roles for the World Bank in Africa

Economic policy in Africa in light of the crisis- I would recommend Ali Mansoor's ( Mauritius finance secretary) comments;

• Emphasis on O&M 
  
• Countercyclical social Safety nets
  
• Invest on environment
  
• Mauritius approach to restructuring firms during the crisis
  -IFC needs to be more proactive
  

Shanta has more.

Development Podcast of the Day- Shanta Devarajan

With Shanta Devarajan and Sheila Page. Discussion of the impact of the economic crisis on developing countries, the food crisis, moves towards a new Free Trade Area for Africa, and the Mo Ibrahim Prize for good governance.

Listen to the podcast

For Discussion: Shanta mentioned that poor African countries can be provided with additional loans through the IBRD window, for infrastructure and productive investments.

How do you rate a Finance Minister?

Finance Minster Dr Ezra Suruma has been honoured as the best finance minister in Africa for the year 2008 by The Banker magazine.

The Banker, established in 1926, is a UK based global intelligence financial magazine that investigates, exposes and passes expert comment on critical developments in the global banking sector. The Banker is published monthly and its ninth Year of the Awards were sponsored by Qatar Financial Centre.

An article in the January edition of the magazine described Dr Suruma as a minister who has overseen a year of strong growth in the face of a series of economic head winds....

Acting Secretary to the treasury Keith Muhakanizi said - at the award giving ceremony on February 9 at Serena Hotel - that Uganda had a consistent economic growth but came out to perform strongly in 2007/08.
“Our real market GDP shot to a record 9.8 per cent fuelled by a robust expansion in the construction, telecom and services sector,” he said...

Mr Muhakanizi said this had been complimented with cautious micro-economic policies rated the best in the world and opting for a private sector led economy that granted Uganda a global B+ placing it among the best economies in Africa...

The criterion for the assessment of the Bank of the Year Awards is conducted among 148 countries and the result is built around detailed questionnaires provided by banks.

This year 740 banks from 150 countries submitted questionnaires to Financial Times Magazine. Peter said their global judging team reflects not only on the latest results, growth rates and performance data over the period contained in the questionnaires but also analyses all available material examining technology, acquisitions and key strategic developments.

According to the Magazine, Uganda scored highly having kept inflation under 7 per cent from 6.8 per cent in 2007. Banks remained well capitalised with an average ratio of liquid assets to deposits of 51 per cent - which saw foreign banks flock into the market - and deposits increased by 26 per cent.

-Suruma named Africa’s finance minister

via IMF's PFM blog.

For Discussion: How do you rate a finance minister? By GDP growth, fiscal space, public debt? I say have a look at the budget speech.

From Suruma's latest budget speech;

Mr. Speaker, I have now come to the end of this year's budget speech. I have put on record Uganda's rate of economic growth which averaged 8.9 percent in real terms in the last three years (10.3 percent in Financial Year 2005/06, 7.4 percent in Financial Year 2006/07 and 8.9 percent in Financial Year 2007/08). I am sure that you Mr. Speaker and honorable members deserve to be congratulated that during your tenure of office our country registered the highest rate of economic growth ever recorded in our history….

Mr. Speaker, the world has marveled for long at the achievements of the Asian tigers.. I hope you will permit me Mr. Speaker to express the hope that the world will soon recognize that there are also .African tigers. and Uganda is certainly one of them....

Mr. Speaker, I would have wished to do better. Indeed during the past several months I have had to bear and absorb attacks and angry protests of many Members of Parliament, Ministers and Heads of Departments who wanted and deserved more money than they got. I am sure we all recognize and understand that this is not a personal matter. These are the real sacrifices we must collectively bear to transform Uganda from poverty to prosperity. I therefore want to ask for forgiveness and understanding from so many people whose requests I have not been able to address adequately in this budget. I ask you to be patient and remember that even in our homes we cannot provide for every single need and desire that our families may want.

Tanzania Civil Service reform experience

Reform efforts in this area started in 1991 with the Civil Service Reform Program (CSRP). This program, implemented between 1991 and 1999, was designed to reduce the size of both the civil service and the wage bill to contain costs while strengthening managerial capacity and improving the organizational structure. The main achievements were a decline in the number of central government personnel from a peak of 355,000 in 1992 to 264,000 by 1998/99 (Figure 11); better control over employment levels using a personnel database and a computerized payroll system (the wage bill exceeded budget by 40 percent in 1994 but by only 2 percent in 1999); and recomposition of the aggregate wage bill by rationalizing and decompressing the pay structure and consolidating allowances into basic salaries.

