Tongo Medium Term Budget Framework

Tongo- Budget Process

Putting Foreign Aid in Macro-Fiscal Frameworks

I found the following from the Mauritius budget call circular to be useful- putting aid into overall sectoral ceiling is really a feature of mature MTEF. Mauritius budget process is certainly very advanced.

Financial resources expected from development partners (grant or loan funding) have already been factored in the macro-fiscal framework used for working out spending limits and do not therefore constitute an additional source of funds available for spending.

For Discussion: How's foreign aid incorporated in MTEF's in other countries like Albania, which have mature MTEF's?

Related:
Albania- Albania Public Expenditure and Institutional Review 2001


REPIM

Wanted - Costing Experts!

Cost accounting is relatively overlooked area in Central Finance Agencies in low income countries- which I think aught to be an important area if we want to progress to a comprehensive MTEF. The following job advertisement for an expert to Brazil, sounds interesting;

The objectives of the project are to (i) implement the public cost system in phases, starting with four pilot entities (health, education, prisons, and social assistance); (ii) develop a cost methodology adequate to the public services at the state level; (iii) organize seminars, courses, and other training events to educate the state officials on how to prepare and use cost information; (iv) document the cost methodology used in the existing projects; (v) prepare guidelines for external dissemination of cost data; and (vi) prepare progress reports.

Recommended Reading

IMF- Selected Issues- Albania;

Comparative Inflation Performance in Southeastern Europe and Albania

Fiscal Rules for Sustainable Public Finances In Albania

Assorted on Sectoral MTEFs- Education

Education Sector MTEF- Vietnam

Education Financial Planning in Asia
A series of case studies on Implementing Medium-Term Expenditure Frameworks in 6 countries -- the Republic of Korea, Mongolia, Nepal, Tajikistan, Thailand and Viet Nam

MTEF for Developing a New Education Strategy- Lesotho

MTEF Portal - UNESCO

Performance, the Upper Level in Management as Part of an MTEF

Filling a $9 billion hole- an MTEF for New York?

One way to save New York's finances;

Years of decisions dictated by political expediency have led to a chronic budget imbalance that threatens our short-term solvency and long-term economic health.

Fortunately, Lt. Gov. Richard Ravitch has put forward a plan to provide sorely needed oversight and discipline. He proposes to create a financial review board that would certify the budget only if it’s balanced. The board would employ a smart, multiyear strategy that would weigh significant cuts in spending against limited borrowing. And it would require Albany to adopt generally accepted accounting principles, the standard bookkeeping rules used in business.

According to the report, 'The State needs a multi-year financial planning process directly linked to the annual budget process.'

Another suggestion;

Finally, our short-term cash crunch would be eased if the state refinanced the interest rates on its tobacco-settlement bonds. Given current low long-term interest rates, this is preferable to Lt. Gov. Richard Ravitch’s plan, under which the state would borrow $2 billion a year over three years for operations, leading us down a perilous road of annual borrowing.

Related: Citizen's Budget Commission

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

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?

By a Consultant for another Consultant?

Senior Budget Adviser- Timor Leste (deadline October 6)

From the scope of work;

-Where requested, report to and advise the Senior Management and on matters of budget design and execution;
-Develop the management and leadership skills of the National Director, focusing in particular on:
clear comprehension of his core roles and responsibilities;
identifying how directorate workflows fit into these roles and responsibilities;
effective delegation;
realistic workload assessment and planning; and
inculcating some basic concepts of team-building.
-Support the development and execution of the national budget in line with the budget guidelines;
-Assist in the integration of the services provided by the Ministry to Line Ministries in the areas of budgeting, planning, treasury functions and procurement.
-Build capacity within the budget and expenditure review units with a view to, over time, a greater percentage of the work of the units can be undertaken independently by national staff,
-Build the capacity of local staff to oversee the management of line Ministry budget processes;
-Support the development of new systems and processes as the budget design is gradually computerised onto the FMIS and devolved to line agencies;
-Provide advice and support to the implementation of the performance budgeting element of the FMIS;
-To instill and further develop a client focus culture in the budget and expenditure review units.
-Provide advice on the budgetary impacts of various government initiatives to the Minister for Finance;
-Provide holistic/ strategic advice on ministry issues, as requested; and,
-In consultation with the Professional Development Program director, identify training needs for staff in the National Directorate of the Budget and Planning and develop strategies to secure the necessary skills needed to ensure the long term viability of the National Budget Directorate.
-Perform such other technical and inline functions as may be required by the Program Services Directorate or the Ministry of Finance.

