Transcript Cambodia

Performance-Based Budgeting in
Governments
Public Financial Management
Reform Programme in Cambodia
Country Case Presentation – Cambodia
Singapore, 24 February to 08 March 2008
Content
1. Brief Background of Cambodia’s Public
Financial Management (PFM).
2. An analysis of gaps in PFM and areas of
potential financial reforms.
3. Public Financial Management Reform
Program (PFMRP).
4. Challenges and Issues in the way
forward.
1.
Brief Background of Cambodia’s Public
Financial Management (PFM)
• Before 1993, a sort of decentralised PFM
adopted, two-tier budget allocation: central
level & provincial level; focus on military
spending, continued budget deficit, increased
public debts
• Starting from 1993, a new financial system
has been introduced: Budget Line Item
• Centralised financial management system
has been adopted
• National Budget:
1.
Brief Background of Cambodia’s Public
Financial Management (PFM) (con’t.)
• Revenue:
- Domestic Source:
a. Tax Revenue:
a1. Import taxes
a2. VAT & other taxes
b. Non-Tax Revenue: Logging, fishery,
telecommunication, casino license & royalty,
privatisation of state enterprise, etc.
- External Source: Multilateral & Bilateral in form of:
a. Loans and
b. Grants
1.
Brief Background of Cambodia’s Public
Financial Management (PFM) (con’t.)
• Expenditure: (14.9% of GDP, year 2008)
– Recurrent expenditure (9% of GDP)
– Capital expenditure (8.2% of GDP, of which
62.2% financed by external sources)
– Debt services (Interest payment 0.7 of GDP)
• From 1993 – 2007 experienced budget
deficit.
2. An analysis of gaps in PFM and areas of
potential financial reforms
• Current PFM considered as an incredible
instrument of strategic and operational
management of public resources.
• Incomprehensiveness in formulation and
execution of budget
• Unrealism of the budget in term of forecasting
and debt management
• Weak tax and non tax revenue collection,
2. An analysis of gaps in PFM and areas of
potential financial reforms (Con’t.)
• Inadequate ability of resource managers in
the Executive Agencies to spend in
accordance with their budget allocation.
• Extra-budgetary spending.
• Poor procurement procedures.
• Poor coordination and decision making
within Ministry of Economy & Finance.
• Poor internal control.
2. An analysis of gaps in PFM and areas of
potential financial reforms (Con’t.)
• Unclear lines of accountability and
government roles, functions, and
responsibilities
• Weak accounting data and management
• Weak reporting for managerial and
performance management
• Weak internal and external auditing
• Weak and unaccountable budget
management
3. Public Financial Management Reform
(PFMR).
A. The launch of Public Financial
Management Reform Program.
• The Prime Minister of the Royal Government of Cambodia
commented in the foreword to the Public Financial
Management Reform Program (PFMRP) dated on 30th
June 2004 that there is an urgent need to strengthen PFM
and this was at heart of the Royal Government Rectangular
Strategy for Growth, Employment, Equity, and Efficiency in
Cambodia and that the PFMRP is consistent with SocioEconomic Development Plan 2001-2005 and the National
Poverty Reduction Strategy 2003-2005.
A. The Launch of Public Financial
Management Reform Program (Con’t)
Enhancing public financial management is a crucial
element for the strengthening of good governance, and
therefore the Royal Government of Cambodia has
formulated and established a clear vision of public
financial management, and the necessary steps toward
the achievement of the vision. The Royal Government
understands that the establishment of enhanced public
financial management will take many years and much
effort.
• Four ‘platforms’ were identified reflecting a staged
approach to development starting with, as Platform 1,
steps to make the budget more credible than it has
previously been.
B. Current Public Financial Management
Reform Program
• The reform strategy developed by MEF and endorsed by
the Prime Minister set an overarching framework for the
reform of public financial management systems in
Cambodia. It reflected three key elements.
• Firstly, the firm establishment of the leadership of the
strategy development and implementation process within
RGC. This importance of both political support and
leadership arrangements within the administration were
clearly recognised. Attention was paid to coordination
arrangements and the assignment of responsibilities
within the administration for implementing the different
activities. Furthermore, steps were taken to establish
clear, positive and efficient arrangements with the
development partners that would support the reform
process with both resources and advice.
B. Current Public Financial Management
Reform Program (Con’t)
• Secondly, attention was paid to the sequencing of
reforms. It was recognised that not everything can be
done at once, but also that some things need to be done
before others can work effectively. Sequencing cannot
be planned based on the importance of individual
technical improvements alone: Some must wait until
more basic things are put in place. To guide this
sequencing, potential activities were grouped in terms of
a series of Platforms with each Platform representing a
real and measurable improvement in the performance of
the public financial management system, but also being
a step to the next Platform. The series of Platforms
decided upon at that time are shown in the diagram
below:
B. Current Public Financial Management
Reform Program (Con’t)
• Thirdly, it was considered important that the
plans to implement each Platform should
encompass not just technical and process
developments, but also complementary
organisational, capacity and motivational
developments. It was recognised that without
attention to all these different dimensions each
Platform would not be a robust step to the next.
Reforms would be shallow and subject to
degradation during the reform process unless
these aspects of reform support each other.
B. Current Public Financial Management
Reform Program (Con’t)
• It was also decided not to try and produce detailed activity
plans for the whole reform programme all at once. Given
the long time scales that it was recognised would be
required to implement the programme as a whole (probably
running up to at least the middle of the next decade) to
attempt such planning would be impractical and introduce
rigidities into the development process that would not be
helpful. Instead, detailed activity planning within the
framework of the overall strategy would focus on the first
Platform. Furthermore, it was considered important to
achieve engagement of staff at all levels in the reform
process. This was achieved by combining a ‘top down’
approach in identifying broad activities with the ‘bottom up’
development of specific action plans to implement those
activities prepared by the operational departments most
involved.
SEQUENCE OF PLATFORMS
Rewarding performance as well as discipline
Basis for stronger deconcentration
Greater external transparency
PLATFORM 4
Integration of accountability and
review processes for both finance
and performance.
ENABLES
Accountability
for performance
Opportunities for efficiency
Re-alignment of resources with priorities
Scope for in-depth review
PLATFORM 3
Improved linkage of priorities
and service targets to budget
planning and implementation.
ENABLES
Focus on what is
done with money
PLATFORM 2
Initial improvements in internal
control and holding managers
accountable.
Around here that:
*Regional standards start to be beaten
*Donors consider more budget support
Credible common data
Effective discipline
Basis for reward and sanction
Greater internal transparency
ENABLES
Basis for
accountability.
PLATFORM 1
Budget is credible because
delivers reliable and predictable
resource to budget managers
Matching of resources used to period in which consummed.
Control over arrears
Better basis for procurement efficiency.
4. Challenges and Issues in the way forward
A. Challenges:
• Continue to apply the budget line items.
• Changes in reform process seem to be
hart to implement due to lack of clear
norms and guidelines.
• Lack of public participation.
• Very limited number of merit-based
payment Incentive (MBPI).
B. Issues:
- Expand & introduce the PFM Reform to
others ministries.
- Extend the MBPI to an appropriate number.
- Reinforce Platform 1 achievement: improve
in revenue policy & administration, debt
management, cash & bank account management,
& public procurement.
- Moving on to Platform 2, Accountable
Budget: Identify objectives to be achieved,
develop key activities, develop detailed work
plans, etc.
- Managing Platform 2 implementation.
Thank you for your attention.