Transcript Building budget credibility Session 1

Building Budget Credibility
Collaborative Africa
Budget Reform Seminar.
1st to 3rd December 2004
FARM INN, Pretoria,
South Africa
1
Outline





Background
Ownership of Priorities
Predictability of Resources
Budget Should Deliver with Minimum
deviations
Lessons Learnt
2
Background


PEAP defines government macroeconomic and
poverty policy objectives: Economic
Management, Enhancing production,
Competitiveness, and Incomes, Security, Conflict
resolution and Disaster Management, Good
Governance, Human development
A credible budget should be consistent with
agreed PEAP priorities and deliver projected
targets .
3
Building budget credibility

Institutionalisation of a harmonised
framework to sustain a credible budget
through:
Identification and consensus and priorities
(Ownership)
 Link Budget with agreed priorities(Assurance)
 Predictability of resources (Trust)
 Deliverance of budget with minimum deviation.


A framework that promotes synergy
between policies, legislation and processes
4
Ownership of Priorities





Participatory approach: strategic role by stake
holders thru SWAP, working groups
National consultations take 18 months at
national , sectoral and local government levels
Action oriented research, studies on sector
specific,institutional and cross cutting issues
(operational efficiency, equity)
Outcomes of studies inform the decision making
process
Revision of PEAP ever three years
5
Trust level 1: Linking National
Budget to Agreed Priorities






Poverty focused & equity concern in
policies and programmes
Outcome & Output Orientation
MTEF
Budget Consultations at national, local
government and sector levels
Parliamentary involvement (Budget Act
2001)
Donor sub groups and PER
6
Sector Wide Approach (SWAP)





Identification and agreement of Priorities ,
targets and monitorable indicators by all stake
holders
Promotes intra-sectoral linkages and synergy
within the sector
Strategic allocation of resources
Facilitates monitoring and minimizes transaction
cost on behalf of the donors
Minimize on duplications and wastage
7
MTEF





The MTEF resource envelope is consistent with
macroeconomic objectives
The MTEF is three year rolling expenditure framework, it
prioritizing the expenditures within constrained
resources.
It enhances fiscal discipline and provides strategic
allocation of resources.
The MTEF operationalises the PEAP and SWAP at both
center and local government levels.
MTEF provides sectors with predictable and stable
projection of budget resources.
8
The Consultative Budget Process
Submission of Indicative
Plan/MTEF
Parliament
April 1
National Budget Workshop
-Indicative Sector Ceilings
-Budget & SWG Guidelines
Preparation of Sector
BFP and Revised
MTEF Allocations
within the Ceiling
Oct - Dec
June 15
Final Budget
Approval
Compilation of National BFP
And Updated MTEF
Inter-ministerial
Consultations
Line Ministries/
Spending Agencies/
SWGs/Donors
May 15
Cabinet Approval
of BFP/MTEF
Cabinet
MFPED
Budget
Speech
Finalisation of Budget
Allocations/MTEF
PER
Preparation of Detailed
Budget Estimates
Jan - Mar
Apr - June
9
Sectoral Shares in the MTEF: 1994/52005/6
30%
25%
Share of Budget (%)
Education
20%
PA
15%
10%
5%
0%
Security
Health
Interest
JLO
Agric.
Water
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06
10
PAF Expenditures 1997/98-2005/6
900
800
700
600
Other (Land Reform, Adult
Literacy, Restocking, LGDP)
Accountability
Rural Roads
Agricultural Extension and
Exports
Safe Water and Sanitation
Shs Bn
PHC
500
Universal Primary Education
400
300
200
100
0
1997/98 1998/99
(Pre-PAF)
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
11
Trust Level 2: Predictability of
Resources




Fiscal Policy Objectives
Forecasting Resource envelope
Improving resource predictability
Execution of the Budget with minimum
deviations
12
Fiscal policy objectives





Economic growth (7%). To fund the public goods and
services needed to run a modern state and meet the
objectives identified in the PEAP
Low inflation (no more than 5%). To maintain a fiscal
stance which is consistent with macroeconomic
objectives. To avoid unsustainable public debt
Competitive exchange rate
Foreign exchange reserves at least 5 months of imports
Growth in private sector credit. To raise domestic
revenues in a manner which does not distort incentives
for the private sector or discourage work and investment
13
Resource envelope



MTEF = Total Inflows (Tax and non tax
revenues + donor inflows) – Total
outflows ( external debt servicing) (domestic arrears payments) .
MTEF distributes the resources into
sectoral and institutional allocations
Improving resource predictability
14
3000
Composition of Resource Envelope
2500
2000
1500
1000
500
0
1992/93
1995/96
Total Revenue
1998/99
2001/02
Domestic Revenue
Grants
15
Domestic Revenues: % of GDP
1992/3-2003/04 (stagnating growth)
14%
12%
10%
8%
6%
4%
2%
19
92
/9
19 3
93
/9
19 4
94
/9
19 5
95
/9
19 6
96
/9
19 7
97
/9
19 8
98
/9
19 9
99
/0
20 0
00
/0
20 1
01
/0
20 2
02
/0
20 3
03
/0
4
0%
Domestic Revenues
16
Enhance Non Tax revenues as % of Domestic
Revenue and %GDP
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2000/1
2001/2
2002/3
Domestic revenue
2003/4
2004/5
GDP
17
700
Donor Commitment verses outturn
(Budget Support in US$ millions)
600
500
400
300
200
100
0
1998/99
1999/00
2000/01
Projections
2001/02
2002/03
2003/04
Outturns
18
Fiscal Deficit as % GDP
25%
20%
15%
10%
5%
0%
-5%
-10%
19
97
/9
8
19
98
/9
9
19
99
/0
0
20
00
/0
1
20
01
/0
2
20
02
/0
3
20
03
/0
4
20
04
/0
5
20
05
/0
6
20
06
/0
7
20
07
/0
8
-15%
Govt Expenditure
Govt Revenue
Fiscal Deficit
19
Budget should Deliver
(Financial front)

Fiscal discipline by maintaining the agreed
budget domestic deficit thru:






Manage expenditures within realized resources (cash
budgeting).
Cut expenditures to match underperformance of domestic
revenues.
Reduce foreign reserves to match under disbursements of
donor funds
Supplementary expenditures are approved by
parliament
Ring fencing of priority expenditures
Enhance financial management, monitoring and
accountability
20
Budget should Deliver
(physical performance front)




Periodic monitoring of the PEAP (Poverty
assessment; House hold integrated
surveys, demographic survey, integrity
survey,National Service Delivery Survey)
Annual Budget Performance Report
District and sector reports on PEAP targets
National Integrated Monitoring and
Evaluation System
21
Lessons learnt






Homegrown responding to Emerging Issues
Substantial investment in awareness raising and
capacity and institutional building or restructring
Budget a Potential but Not sustainable Means
to All Political Aspirations: role of Govt
Intervention and Balancing spending between
social and productive sectors.
Targeted and Cost effective consultations versus
bottom up approach.
Measures to counter political interference
(necessity for ring fencing the poverty priority
programmes)
Clarity on Principles of collaboration
22
THANK YOU
23