Transcript The PRSP and Its Contribution to Medium

Medium-Term Budgeting in
Moldova
Progress and
Future Challenges
February 2009
A. Context
Objectives in Introducing the MTEF

In 2002 Government introduced MTEF to bring a
more strategic approach to budget planning

Objectives
 Multi-Year Outlook – Budgets need to be planned within a
medium-term context.
 Policy Linkage – the National Public Budget is a key
instrument in realising government policies.
 Comprehensiveness – medium-term budget planning
covers all public revenues and expenditures.
 Realism – government programmes must be planned
against a realistic assessment of available resources.
 Prioritisation – programme planning must recognise
budget constraints, include cost analysis, and allow for
reallocation of resources to higher priority areas.
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Institutional Context

Central Policy Development and Coordination
• national plans and policies prepared without reference to fiscal
consequences and constraints
• strengthened central policy coordination process established in
2007 linked to National Development Strategy
• greatly improved linkage between policy and budget processes

Relatively strong finance ministry
• established record of sound fiscal management
• expenditure planning inertial rather than strategic

Line ministries
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•
•
•
small and limited secretariat function
weak policy and budgeting roles
ministry reorganisations started in 2006
policy units only established in 2007
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Economic Context

MTEF reforms took place in a evolving
economic environment:
Revenue growth has been driven by economic
recovery and the rapid rise in remittance
financed imports.
Over the last five years the National Public
Budget has increased by more than 50% in
real terms.
Revenues have increased from 34% of GDP in
2003 to 40% of GDP in 2008 and are high
compared with other countries of similar levels
of economic development.
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B. Institutional
Framework
MTEF/Budget Integration

MTEF is comprehensive of
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•
•
•
State Budget,
Local Government Budgets,
Medical Insurance Fund and
Social Security Fund

MTEF is updated every year to maintain 3 year
planning horizon

MTEF sets the strategic framework for budget
preparation

MTEF forecasts are prepared before budget
guidelines and ceilings issued

MTEF first year allocations for State Budget =
annual budget law.
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MTEF – Linking Policy and Budget Processes
Sequencing
Jun-Nov
Strategies
and
Programme
Priorities
National
Development
Strategy
Update
MTEF
Dec-May
(strategy and
forecasts)
(updated and
finalised in
September)
Sector Resource
Ceilings and
Spending
Priorities
Detailed
Resource
Allocations
May-Sep
Resource
Framework for
Public
Expenditure
Annual
Budget
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MTEF calendar




January – process launched - MTEF Concept Paper
January – March – Macroeconomic and fiscal framework
updated, elaboration of strategic expenditure plans linked with
NDP policies, resource ceilings determined
April – MTEF Forecasts Document presented to the
Government (Government Committee for Strategic Planning),
which approves the expenditure ceilings.
June - August – annual budget elaborated. Macro-fiscal
framework and MTEF forecasts. MTEF document finalized
and included as an explanatory document accompanying
submission of the Annual Budget Law to Parliament.
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Stakeholder Involvement

Parliament
 MTEF provides the policy context for discussion of annual
budget
 a more strategic approach to budget debate in Parliament is
required

Government (Committee on Strategic Planning)
 discusses and approves MTEF Concept Paper (Jan/Feb), MTEF
Forecasts (Apr/May) and final MTEF Document (Sep)
 also responsible for approving National Development Strategy
Update and Action Plan

MTEF Coordination Group
 a consultative body in the decision making process
 wider participatory approach (Parliament, Presidency,
Government, public authorities, trade union, syndicate)
 detailed discussions and regular meetings
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MTEF Organization Chart
Government (Government
Committee for Strategic Planning)
MTEF Coordination Committee
Working Group for
Macroeconomic Framework, Fiscal Policy
and Resource Framework
Responsible – Ministry of Economy
Responsible – Ministry of Finance
Sector Working Groups
(education, health, social
protection, agriculture,
culture, defense etc.)
Responsible – Relevant
Line ministries
Working Group for Public Expenditure
Policy and Priorities
Responsible – Ministry of Finance
Sector Finance Divisions
of the MoF
Public investment
Wage bill
Budget Synthesis Department within Ministry of Finance
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C. Main Elements
Core Elements of the MTEF
Analysis
1.
2.
Macro-Fiscal Analysis and Forecasts
Analysis of Cross-Cutting Budget
Issues
3.
Ministry Expenditure Strategies
4.
Expenditure Ceilings
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Macro-Fiscal Analysis and
Forecasts

Key players: MoF, Min. of Economy and Commerce, NBM

MEC uses multiple macroeconomic models and produces at
least 2 scenarios


MoF has its own fiscal model, based on macro indicators,
forecasts main types of revenue and generates overall
resource framework available for expenditure. It also
divides resources between components of NPB
Level of deficit is forecast taking into account resource
availability and cost of debt servicing
Challenges Ahead: improve macroeconomic forecasting,
increase accuracy of revenue forecasts, obtain better
information for forecasting donor financing
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Analysis of Cross-Cutting Resource
Issues



Wagebill analysis --> set limit on wagebill and
concept on reducing employment in public sector
is elaborated
Public Investment  grater emphasis on public
investment, significantly more allocation for PI,
especially for infrastructure
NDP Priorities -> better link b/w policy and
resource allocation, does not rely on foreign
assistance to finance new policy incentives
Challenges Ahead: Ensure all policy decisions are
made with financial coverage, adopt improved
procedures for PI selection and prioritization
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Ministry Expenditure Strategies

Gradual roll-out and sectors covers: from 3 sectors to
12 sectors at present (budget coverage is about 72%)

Sector Working Groups

Format and contents of the strategies
• typically a lead ministry in each sector.
• provide basis for coordinating expenditure planning
across the sector
• linked with new budget program classification
• highlights link with NDP
Challenges Ahead: build policy, planning and
budgeting capacities in ministries following recent
reorganisation.
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Inter-Sectoral Expenditure Priorities
and Ceilings


Preliminary ceilings set at the beginning of
process (based on outer year ceilings from
current MTEF rolled forward by one year)
Final ceilings (by budget, sector and ministry
within indicative breakdown for wagebill and
capital spending) set before preparation of
annual budget
Challenges Ahead: clarify inter-sectoral priorities,
more rigorous methodology for setting ceilings,
more realistic costing of plans, focus on budget
effectiveness and efficiency
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D. Conclusions
Impact on the Budget Process and
Negotiations

The budget now involves a strategic phase before
detailed annual budget is prepared

MTEF makes annual budget easier and faster to
prepare



Expenditure Ceilings have led to more realistic budget
proposals, by encouraging ministries to focus on
“needs” instead of “priorities “
All legislative amendments, required for policy
implementation (agreed under MTEF ) are approved
by the Parliament before annual budget is approved
MTEF offer strategic background for Budget readings
in the Parliament.
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Sustainability of the MTEF Reforms




Demand and ownership – political and
administration.
Unified – MTEF is the budget planning cycle.
Integrated – policy and budgeting cycle is
emerging
Inclusive – collaboration among many
stakeholders.

Evolving – annual review and improvement.

Capacity – not reliant on external consultants.
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Key Challenges Ahead




Managing the impact of the global crisis
Reform of line ministry institutional
structures and capacities
Making better use of existing resources
Building the credibility of the outer year
ceilings
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Ministry of Finance
of the Republic of Moldova
MTEF’s documents available in
English :
 http://minfin.md/en/middlecost/
Russian:
 http://minfin.md/ru/middlecost/
More information (instructions,
methodological guidance organizational
framework, etc.) is available in Romanian:
 http://minfin.md/ro/middlecost/
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