I've to say good luck to the Budget Adviser.

Related;
Timor-Leste PEFA

A Balancing Act: Implementation of the Paris Declaration in Timor-Leste

East Timor- AUSAID

Timor-Leste: Reflections on the 10th anniversary of independence

Timor-Leste-World Bank

Assorted about budgets and transparency

Budget 2009: Lets Assume we have a Candle Opener (Australia)

OMB reveals transparency roadmap

The White House wants to make about 240,000 different sets of data available to the public over the next month. It took the first step Thursday by launching its Data.gov web site with 46 sets of data in 13 areas from 26 agencies.

New Zealand budget 2009: Downgrade alert?

Is Australia's Treasury independent?

The setting for the budget speech- India

Planning Commissions are supposed to disappear

Now South Africa's incoming President Jacob Zuma is moving Manuel to a new job, a cabinet-level post heading a National Planning Commission (NPC) that is key to Zuma's plans for overhauling much-criticised public services.

"The NPC will be responsible for strategic planning for the country to ensure one national plan to which all spheres of government would adhere," Zuma said in announcing the change.

"This would enable us to take a more comprehensive view of socio-economic development in the country."

Manuel's successor at the finance ministry, former tax boss Pravin Gordhan, is also a respected figure credited with improving tax collection during his time at the helm of the revenue service...

Appointed Nelson Mandela's finance minister without any formal economics training in 1996 at the age of 40, the trained civil engineer announced a budget surplus a decade later -- the first in 30 years.

Stringent fiscal policies under his watch are also credited with steering South Africa's banks safely through the global meltdown.

But while widely applauded, Manuel has not shied from unpopular choices and has frequently raised the ire of South Africa's powerful political left who criticise his tight controls over the budget and views on inflation targeting.

-Manuel handed S.Africa planning commission post

For Discussion: What do you think of the creation of this new planning commission in South Africa? In terms of PEFA ranking for medium term fiscal planning, the country gets a B grade- not a bad score?

Related; Development of central fiscal institutions;

Planning ministries are quite common in developing countries, but become less common as countries develop. Across the world, there has been a shift from traditional detailed planning, as reflected in 5-year plans and similar instruments, towards strategic coordination. This coordination is increasingly done by finance ministries or by prime ministers’ offices. This is often accompanied by a gradual integration of planning, strategy development and budgeting into a single, coordinated process, and a unified, strategic budget document. Planning ministries were often involved in project preparation, but this function is shifted to line ministries as their capacity develop. Macroeconomic forecasting is often transferred to the emerging macrofiscal and macroeconomic departments in the finance ministries, and statistics are increasingly produced by independent statistics agencies.

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

Publi Financial Management reforms in Cape Verde

The Cape Verdean authorities consider it a priority to strengthen debt management.
Notable progress has already been made:

• Debt sustainability analyses (DSAs) are now conducted annually. The Ministry of Finance and the Bank of Cape Verde (BCV) recently conducted a joint DSA applying the Bank-Fund Debt Sustainability Framework. The exercise benefited from assistance from Debt Relief International (DRI) and UNDP. The next DSA will be conducted in early 2009 at the beginning of the preparation of the 2010 budget to help determine the borrowing envelope consistent with debt sustainability.

• Internal controls have been substantially improved. Software from the Commonwealth Secretariat was upgraded and now records state guarantees as well as debt. With the assistance of the Crown Agents, the system will be fully operational by year-end. The software will allow for currency decomposition of the debt stock, be linked to the Government’s Financial Control Network (SIGOF), and allow for compilation of debt data in the new chart of public accounts (PNCP).

