Transcript MKUKUTA/PER Consultations 2007

MKUKUTA/PER Consultations
2007
DPG session MKUKUTA/PEFAR
22 May
PEFAR 2007 Components
PEFAR
2006 LGA
May
consultations
Core analysis
Budget
outturn
September
consultations
Scenarios analysis
Planning/
budgeting
PEFA parastatals
Sector/LGA analysis
CPAR parastatals
Main messages from PEFAR core
analysis
• Rising aggregate expenditure, high level of aid
dependency, expenditure needs for sustained
growth raise urgent questions of medium and
long term expenditure strategy
• Government has invested heavily in instruments
and processes for strategic allocation – Budget
Guidelines/MTEF, SBAS – but these are not yet
working effectively for strategic planning or as a
base for dialogue and accountability
Key challenges for medium term
budget strategy
• Aggregate and recurrent expenditure continues to rise
(28% GDP), posing serious question on sustainability
• Major increase in external financing (from 6% to 12%
GDP over past five years), need for a medium and long
term strategy for reducing aid dependency
• Effective absorption of aid will depend on making critical
strategic choices on expenditure composition
• Need to plan for
– increased investment expenditure, appropriate balance between
development/ recurrent,
– major focus on growth promoting expenditure, esp infrastructure
investment,
– medium term strategy on wage bill underpinning public service
reform
Medium term expenditure planning
- how well does the steering work?
Observations from budget preparation in FY07
• MDA budget requests highly unrealistic (on
average 150% above available resources, no
link to previous year’s decision on MTEF year 2)
• ‘Priority investments’ in Budget Guidelines
weakly aligned with existing sector plans (eg
transport)
• MDA initial submissions prepared in excessive
detail (eg ) absorbs scarce planning capacity,
distracts from key strategic decisions
How well does the steering work?
(part 2)
• Lack of early consistent policy direction: late
preparation of Budget Guidelines, key changes
between BG and MTEF (eg implementation of
consolidation of allowances in wage bill)
• Three years after introduction of Strategic
Budget Allocation System still no reporting on
actual expenditure by main MKUKUTA
categories (objective, target, activity)
• Track record on external financing projections
shows deviation of 4-5% GDP, FY07 projections
still heavily skewed to existing commitments
Problems with the MTEF
Existing MTEF has the following weaknesses
• Absence of clear Cabinet/political decision on strategic
priorities early in the cycle
• MDAs begin detailed budget submissions without
guidance on resource constraints and strategic priorities
• Excessively detailed budget classification for early
submissions
• Uncertainty on external financing within the resource
envelope
• Lack of a clear, user friendly published summary of the
MTEF as a base for accountability
• Lack of reporting on MKUKUTA/MTEF actual
expenditure
Strengthening the MTEF
• Scenario analysis
– early guidance on resource envelope,
– greater clarity on external financing,
– focus on key programs at MKUKUTA
objective/target level
– public debate on strategic allocation
Reporting on MKUKUTA
expenditure
• Since 04/05, SBAS has been GOT chosen
means of translating MKUKUTA into expenditure
plans and budget (objective, target, activity)
• GBS Annual review October 06 – GoT
committed next PEFAR will be based on SBAS
reports
• Assuming reports available shortly, analysis will
be carried out prior to next GBS annual review
• Analysis should combine assessment of outturn
with review of classification structure –
consultation with DP working groups will be
important
Key issues local government
• LGAs heavily dependent on central
government transfers: more than 90 per
cent of funding comes as transfers
• Tracking of funds to LGAs through
different channels is difficult
• Transfer of development funds to LGAs is
a challenge
• Balance between PE and OC transfers
questionable
Scenario analysis
• Objectives
• GoT perspective, rrelation to budget
process
• Implications for DPs/ DP working groups
Objectives
• Strengthen GoT capacity to translate the
MKUKUTA into a realistic MTEF
• Improve the transparency and dialogue on
moving from broad MKUKUTA objectives
to resource constrained strategic priorities
• Provide a framework for integrating
external financing into the MTEF,
addressing predictability issues on
medium term aid
GoT perspective
• Must be fully integrated with budget process,
directly linked to subsequent development of
detailed Budget Guidelines
• Budget Guidelines Committee should provide
oversight to ensure link to budget process
• Keep it simple : simplest option might be existing
MTEF resource as base case, second scenario
maps spending plans based on trend actual
external financing
• DP /consultant technical support can be useful
for background analysis, but scenarios must be
firmly rooted in MDA spending plans
Proposed work program for DP
working groups
•
•
June : Background note on resources and
issues for scenario analysis
July-September
–
–
–
•
reference group for sector issues on scenario
development,
analysis of MKUKUTA/SBAS expenditure reports,
comments on revised SBAS categories for
scenarios/BG
Group review of proposed MTEF financing
projections, update of results matrix
September : Participate in consultations on
GoT MTEF scenarios
Background note on resources and
issues
• Inventory/assessment of existing
resources on which sector scenarios can
be based (MKUKUTA costing, sector
expenditure plans, other existing/ongoing
sector analysis)
• Summary of key issues in the sector for
enhancing base case (existing MTEF) and
developing scaled up scenario