Transcript MKUKUTA/PER Consultations 2007

Key messages from PEFAR 2007
25 May

Challenges for medium & long term
expenditure strategy due to:
◦ Rising aggregate expenditure;
◦ High aid dependency, constraints on absorption
◦ Strategic choices on expenditure for sustained
growth & poverty reduction

BUT GoT’s reform of strategic allocation
systems has not yet delivered:
◦ An effective instrument for strategic planning and
budgeting; or
◦ A transparent framework for dialogue and
accountability

Sustainability

High aid dependency
◦ Aggregate & recurrent expenditure continue to
rise (28% GDP)
◦ Need for medium & long term strategy to address
major increase in external financing
 ⇧ from 6% to 12% of GDP over past 5 years

Effective absorption of aid
◦ Requires making critical strategic choices on
expenditure composition
30.0
28.0
26.0
24.0
22.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Domestic revenue
Total expenditure
Recurrent expenditure
ate
es
t im
20
06
/0
7
ac
tu
al
20
05
/0
6
ac
tu
al
20
04
/0
5
ac
tu
al
20
03
/0
4
ac
tu
al
20
02
/0
3
ac
tu
al
20
01
/0
2
ac
tu
al
20
00
/0
1
ac
tu
al
0.0
19
99
/0
0
% of GDP
20.0
External Financing (net)

Appropriate balance between
development/recurrent expenditures

Translating the MKUKUTA growth objectives
into specific growth promoting expenditure

Develop medium term strategy on wage bill,
underpinning public service reform and
better service delivery
Addressing these challenges will need more
than good macroeconomic management.
It will need…..


Careful steering of the composition of public
expenditure
Broad based public debate on the important national
choices ahead
…….so how effective and transparent
are the Government’s tools for
steering public expenditure ?

Highly unrealistic MDA budget requests

Budget Guidelines “Priority Investments”
weakly aligned with Sector Plans

Key strategic decisions poorly reflected in
the MDA initial submissions
◦ On average, 150% above available resources
◦ Not linked to previous year’s decision on MTEF year
2
◦ In part due to excessive detail which absorbs
scarce planning capacity

Late release of Budget Guidelines results in a
lack of early consistent policy direction

Discrepancies between BG and MTEF
◦ e.g.: Implementation of consolidation of allowances
in wage bill

No reporting on actual expenditure by main
MKUKUTA categories (objective, target,
activity) in the last three years






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
Total External Financing, actual + projections
14.0
12.0
% of GDP
10.0
8.0
6.0
4.0
2.0
0.0
1999/00
2000/01
2001/02
2002/03
2003/04
Actual Donor Support
MTEF Projection 05
2004/05
2005/06
MTEF Projection 07
MTEF Projection 04
2006/07
2007/08
2008/09
MTEF Projection 06
MTEF Projection 03
2009/10
Issue:
 Lack of reporting on expenditure by main
MKUKUTA objectives and targets
◦ Despite use of SBAS since 04/05; and
◦ Government’s commitment to such reporting at
the GBS Annual Review Oct 06
Next Steps:
 Analysis of reports to be carried out prior to
next GBS annual review
 Review of classification structure



Lack of clear user-friendly published
summary of MTEF as a base for accountability
Better accessibility to budget
planning/execution documents
For LGAs, difficulty in tracking funds due to
various funding channels

Challenges for medium & long term
expenditure strategy due to:
◦ Rising aggregate expenditure;
◦ High aid dependency, constraints on absorption
◦ Strategic choices on expenditure for sustained
growth & poverty reduction

BUT GoT’s reform of strategic allocation
systems has not yet delivered:
◦ An effective instrument for strategic planning and
budgeting; or
◦ A transparent framework for dialogue and
accountability