The authorities intend to further strengthen their debt management practices:
• The institutional framework for debt management will be adapted. The organic law of the Ministry of Finance will be amended to give the debt management office a clear mandate, and the budget execution law will be changed to allow the Treasury to manage debt efficiently.

• A new debt management strategy will be embedded in the procedures manual of the debt management office.

• The domestic market for Treasury securities will be developed. With MCC financing, Treasury securities will be easily available for purchase by nonbanks to make the market more efficient and liquid and reduce borrowing costs.

• Capacity in the debt office will be reinforced. A new financial analyst was hired in September, and another will be hired in 2009. Portugal trained four staff in debt management in September.

Source;Cape Verde: Fifth Review Under the Policy Support Instrument - Staff Report

Iraq IFMIS to be operational in 2009

We are making progress in modernizing public financial management (PFM). The Board of Supreme Audit (BSA) has completed the audit of the final accounts of the federal budget for 2005 and the audit of the final accounts for 2006 is underway. We have submitted the final accounts of the federal budget for 2007 to the BSA in October. The audit reports will be submitted to the Council of Representatives and published. We have also adopted, in consultation with the Fund and the World Bank, a three-year action plan that identifies priority measures to modernize PFM, notably as regards budget preparation, execution and reporting; cash management; public procurement; cash management; and the accounting framework. We will step up our efforts to put in place, in cooperation with USAID, the renewed Iraq Financial Management Information System (IFMIS), in order to make this system fully operational in 2009.

14. We have completed about 25 percent of the data collection for the census of public service employees at end-October, but finalization of the project is being delayed due to technical problems. We will make all efforts to have the census completed by end-January 2009. After completion of the census we will move swiftly to eliminate ghost workers and adopt an action plan to computerize the payroll, as a first step for a comprehensive civil service reform. In parallel, the BSA has begun a project to verify the personnel records in line ministries, in order to clean up the existing payroll.

-Iraq: Letter of Intent and Memorandum of Economic and Financial Policies

Related;

Integrated Financial Management Information Systems: A Practical Guide

Tuvalu to get an MTEF

ADB to Help Tuvalu Strengthen Public Financial Management and Good Governance

“The Improved Public Financial Management Program will assist Tuvalu with fiscal stability, improve public enterprise performance, and boost business and public confidence in the government’s financial management and governance systems,” said ADB Country Specialist Emma Ferguson.

ADB is providing a grant of $3.24 million sourced from the concessional Asian Development Fund (ADF).

Related;

Tuvalu: Capacity Development for Public Financial Management

The Government of Tuvalu (the Government) has adopted a set of five performance benchmark indicators (PBIs) developed jointly by it, the Asian Development Bank, the Australian Agency for International Development, and New Zealand International Aid and Development. The PBIs track the achievement of the stated social outcomes with a focus on improved financial management and fiscal consolidation. The PBIs are as follows:
(i) Benchmark 1.1. The Government’s recurrent expenditure each year should not exceed the total of its recurrent revenue plus a sustainable Tuvalu Trust Fund (TTF) distribution (consolidated investment fund drawdown).
(ii) Benchmark 1.2. The target minimum value of funds retained in the consolidated investment fund should not be less than 16% of the maintained value of the TTF at the beginning of the TTF year, to ensure that sustainable distribution is available to help finance annual budgets.
(iii) Benchmark 1.3. The Government’s total debt liability, both domestic and external, should not at any time exceed 60% of the gross domestic product, as specified in Te Kakeega II.
(iv) Benchmark 2.1. In 2008, the Government will increase its budgeted non-salary expenditure on basic education by at least 5%.
(v) Benchmark 2.2. In 2008, the Government will increase its budgeted non-salary expenditure on primary and preventative health services by at least 5%.

See also there Development Coordination Matrix (page 59)

MTEF Presentation Formats- Tanzania

For Discussion: How can it be improved?

