PFM Efficiency gains in Egypt

one percent efficiency gain in Egypt’s budget for 2009 would yield $637 million dollars, enough resources to build 40,000 schools, pave 4,500 kilometers of highway, or recruit an additional 600,000 doctors.

- "Public Financial Management Reform in the Middle East and North Africa: An Overview of Regional Experience"

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The Winner is Kosova.

Budget Circular

MTEF

Law on Public Finance

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Prioritization of Expenditures in Tanzania

Some of the institutional weaknesses for creating fiscal space;

budget classification: the country’s budget classification, reporting and accounting systems do not allow for the ready identification and monitoring of public infrastructure expenditure—part of which is either conducted outside of the central government or not systematically recorded in the government’s accounts;

project selection: a 2006 audit of procurement practices of 20 public entities found significant weaknesses, with compliance only at 39 percent of procurement regulations. Several recent high profile scandals have also highlighted the weaknesses in this area, in particular regarding the lack of transparency in the bidding process and problems enforcing large government contracts;

budget execution: in 2006-07 only about 50 percent of central and local governments’ development expenditure was executed. While the creation of the Tanzania National Roads Authority has helped to boost budget execution rates for major trunk road projects from around 50 percent in 2002-03 to over 75 percent in 2006-07, execution rates for regional and local road rehabilitation projects remain around 40 percent (Ministry of Infrastructure Development, 2007); and

regulatory frameworks: the AICD estimates that hidden fiscal costs resulting from underpricing and other inefficiencies in the power sector amounted to nearly 2.5 percent of GDP between 2001 and 2006 (Briceño, Smits, and Foster 2008).

If infrastructure investment is a key development priority, governments should look to ensure that it is given adequate emphasis in their expenditure planning and budgeting procedures. Over the past decade or so, a number of governments in both developed and developing countries looking to alter the intersectoral allocation and the impact of public expenditure have made effective use of two public financial management tools:

expenditure reviews: comprehensive program reviews designed to improve the efficiency of public expenditure and to create fiscal space on the expenditure side of the budget have become a regular feature of the budget process in countries such Canada, Chile, France, the Netherlands, South Korea and the United Kingdom. Box 1 discusses the UK experience with using expenditure reviews to put greater emphasis on public investment within their resource allocation process over the past decade;

-medium-term expenditure frameworks (MTEFs) which enable governments to “lock in” savings identified in lower productivity/priority sectors and reallocate them to higher productivity/priority sectors over a period of years. MTEFs are a now a common feature of budgeting systems in Africa and a number of countries have made effective use of them to alter the sectoral allocation of expenditure over a number of years. For example, in Uganda, the government’s most recent National Budget Framework Paper envisages a real reduction in expenditure on security, justice and governance from 39 percent of the national budget in 2008 to 36 percent in 2011 to allow for a scaling up of pro-poor expenditure on rural development, energy, road infrastructure and human development over the next 3 years.

Typical issues with MTEFs

Some of the issues with MTEF development in Cape Verde;

Some progress has been made in the preparation of the sectoral MTEFs, but this process is still in its infancy. International technical assistance and training is being provided to the MFPA and sector ministries, in order to help them develop the global and the sectoral MTEFs. Four ministries have started the elaboration o f the MTEFs: Health, Education, Agriculture, Fisheries and Environment, and Social Protection. The Ministries o f Education and Agriculture, Fisheries and Environment, and Social Protection already have a first draft. The MTEF on Health i s behind schedule and that is primarily the result o f lack o f capacity and shortage o f human resources at the sectoral level. Coordination on the MTEF exercises between DGO, DGP and the sectors has improved but needs to be strengthened. A lack o f reliable information on the revenues’ forecast and on donor financed projects, prejudices the budget preparation and slows down the implementation o f the MTEF.

The 2006 budget was linked to the PRSP and to the MTEF. The four ministries that have produced MTEFs prepared the 2006 budget in accordance with their MTEFs. This is an important improvement but is still in a very early stage. Regarding the alignment with the PRSP programs and sub-programs, they are now linked to the budget and the SIGOF functionalities allow for their management in a coherent way. The 2006 budget has been prepared in a decentralized way with line ministries, directly entering data on the SIGOF system and it has also been prepared for investment by program and sub-program. Moreover, sectors are shifting progressively to a results-based management approach.

Overall the implementation of the MTEF has not been properly conducted, undermining the effectiveness of this instrument. The preparation o f the sectoral MTEFs overlapped with the preparation o f the global MTEF and the interaction between the two processes was insufficient. The global MTEF set ceilings which were not respected as truly upper limits and, as a result, the global MTEF was revised to accommodate the revised ceilings. Furthermore, PRSP and MTEF are not in line, as again the preparation started at about the same time, and thus PRSP does not emerge from the MTEF. This complicates the budget preparation and execution as there is not a clear and consistent directive. In order to use the MTEF as an instrument that defines the overall fiscal strategy, the global MTEF has to work as a top down envelope setting hard budget constraints that define line ministries spending plans. Without a hard budget constraint, derived from the global MTEF, trade-offs between sectors/ministries are not faced and policy is not disciplined by availabilities.

The foregoing suggests that the Government has yet to develop a coherent vision of how a MTEF should be developed, and the role it can play in supporting the Government’s fiscal strategy, ensuring that allocations to sectors and ministries reflect political priorities, and that projects and programs are adequately and reliably funded through the budget. It will be especially important for the Government to develop a sound MTEF based on the budget process in the years ahead, to maximize the development value of public spending, but also to put the country in a better position to manage any future external shocks, given the central role o f the fiscal policy in adjustment in Cape Verde.

The linkage between government departments and donors is strengthening. A first memorandum o f understanding was agreed upon in February 2005, and signed in April 2005 by the Budget Support Group, consisting o f the World Bank Group, the European Union and the Kingdom o f the Netherlands. A revised version is being prepared and two new donors are joining the support group: the African Development Bank and Spain. The DGP is the liaison between the various departments and donors.

MTEF Advice for Laos- World Bank

From Public Expenditure Review, 2007;

In the longer term, an MTEF will be an important tool for planning and budgeting in Lao PDR. The country’s short-term budgeting horizon is a deficiency, and the progress that has been achieved so far is valuable, both as capacity building and as an end in itself. However, moving beyond the current very simple MTEF would be premature at this stage and might divert attention from more pressing and fundamental problems associated with the annual budget cycle.

Elsewhere in the report;

Deficiencies in the budget nomenclature, which remains overly detailed, does not include a functional classification. The nomenclature also muddles administrative and economic classifications in a way that is not compatible with the IMF’s internationally recognized “Government Finance Statistics” (GFS) classifications.

The short-term horizon also is an issue. A Medium-term Expenditure Framework (MTEF) was included in the NGPES, but it was more of an aggregate fiscal framework than an expenditure framework and did not include expenditure breakdowns by ministry, province, centralAoca1 level, sector, or sub-sector.

Related;
CFAA 2002- Summary Report, Detailed Report

Public Expenditure Review 1997, Volume 1, Volume 2