Transcript The main players in budget execution - Allister Moon

Main players in budget execution
Allister Moon
Budget execution course, Jan 16
Perspectives on the roles in
budget execution
• Positive / normative
• Law,regulations/ practice
• ‘normal’budget implementation/ fiscal crisis
Legal Framework for Public Expenditure Management
Constitution
Fiscal
Responsibility Acts
Local Government Laws
Budget System Laws
Public Debt Laws
Annual Budget Law
Regulations
Central agencies functions in
budget execution (1)
•
•
•
•
•
Administering release of funds
Monitoring expenditure flows
Reporting
Cash management
Managing central payments
Central agencies functions (2)
• Monitoring macro/fiscal performance
• Review progress in sector programs
• Coordinating budget revisions as required
Varying configurations of central
agencies
• Separate Treasury ministry
• Role of Office of President/Prime Minister
/State Chancellry
• Ministry of Economy/Planning –
monitoring macro, sector programs
• Public Service ministry – wagebill
Spending agencies functions
• Allocating funds to spending units
• Procurement ; commitment, purchase,
verification
• Payments/prepare request for payments
• Progress reports, performance monitoring
• Review program implementation
• Reallocation within approved ceilings
Rules of the game in budget
execution
• What kind of flexibility do spending
agencies have : budget classification,
appropriations, virement provisions
• Aggregate fiscal discipline, predictability
and frequency of releases
• Quality of control systems: treasury
function, commitment controls
Other players
•
•
•
•
Central bank, banking system
Legislature
Revenue agencies
External audit
Formal/informal practices
• Budget deviation : a useful indicator of informal
allocations through budget execution
• Stable patterns of excess allocations to ‘power
ministries’
• Unrealistic budgets creating discretionary powers
• Evading aggregate discipline : exploiting
weaknesses in commitment control
Armenia. Budget Deviation, % Total Budget
1997
Broad Functional Classification
15.3
By Sub Group
17.7
By Category within Sub Group
Source: Ministry of Finance
1998
9.2
15.8
33.2
Out turn as % Budget for selected Ministries
Recurrent expenditures, 1987/8-1994/95, Uganda
Out turn % approved budget
200
150
100
50
0
President's
office
Foreign Agriculture Education
Affairs
1987-93 average
Health
1994-95
Works &
Transport
Defence
State
House
Case study : developing the
Russian Treasury
• Background : esw on overall budgetary system,
review of draft budget legislation,
• Treasury established, but major gaps in coverage,
classification system, commitment control,
inadequate information systems
• High budget deviation, low credibility
• Strong commitment to Treasury reform, little
interest in broader budget management reform
Problem : establishing an appropriate role for the
Treasury through defining the interface with other
players
Defining the role of Treasury
with other players
• Central bank, the banking system:
transferring to the Treasury single account
• Revenue agencies
• Line ministries
• Sub national government
• Chamber of Accounts
• Treasury staff
Case study : Uganda cash
management
• Background : early 1990s macro crisis,
inflation 100%, major fiscal imbalance
• Facing persistent revenue instability,
external shocks
• High priority for stabilisation objectives,
but need to maximise predictability for
spending agencies
• Adapting budgetary institutions to context
Frequency Distribution of One Year Errors as a Percentage of GDP,
1980-2000
8
7
Frequency
6
5
4
3
2
1
0
-3 to -2
-2 to -1
-1 to 0
0 to 1
Errors as a Percentage of GDP
1 to 2
2 to 3
Revenue instability
Grouping
Index
Developed market economies
Asia
Latin America
Africa
of which SSA
1.2
1.65
2.23
2.97
3.31
Index = standard deviation of year to year changes in tax revenue
and grants as percentage trend GDP
Design issues in cash
management
• timetable : long planning horizon, short review &
intervention horizon
• scope of analysis : review all stabilisation
instruments
• institutional issues: broad inclusion, joint
commitment, accountability for forecasting, close
coordination with central bank
• decision rules : feedback from macro outturn,
protected expenditure
Dimensions of a cash
management system
planning horizon
Uganda
Tanzania
12 months
1 month
intervention horizon 1 month
1 month
scope
fiscal + monetary fiscal
institutions
Finance
(macro+budget),
Central Bank,
Public service,
others
Finance(macro)
decision rule
macro outturn +
protected exp
monthly fiscal
balance