Upload
stewart-park
View
217
Download
1
Tags:
Embed Size (px)
Citation preview
INTRODUCTION TO PUBLIC FINANCE MANAGEMENT
Module 2.3 :MTEF and other special issues
1
Module map
2
Course outline
• What is an MTEF?
• Main features of an MTEF
• The MTEF preparation procedure
• Achievements and pitfalls
• Other special issues
3
Course outline
• What is an MTEF?
• Main features of an MTEF
• The MTEF preparation procedure
• Achievements and pitfalls
• Other special issues
4
What is MTEF?
5
“ It is said that the Inuit people have 15 different words for snow. The opposite is true of MTEF, where the same term is used to refer to very different ways of stretching the time perspective of annual budgeting. Conflating a variety of different approaches into a single rubric has caused a host of problems”
Schiavo-Campo, “Potemkin Villages: 'The' MTEF in Developing Countries” Public Budgeting and Finance, Summer 2009 .
6
What is MTEF?
What is MTEF?
Variant 1/ The MTEF is an instrument for fiscal discipline, for prioritisation in conformity with the strategies and for providing funding predictabilityOECD countriesSome developing countries
Variant 2/ The MTEF(s) cost sector strategies. It is used for negotiating budget increases with the Ministry of Finance and additional financial support with the donorsOther developing countries
7
8
1.MTEF for fiscal discipline and prioritisation
2.Strategy costing
Ministerial Sectoral
Consistent with the MTFF Should be realistic, but may include financial gap and scenarios
Rolling horizon Regularly updated, but may have a fixed horizon
Projection period: 3 to 4 years A long term period is required in several sectors
Unified budget-MTEF preparation processes
Prepared outside the pressure of the budget preparation process
Expenditure projections are the result of the budget process
Simulation models are frequently used to prepare the projections
9
Instrument +Process
Government strategic framework sector strategies & policies framework, laws
Annual budget law appropriations & forward estimates
MTEF
What is MTEF?
• The MTEF defines a strategy implementation path that takes into account the financial constraints
• We can distinguish:
• The MTFF, which defines the totals
• The Medium Term Budget Framework (MTBF) –or “global” MTEF- which allocates MTFF overall expenditure envelopes to ministries or sectors/functions
• The MTEF; detailing MTBF projections by programme 10
What is MTEF?
Financial constraint
Pre
pare
d a
nnually
SectorMT/LT plans &
strategies
National strategyDevelopment plans
PRSP
Macroeconomic framework
MTFFMTBF-Expenditure ceilings
by ministry/sector
Budget Ministry MTEFs
MT
EF
Economic situationCosting
11
What is MTEF?
• The MTEF projects expenditures according to their purpose. It is aimed at:• Planning policy changes that need several years
to be implemented, finding a fiscal space for priority programmes
• IF, the processes are disciplined, improving operational efficiency through providing managers with predictability of funding
12
Fiscal discipline
Inter-sectoral resource allocation
Intra-ministerialresource allocation
13
t-3 t-2 t-1 t t+1 t+2 t+3Budget
Medium-Term Macro-economic FrameworkProjection of national accounts including the government account (i.e. the MTFF)
Medium-Term Fiscal Famework (MTFF)Revenue and grants
Total expenditures PersonnelGoods and servicesInterestTransfersCapital
Medium-Term Budget Framework (MTBF)Defence
PersonnelGoods, services and transfers Capital
EducationPersonnelGoods, services and transfers Capital
Administration PersonnelGoods, services and transfers Capital
Primary EducationPersonnelGoods, services and transfers Capital
Secondary EducationPersonnelGoods, services and transfers Capital
Etc
TourismPersonnelGoods, services and transfers Capital
Etc
Balance (deficit/surplus)
Financing
Projection
Educa
tion m
inis
try
MT
EF
ActualMedium-TermFrameworks
Course outline
• What is an MTEF?
• Main features of an MTEF
• Achievements and pitfalls
• Other special issues
14
MTEF in TajikistanMTEF in Tajikistan
15
ExerciseExercise:
•Identify key MTEF concepts
•Explain content of key concepts
16
What is top-down / bottom-up in an MTEF?• Top-down budget preparation
Multi-year projections of resource envelope targets (what is affordable)
• Bottom-up budget preparation
Multi-year cost estimates of sector programmes (what has to be financed, with a focus on programme performance)
• Integrating these two pillars
Institutional (political-administrative) decision-making process to make the necessary trade-offs
17
What is baseline costing?
Year 0 Year 1 Year 2 Year 3
Baseline
Expenditure ceiling
Savings on existing
programs
MTEF expenditure projections
New programs and policy changes
18
What is a rolling budget??