Feasibility study of PFM regional training center

For the MENA region

MTEFs in the Pacific

Strengthening Public Financial Management in Pacific Developing Member Countries;

These and other efforts have produced positive results in several aspects of PFM. For instance, public auditing in the Pacific region overall has advanced substantially in the past decade, with numerous audit backlogs cleared and a significant improvement in audit quality. Likewise, the application in the Pacific of the Public Expenditure and Financial Accountability (PEFA) PFM Assessment Framework reveals that planning and budget processes are rated satisfactorily (B+ average). Given their potential to better link policy with budgets and to enable better decision-making, it is not surprising that emphasis has been placed on developing medium-term expenditure frameworks (MTEFs), but some reviews caution countries to implement MTEFs only when basic financial controls and annual budgeting are working well. However, Pacific island countries rate poorly in terms of budget execution, with payroll controls scoring a C- average and internal audit scoring a D+ average. A Pacific auditor-general reported recently to their public accounts committee that “Put simply, sometimes there is nothing to audit because the records are non-existent” … “there was a lack of bank reconciliations, poor documentation supporting the transactions, lack of physical stocktakes … and ineffective budget controls. [… Moreover, the Office has been] auditing accounts and records that are sometimes six years old.”15 The situation described is not uncommon in the Pacific.

The ideal macro-fiscal policy department?

IMF gives some suggestions for institutional strengthening of Armenian Ministry of Finance;

The Armenian authorities are taking steps to establish a strategic, coordinated, and multi-year approach to macro-fiscal policy. Recent measures include strengthening public financial management systems, further institutionalizing the MTEF, and adopting performance-based budgeting over the next few years. In the last few months, macroeconomic projections and analysis have been strengthened with the use of fiscal impulse indicators for macro-fiscal analysis during the budget preparation. However, macrofiscal policy-making could benefit from a more elaborated analytical approach within an enhanced and supportive institutional environment.

28. Many countries have relied on strong macro-fiscal policy departments to strengthen their policy framework. Best international practice suggests that an effective macro-fiscal policy department should “own” its country’s fiscal framework by helping:

-Develop the fiscal framework, through forecasting, analysis, and monitoring of other
short- and medium-term fiscal policy developments;
-Monitor the implementation of the fiscal framework, by assessing budget execution and by linking it to developments in other macroeconomic areas such as growth and inflation; and
-Protect the fiscal framework, by advising the Minister on emerging near and mediumterm risks; flagging the need to undertake corrective actions; and identifying possible alternatives.

29. The core tasks of the department should be well coordinated and carried out in close cooperation with other units within the Ministry of Finance, and relevant institutions with related responsibilities. The value added of the department would come from adopting a topdown or big-picture perspective, thus helping the work of other units in related areas:

- By performing macroeconomic analysis the department should ensure an internally consistent macroeconomic framework.

- By performing fiscal modeling, forecasting and impact analysis, the department should develop multi-year fiscal projections under the baseline of unchanged policies that allows to superimpose the impact of any expected or potential policy change, all of which could be included in budget documents. This task requires sound fiscal forecasting to examine the linkages from the real, monetary, and external sectors into the fiscal sector.

- By aligning all aspects of fiscal policy toward the achievement of the government’s economic objectives, the department should help create a consistent framework in which policies and objectives are clearly linked. The appropriate path for the fiscal aggregates within a specific time horizon can be chosen to attain objectives such as macroeconomic stability, medium-term growth, poverty reduction, and fiscal and debt sustainability. The impact of these targets on macroeconomic stability can be examined through macroeconomic analysis, while the appropriateness of the fiscal path’s financing implications can be assessed through debt and fiscal sustainability analysis. Once a consistent set of policies is determined, revenue, expenditures and debt targets can be refined. A macro-fiscal policy department plays a key role in assessing this consistency, and also in identifying fiscal risks associated with the proposed policies, through the examination of alternative scenarios and stress tests.

- By monitoring fiscal performance, the department should analyze in-year budget outcomes—financing, revenues, and expenditures; help explain deviations of outturns from plans; assess the implications of such deviations for end-year forecasts; and determine whether some in-year corrective measures are required. It should also participate in the design of such corrective policies from the analysis of their impact on the short- and medium-term. Close coordination with other departments is required to avoid duplication.

Related;
Armenia MTEF

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.