The next stage of reform, the Public Service Reform Program (PSRP), spanned 2000–07. The focus changed to improving delivery of public services. While improvements were made in some areas, progress was slow. Positive areas included the introduction of a performance management system and more decentralized policy making. However, poor service delivery persists in many areas, accountability remains weak, and there are limited value-for-money assessments. The PSRP sought to adjust salary scales to attract and retain qualified staff. For this purpose, it incorporated the medium-term pay policy, which had been adopted by the government in 1999, aimed at gradually increasing civil servant remuneration over the following five years, as well as enhancing the salaries of key professional, technical, and managerial personnel. The policy envisaged a gradual increase in the wage bill of about half a percentage point of GDP by 2003/04, together with a further decline in the size of the civil service. Its implementation was uneven, but the significant wage increase introduced with the 2006/07 budget (reflecting in part a consolidation of allowances previously recorded separately from wages) put remunerations close to the targeted level. Even so, retaining quality staff remains challenging. A further substantial salary increase was granted in 2008. At the same time, the wage bill increased by more than originally envisaged, as the government recalibrated its employment strategy to achieve the MDGs and substantially expanded the hiring of education and health workers.

To enhance performance and accountability and better align its operations with MKUKUTA, a second phase of the PSRP has recently been launched. It emphasizes building the capacity of government entities to formulate policies; decentralizing human resources processes and systems; retaining quality staff through adequate remuneration and incentives; institutionalizing performance management systems; and increasing public sector accountability. The government is still aggressively hiring teachers and health care workers to address pressing social needs. A revised Medium Term Pay Policy is under preparation.

-Tanzania: The Story of an African Transition

Quote of the Day

The central banker from Hell?

Your critics blame your monetary policies for Zimbabwe's economic problems.

I've been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.

Related;
John Robertson comments on Dr Gideon Gono’s book ‘Casino Economy: Extra-ordinary Measures for Extra- ordinary Challenges.’

The state of GFS in Malawi

The accuracy and reliability of the data are affected by inadequate source data. A key shortcoming in this area is inadequate system of recording source data. In addition, there are serious quality problems, including data inconsistencies, that complicate program monitoring:

• While tax revenue data are received in a timely fashion, it is not always possible to reconcile them with deposits in the Malawi Government (MG) Account.

• Nontax revenue, including capital revenues collected by line ministries are not properly accounted for in the fiscal reports prepared by the Ministry of Finance.

• Data on recurrent expenditure suffer from serious shortcomings partly related to insufficient bank reconciliation between expenses records prepared by line ministries and financing information prepared by the Ministry of Finance. Line ministries submit spending reports to the Ministry of Finance based on recorded expenses, while the Ministry of Finances estimates expenses based on funding data (from the Credit Ceiling Authority). At times, there are sizable discrepancies between these two sources of data for both wages and other recurrent transactions—to some extent reflecting the widespread practice of reallocation across budget lines.

• Domestically financed development expenditure estimates are based on funding released to line ministries, and estimates on externally funded expenditure are based on reported project grants and loans. Owing to differences in timing and financing modalities (e.g., some donors require prefinancing of expenditure before reimbursement), there are substantial differences between the flow of expenses and corresponding financing data. Thus, there are substantial errors in the reporting of capital spending. In addition, many donor projects are still not incorporated in the budget, and hence the corresponding expenditure is not captured in government finance statistics. Some externally funded development expenditures are likely recurrent and reported capital expenditure therefore overstated.

• Data on expenditure arrears are likely incomplete, as reporting from the Commitment Control System appears to be only partial, and ministry level data are not consistent from report to report.

• The budget classification and chart of accounts may be adequate for some administrative, economic, functional and program classifications. An output-oriented activities-based budget classification (ABB) is used for the presentation of the budget. However, pro-poor expenditures that have been protected in line with the PRSP are only identified in the ABB classification. As no bridge table exists to map the ABB classification into the program classification used for expenditure reporting and accounting, pro-poor expenditures cannot be monitored.

