Transcript The MTEF in Practice - Reconciling Conflicting Claims

The MTEF in Practice - Reconciling
Conflicting Claims
Malcolm Holmes
Implementing an MTEF
Pilot or whole of Government
 Budget unification (PIP elimination)
 Reduction of the number of budget line
items
 Link between line items and objectives
and impact
 Introduction of a 3 year perspective
 Mission statements and strategic plans
for sectors

Implementing an MTEF (Cont.)
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Use of strategic plans for budget
preparation
Emphasize costs of activities
Merging of external and domestic
financing
Withdrawal of MoF from details of budget
allocations in LM
Engaging cabinet
Focus on performance
Ghana: Explaining progress
Commitment from Minister and Ministry
of Finance, line ministers and donors
 MTEF based on GOG-led PER
 Consensus building efforts (losers and
winners)
 MTEF becomes budget process

Ghana: Explaining Progress
(Cont.)
 Consistency
between MTEF and
sector approaches
 Link to other reforms
 Performance focus - matching
authority and accountability
Ghana: Sustainability Tests
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Predictability of funding (domestic and
external)
– predictable macro/fiscal framework
– cash flow estimates
– cash available on time
– budget voted on time by parliament
Predictability of policies
- Cabinet Engaged
Controlling expenditure
Focus on outcomes
Ghana: Sustainability Tests
(Cont.)
 Dynamic
process of evaluation of
policies
 Autonomy and accountability of LM
 Civil service management - pay
policy, authority
 Decentralization
Uganda
Sequential progression through 3 levels
 Using MTEF-style approach since early
1990’s
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– Fiscal discipline
– Predictable sectoral expenditures that
reflect stated strategic policies
MTEF reinforcing goals
 Provides framework for implementing
Poverty Eradication Action Plan

Sequencing the MTEF in Uganda

1992/93: Medium-term expenditure
planning with goal of fiscal discipline
– Cash-flow management with monthly
expenditures
1996/97 Linking sectoral allocations to
policies
 Linking policy and funding predictability
to technical efficiency

Reforming the budget process

Annual budget framework process:
– Identifies medium-term priorities, resource
constraints and sectoral ceilings
– Consultation with line Ministries and
external stakeholders
– Links with civil society through more
transparent budgeting documents
Extending the MTEF

Extending MTEF to district government
– Provision of technical expertise from
central Ministries
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Defining roles in budgeting
– Budget administrators propose envelopes
– Sectors propose policy choices and
allocations
– Cabinet and parliament make political
choices
Uganda: Sustainability Tests
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Implementation of strategic allocations
– Deviation between budgeted expenditure
and actual spending 25%
– Line Ministries overspending MTEF ceilings
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Revenue unpredictability
– Shortfall of tax revenues
– Inability of donors to provide medium-term
commitments
– Impacts on expenditure disbursement
Uganda: Sustainability Tests

(contd)
Limited flexibility with expenditure
readjustments
– Statutory expenditures
– Politically important areas
– Areas with donor conditions

Continued separation of donor-funded
project from Consolidated Fund
Uganda: Sustainability Tests

(contd)
Sectoral planning issues
– Little clarity of goals
– Little quantitative analysis
– Failure to link expenditure estimates to
priorities
– Few performance measures

Monitoring and evaluation of sectoral
efforts is weak
Uganda: Sustainability Tests

(contd)
Improving the quality and efficiency of
service provision
PRIORITIZATION
Institutional Arrangements
Hard Budget Constraint
 Cohesive political executive
 Sector Strategies
 Forum within which decisions constrained
by resource availability over medium
term and policies compete
 Programmatic decisions devolved to line
ministers (within hard sector ceilings)
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PRIORITIZATION
Institutional Arrangements
(Cont.)
Strategic priorities and sustainability
drive aid
 Information - Costs, Performance

Mechanisms for Prioritization
 Case:
Australia
 Aggregate Fiscal Targets and
Strategic Objectives
 Medium-term Costs of Competing
Policies
Australia: Medium-term Costs of Policies
Mar 84
15
Projection dates
10
May 85
Nov 85
5
Dec 86
Aug 89
0
82/83
83/84
84/85
85/86
86/87
87/88
88/89
89/90
90/91
91/92
92/93
Mechanisms for Prioritization
Case: Australia
Aggregate Fiscal Targets and Strategic Objectives
 Medium-term Costs of Competing Policies
 Arena for Contesting and Coordinating Policies
- Cabinet: Strategic Priorities
- Line: Spending-Savings within Hard Budgets
 Ex-post Evaluation
Outcomes:
- Deficit 4% GDP to surplus of 2% GDP
- Shifts in intra and intersectoral composition
- Greater funding predictability
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Australia: Changes in Expenditure
Composition, 1983-94
Spending
Saving
Net change
$ Millions
5000
New spending
4000
3000
Net change
2000
1000
0
-1000
-2000
-3000
Savings from existing policy
-4000
Defense
Educ
Health
Source: Dixon, 1993 : 32
Socsec
Transp.
Other
Sector-wide Approaches as
Performance Based Budgeting
Sector-wide
 Clear Strategy and Policy Framework
 Program Focus
 Sector Expenditure Program
 Medium-term Perspective
 Consistent with Macroeconomic
Framework
 Donor Coordination

Getting Decisions in
the Right Hands
Strategic Policy
 Sector Envelopes
 Program: Individual Ministers
 Running Costs: Managers
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