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SCP- PERFORMANCE BASED BUDGETING Country Case Presentation SRI LANKA Country paper-Sri Lanka 1 The Country Sri Lanka is an Island situated in the Indian Ocean, off the base of the Indian Sub Continent Total Land Area - 65,610 sq.km 435 km long and 225 km wide Commercial Capital – Colombo Total Population: 20 million; Multi ethnic & multi religious GDP Rs. 3,578 billion Country paper-Sri Lanka 2 Key Economic Indicators: Key Economic Indicators 2004 2005 2006 2007 GDP Growth Rate (%) 5.4 6.0 7.7 6.8 Unemployment Rate (%) 8.3 7.7 6.5 6.0 Investment/ GDP (%) 25.0 26.5 28.7 29.5 GDP (nominal) Per Capita $ 1,030 1,197 1,355 1,617 -8.2 -8.7 -8.0 -7.7 Budget Deficit/ GDP Ratio (%) Sect oral Composition GDP Employment Agriculture (%) 16.8 32.2 Industries (%) 27.0 26.6 Services (%) 56.2 41.2 Country paper-Sri Lanka 3 Current Budgetary System The current budgetary system of the country is a mixed system Block Budgeting Parliament approves the block budget MOF fixed ceilings for sectors, line Ministries (Recurrent + Capital) Flexibility is given to line Ministries to decide their budget within the ceiling Programme Budgeting Cluster based Expenditure Head, Programmes, Projects, object code Country paper-Sri Lanka 4 Current Budgetary System- ctd Performance Medium-term Budgetary Framework Vision, Mission and KPIs for each line Ministry have identified. However, linkages between these outcome indicators and actual budget figures are still weak. Line Based Budgeting Item Budgeting Expenditure figures are available for administrative and monitoring purposes Country paper-Sri Lanka 5 Medium-term Macro Economic Framework (2006-2010) Indicator 2006 2008 2009 2010 GDP at market price – (Rs bn) 2939 4307 5047 5923 GDP growth (%) 7.7 7.0 7.5 8.2 Total investment 28.0 30.0 31.5 32.5 -1478 -1545 -1664 -1881 Current Account Deficit -5.3 -4.0 -3.9 -3.9 Revenue 16.3 17.4 18.0 18.5 Expenditure 24.3 24.4 23.9 23.7 Overall budget deficit -8.0 -6.8 -5.8 -5.2 Current Account (US $ mn) Country paper-Sri Lanka 6 Legal Framework Constitution- empowers parliament Finance ActAppropriation ActFiscal Responsibility Act Budget deficit shall not exceed 5% of GDP Total liabilities should not exceed 85% of GDP Financial Regulation Country paper-Sri Lanka 7 Vision for a new Sri Lanka Agriculture Economic Infrastructure Education Health Environment Public Administration Reforms Livelihood and Social Protection Urban Development and Human Settlements Tourism Labour Science and Technology Sports and Culture Development of Conflict Affected Areas Macro-economic vision Country paper-Sri Lanka 8 The document contains overall development policies, strategies, goals, priority areas for next ten year period. Aimed at raising the GDP growth rate in excess of 8% and sustain this rate for 6 years. (9-10% growth thereafter) Raise per capita GNP to US$ 3960/- by 2016 elevating SL’s position as a middle income country. Improve growth prospects with equitable development in the country, with special emphasis on the needs of lagging regions. Enhanced resource allocation for identified strategic priorities in rural development, education, skills development, health, roads, irrigation & delivery systems. Raise Investment/ GDP ratio to a level of 32 to 38% during next 10 years. www.treasury.gov.lk Country paper-Sri Lanka 9 Medium Term Budgetary Framework 10 Year Plan MTEF 1 MTEF 2 MTEF 3 Budget estimates are now presented over 3 year horizon. The present MTBF is from 2008 to 2010 Project/ Programme 1 2008 Estimate 2009 2010 Projection Projection 2 etc Country paper-Sri Lanka 10 Budget Calendar Preparation of the MTBF and approval of the Hon. Minister of F&P for the Budget Circular- June Briefing note to Cabinet on budget outline and prioritiesJuly Issuing the budget circular calling for proposals- July Review of budget requests with line Ministries- August Presenting the Appropriation Bill (Cabinet + Parliament)October Budget Speech- November Release of cash flow statement- December Country paper-Sri Lanka 11 ACHIVEMENTS TOWRDS PBB 1. MTBF - 3 year Budgetary framework - Cluster Basis approach - More Resources for Priority Sectors - Performance Targets - Expenditure Ceilings (Flexibility ) 2. Managing for Development Result (MFDR) - Whole - of Government Approach - Led By the Ministry of Plan Implementation - Aim is to enhance aid effectiveness Country paper-Sri Lanka 12 Country paper-Sri Lanka 13 WHAT WE DID ? and HOW? 1. Government Level Country paper-Sri Lanka 14 2. Agency Level MPI facilitate each ministry to - Form a committee as change agents - Develop a Agency Result Framework and Result Card with Mission, Thrust Areas , Goals, and Key performance indicators (KPI) - Report Progress on KPIs Using Score Cards # electronic Project Monitoring System # 3 Color Traffic lights MPI evaluate achievements Quarterly and report to the Cabinet Completed 3 Phases # Phase I – 5 Ministries # Phase II – 12 New Ministries # Phase III – 18 more Ministries ADB’s Redness Assesment toolkit is use for identify capacity gaps in the Ministries Country paper-Sri Lanka 15 Country paper-Sri Lanka 16 Country paper-Sri Lanka 17 Gaps in Public Finance Management and Area for Reforms Gaps Reforms Recommended No linkage between 2 process of Budgeting and MFDR systems Top level Leadership (Political/Official) Deficiencies in Current Accounting System Move towards Resource based Accounting System Capacity Gaps Awareness and Capacity building Policy Gaps Integrated National policy framework Inadequate Discretion for the line Ministries More Flexibility Absence of reward system Country paper-Sri Lanka Introduce reward system 18 CHALLENGES Make a linkage between existing 2 systems of Budgeting and MFDR Over coming Capacity gaps Changes in Attitudes and Mindsets Improving availability of statistical information Hard Budget Constraints Tribunal environment Country paper-Sri Lanka 19 Thank you Country paper-Sri Lanka 20