• Financing estimates are based on monetary and debt data, rather than on government records of financing. Reporting on treasury bills directly issued to the RBM at times has been slow.

8. The authorities have received significant technical assistance from the Fund and other donors to strengthen expenditure monitoring and reporting, accounting, and statistical reporting, but results have lagged. The government has pledged to strengthen public financial management and fiscal reporting, and renewed efforts are being made to establish a work plan, including utilizing donor technical assistance more effectively.

9. Government finance data are not reported for publication in the Government Finance Statistics Yearbook (GFSY) or the International Financial Statistics (IFS). An August 2005 and August 2007 STA mission that visited Lilongwe reiterated the importance of continued efforts to implement the Integrated Financial Management Information System (IFMIS), and encouraged the authorities to improve the coverage and sectorization of government financial operations and to correctly classify transactions according to international guidelines. The mission proposed, and discussed with the authorities, a migration plan and timetable to adopt the GFSM 2001 methodology.

-Malawi: Request for a One-Year Exogenous Shocks Facility Arrangement - Staf Report

Related;
Malawi Ministry of Finance
Report on MTEF process

Headline of the Day

Zimbabwe: Currency Facing Extinction;

A senior government official said Zimbabwe had approached South African finance minister Trevor Manuel and South African Reserve Bank governor Tito Mboweni with a proposal that they rescue the Zimbabwean economy by extending the common monetary area of rand into Zimbabwe. It currently encompasses South Africa, Namibia, Lesotho and Swaziland.

Similar proposals have been made by Steve Hanke, Cato Institute Senior Fellow and Professor of Applied Economics at Johns Hopkins University, who advocates the creation of a currency board to end Zimbabwe's spiralling inflation, and by Tomaz Salamao, executive secretary of the Southern African Development Community, SADC.

Tomaz has reportedly suggested that Zimbabwe's depleted foreign reserves be topped up with the South African currency and that Zimbabwe be allowed to join the rand monetary area.

The Zimbabwe government, invoking its sovereignty mantra, initially rejected the suggestion, but IWPR has learnt that it has backed down under the pressure of the imploding economy and proposes issuing Zimbabwean dollars that are fully backed by and convertible into rands at a fixed rate.

Under this plan, the currency board will initially be capitalised by South Africa and the rand will be allowed to circulate legally in Zimbabwe.

"The rand would effectively prop up the Zimbabwe dollar," which has become almost worthless, said a government official.

The ultimate aim would be to stabilise the exchange rate of the Zimbabwe dollar and curb hyperinflation, enabling the country to buy foreign exchange and continue to import essential goods.

MTEF Presentation Formats- Tanzania

For Discussion: How can it be improved?

Illicit from Madagascar

Illicit sex tourism in Madagascar

India and Africa

Mittal, Sanjiv Ahuja, Dr Mohamed Ibrahim

Why is Africa poor and what (if anything) can the West do about it?

Want to know more, follow this course.

Namibia - Budget Calender

The MTEF has the following key characteristics:

• It sets out the macro-fiscal framework for the coming three years, reviews government fiscal policy objectives, and provides expenditure ceilings for the operational and development budgets by Vote.
• The allocation of resources and expenditure priorities are set in line with Namibia’s Vision 2030, and National Development Plans.
• The MTEF is supported by MTPs prepared for each Vote. The MTPs set out, for each Vote, the total resources allocated to each Program, the main activities to be carried out under each Program, and how the Programs will help to achieve the ministries’ objectives which contribute to the overall national development objectives. The expenditure plans are linked to socioeconomic variables in the PEMP.
• The MTEF covers a period of three years, but is revised every year. It thus serves the purpose of threeyear rolling budget and also an annual budget. The Votes also include statements on financial operations of some special funds and state-owned enterprises falling under the respective ministry.
• The MTEF is regarded as the main budget document, and detailed information on the budget estimates is presented in the accompanying books—Estimates of Revenue and Expenditure and the Three-Year Rolling Development Budget.

The MTEF in Namibia, in principle, could offer several major advantages:

• Its medium-term perspective enables a rationalization and improvement in the sectoral and intra-sector allocation of resources in terms of Government priorities.
• The MTEF expands the budget coverage by including donor and other extra-budgetary funds.
• It integrates the operational and development budgets and relates recurrent costs to capital expenditure.
• It puts increased emphasis on performance as programs are expected to be planned and costed with a view to produce outputs that in turn should achieve objectives.