19
Forward EstimatesBudgetT
T +1
T +2
Budget Forward Estimates
Forward EstimatesBudget
t +1 t +2 t +3 t +4 t+5 19
MTEF processTop-down (MoF)
Bottom-up (Line Ministries)
Step 1Sector review
of ministry objectives/outputs and
activities
Step 2Agreement
on programs and
subprograms
Step 3Costing of
agreed programs
and subprograms
for 3 years
Step 2Detailed
expenditure and sector/
ministry ceilings for 3
years
Step 1Macro-
economic framework /
Availability of resources
Step 4Preparation
of 3 year estimates
within cabinet approved ceilings
Parliament
Step 5Review of
estimates in MoF and
presentation to Cabinet
Step 4Hearings to
agree on objectives and priority programs
Budget Submission
Step 3Approval of ceilings by
Cabinet
20
MTEF Features of an MTEF
Projection period: 3 to 4 years
Encompass all expenditures whatever their economic nature and financing source
Generally, the MTEF is rolling.
The MTEF is consistent with the MTFF
The first year of the MTEF is consistent with the budget
The out-years are indicative, but they show a political commitment
21
Main features of an MTEF
• The Ministerial MTEF
For accountability and to ensure a close link with budget management
Sector/cross-ministry MTEFs if any, should be divided in ministerial MTEFs
providing managers with some predictability
providing a framework for performance monitoring
22
Main features of an MTEF The Ministerial MTEF
Generally structured in programmes, they may include performance indicators
Degree of detail variable from the same degree of detail as the budget to a presentation by broad programmes
23
Course outline
• What is an MTEF?
• The MTEF preparation procedure
• Achievements and pitfalls
• Other special issues
24
Achievements and pitfalls
• The results are uneven…..
• “Developing comprehensive MTEF can be effective when circumstances and capacities permit…. Otherwise, … it might distract attention from the immediate needs for improving the annual budget and budget execution processes… in a number of African countries, the MTEF was introduced prematurely, and is turning out to be merely a paper exercise”.World Bank-IMF Global Economic Report 2006, page 146
25
• Why uneven results?
Too complex/sophisticated approaches.
Poor annual budget discipline.
No impact on the annual budget, the MTEF prepared the previous year is ignored.
Administrative and/or political instability. Every year MTEF preparation starts from scratch.
26
Achievements and pitfalls
Achievements and Pittfalls
• Why uneven results?
Isolated sector MTEF prepared by external consultants to comply with a donor request.
The MTEF remain a pure technical exercise; no political interference
Economic instability
Lack of predictability of resources
27
Supporting donor practice??
• However,it does not make sense to demand a "sector MTEF" prematurely…. Taking stock from experience, it is recommended to adopt a process and systemic perspective on the development of a sector MTEF, rather than making it a pre-requisite for supporting a sector programme.
EC. Support to sector programmes. Guidelines no2. July. 2007. Page 22.
28
Achievements and pitfalls
•How to avoid the pittfalls?
•Before considering implementing an MTEF
• Make sure annual budget processes are disciplined
• Make sure decision makers are involved
• Ensure there are capacities to prepare an MTFF
29
Achievements and pitfalls
• How to avoid the pittfalls?
• Prepare costed sector strategies first • Estimate the forward costs of existing activities (the
baseline)• Prepare an MTBF• Avoid complexity
• Once these tasks completed, consider implementing an MTEF, eventually starting with few pilot ministries
• avoid complexity
30
Achievements and pitfalls
Course outline
• What is an MTEF?
• The MTEF preparation procedure
• Achievements and pitfalls
• Other special issues
31
32
Performance information
ActivitiesInputs OutputsIntermediate
outcomes
Efficiency Quality
End outcomes
Effectiveness
Operational arrangements;or other benchmarks
Policy objectives
Economy
Performance indicators: •Input•Output indicator •Outcome indicators
• Some points to keep in mind• The link between performance information and
resource allocation is generally indirect• PI should be attributable to the programme or
the organisation the performance is measured• PI published for the legislature and the
citizens should be: aimed at measuring the efficiency and the
effectiveness of the relevant activities in a limited number
Performance information
33
Function of the performance information
Link between performance information and funding
Planned or actual
performance
Main purpose in budget process
Presentational No link Performance targets and/or performance results
Accountability
Performance informed budgeting
Loose/indirect link
Performance targets and/or performance results
Planning and/or
accountability
Direct/formula performance budgeting
Tight/direct link
Performance results
Resource allocation and accountability
Performance information Performance budgeting in OECD countries. OECD 2007
34
35
Performance information
• Prepared in many countries, notably in the social sectors
• May have two functions:
• Support budget preparation within MDAs
• Support budget implementation and its monitoring
The annual activities plan
36
•
• But these activities plans should be kept simple
• In some poor countries there are plans of about 8000 thousands activities. Such plans cannot be monitored.
The annual activities plan
37
Sound MTEF processes may help in reinforcing the policy-budget link, but only if several preconditions are met
Strategy costing should be carried out, but planning documents with a financial gap should not be considered as financial commitment of the government
Programming documents and working plans should not be over-sophisticated
Key messages
38