In practice, the MTEF process is still in its early stages and falls short of its potential as a tool for rational allocation of resources, review of priorities, and decision making. In particular:

• While the MTEF is presented by Vote Programs (through the MTPs), the detailed budget estimates for each Vote continue to be shown by Divisions and Sub-divisions (economic items). The expenditures are classified and recorded by Divisions and Sub-divisions alone. Thus, there is as yet no explicit link shown between the Vote-level Programs in the MTEFs and Votes, Divisions and Sub-divisions, and thus the report on the budget implementation through the Appropriation Accounts and the Audit Report. Hence it is not possible to compare what was supposed to have been spent on programs with what was actually spent.

The MTEF process is currently largely top-down, concentrating on the aggregate expenditure amounts. The bottom process for feeding back into the MTEF ceilings is limited; this also hampers the Government’s ability to use the budget as a strategic tool for achievement of its development goals.
• Expenditure allocations still seem to follow an incremental basis; estimates for the two out years do not reflect reprioritization or genuine costing of programs, but seem to be derived by applying uniform growth factors.

Most Colorful Website for a Central Finance Agency

Ministry of Finance - Namibia

Related;
Statement by an IMF Staff Mission to Namibia;

"Against this background, a counter-cyclical fiscal stance is appropriate in the fiscal year 2008/09 (ending March 31), and sound fiscal management in recent years provides scope for some fiscal easing to allow for increased outlays in priority areas such as rural infrastructure, education, and poverty reduction. However, the magnitude of the easing implied by the 2008/09 budget-the fiscal balance would swing by some 6.5 percentage points of GDP-seems considerably larger, even given counter-cyclical considerations. Moreover, the projected large increase in expenditures raises concerns about the ability to ensure high quality of spending. It will be important to integrate the annual fiscal programs into sustainable multi-year budget expenditure plans.

"The mission shares the view that further development of the domestic financial sector would facilitate broad-based economic growth, but is concerned that the new pension fund and insurance company regulations would be difficult to implement and risk distorting capital flows at the expense of lower returns and higher risk to domestic savings. Consideration could be given to a greater focus on market-based alternatives to financial market development, including a broadening of the range of available domestic assets. More broadly, it is important to preserve the stability of the financial sector and the mission welcomes the Bank of Namibia's prompt steps to curb and control non-licensed deposit taking operations and pyramid schemes.

"The National Development Plan 3 provides a helpful framework to achieve high sustainable growth, and to reduce poverty and inequality. Continued improvement in labor productivity and private sector competitiveness will be critical in order to facilitate economic diversification and lower the high unemployment rate.

Working Papers from the Central Bank;

•Central Government Debt Sustainability
•Public Exp Management in Namibia
•Monetary Policy Transmission Mechanism in Namibia
Private Equity - Lesson for Namibia

Namibia's social safety net : issues and options for reform

Namibia - Public expenditure review

Namibia: Selected Issues and Statistical Appendix

Namibia: Report on Observance of Standards and Codes - Fiscal Transparency Module

For Discussion:What do you think of their MTEF? With 500 pages it appears too detailed to be effective? See the Fiscal ROSC for a summary of the current features of the MTEF.

How to be an expert in PFM?

The assignment is for an ex-post evaluation of the Institutional Strengthening of the Ministry of Finance of Sierra Leone. This project was intended to provide capacity support to the Ministry of Finance and Economic Development, given the low capacity at the Ministry at the end of the war. Following the monitoring mission undertaken by the EC, an external mid-term evaluation was carried out at the request of the EC delegation and complying with provisions in the Financing Agreement.

- The Expert should have a relevant master's degree in Financial Management.

- Public Financial Management experience (10 years) in strategic planning, financial programming, institutional and organisational development and evaluations, project performance measurement.

- Minimum of 10 years experience in developing countries.

- The expert must have previous experience in project evaluation in the Economic sector, preferably with regard to EC funded projects. S/he must be familiar with the logframe and with evaluation of institutional strengthening programmes.

Related;
Ministry of Finance/UNDP Launch joint programme support to MTEF