A Comparative Budget Reform Experience
Liberia and Uganda
By
Florence N. Kuteesa
IMF/Fiscal Affairs Department
Liberia : Public Financial Management Course
Offered by Duke University, North Carolina, USA February 24 – March 4, 2011
Content
• Focuses on post-conflict budget reform experiences for
both countries.
• A glance at select socio-economic indicators
• Post-conflict PSR and PFM Reforms
• Evolution of budget reforms
• Have the budget reforms been effective? a comparative
analysis of PEFA scores.
• What are the emerging lessons?
A glance at select socio-economic indicators…….
Indicator
Area
Liberia
2003
2011
(start of new era) (eight yrs later)
11,370 sq. kms
Uganda
1986
1994
(start of new era) (eight yrs later)
236, 040 sq.kms
2011
Population 2.5 m
3.3m
13.0m
Inflation
rate
GDP
growth
rate
5.0
4.5
Highest 200 %
-31.3
8.8
Negative
US$195
Less than
US$150.00
11.9
25
6.8 % (91/92)
10
12.8
14.5
25
21.6 (91/92)
16.9
21.2- 17.8
NS
GDP per
capita
Domestic
Revenue
%GDP
Governme
nt Exp %
GDP
16.0m
32.4m
Single digit
6.5
6.2
US$500
Post Conflict: Select Public Service and PFM Reforms
Liberia
2003
Political/Governan
ce System
Public service
reforms
Constitution and
PFM legislative
Decentralization
Budgetary
Institutions
Revenue
Mobilisation
2011
Multiparty
21 Ministries and
15 Counties.
Constitution, PFM
Act 2009),
Financial
Regulation(2009)
A long-term reform
Budget Dept, MoF & MPEA
MoF &
Budget Committee
MPEA
Still Departments
in MoF?
Uganda
1994
1986
One Party
32 ministries
with 329, 000
civil servants
1964 with
amendments
MoF & MoPED
Various
Departments in
MOF
2011
Multiparty
22 ministries
Civil servants:
157,000(1995)
Capacity building
Constitution 1995
228,000(2005)
Political
33 districts
Fiscal Dec (1996)
110 districts
PFM Act 2003
Merged since 1992
Creation of
Revenue Authority
(92)
URA
Post Conflict: Select Budget Reforms
Key Reform
areas
Spending
Priorities
Public Investment
Program
Medium-term
fiscal framework
MTEF
Liberia
2003
Uganda
2010/11
PRS (2008)
A system for
appraisal & selection
of PIP(2010)
Public
Expenditure
1993/4
Core &non-core programs
PIP (wish-list)
1998- 2011
PEAP(1997)
Rolling PIP& Database
(1992)
Development Planning
manual
MTFF(2009)
MTFF since 1992
Reform strategy
being developed.
Fiscal
Decentralization
Budgeting
Approach
1986
Aggregates- wages, non-wage recurrent,
development (92)
No direct transfers
Incremental and line item-based for
recurrent
Health and
Education
Block grants( 94)
Incremental and line item-based for recurrent
Annual PER by
World Bank
Disaggregated by LM &
broad economic exp items
All grants(1998)
Policy/output informed
budgeting (98)
Automation of
OBB(2009/10)
PER since 96- transfers,
sector-specific or cross-
Post Conflict: Select Budget Reforms
Key Reform
areas
Liberia
2003
Uganda
2011
1986
1994
Integration of Aid
into the Budget
and MTEF
Draft Aid
Coordination
Policy
Openness of
Budget process
Budget calendar
revised
Only budget discussions conducted by
MoF/MPED
Budget
Documentation
Budget
Framework
Paper
Budget Framework Paper ©
Background to Budget(P), Ministerial
Policy Statements(P)
Planning &
budgeting capacity
?????
1998- 2011
Partnership Principles (
2001).
Integrating aid resources
into the medium-term
fiscal framework and
MTEF
Profession of economist &
statisticians cadre.
Strengthening planning
units
Budget Calendar with
consultations and PERs
(98)
Communication Strategy
Citizens Guide to Budget
BFP(N&S)
BTTB
Planning and budgeting
manual in 2004
Evolution of PFM Reform in Uganda: Major Milestones
Macroeconomic
Stabilization
Investment &
Infrastructure
Poverty Reduction
Enhanced
accountability
Automation
Poverty/results
focused Budgeting
Enhancing fiscal
discipline
1986
1996
2005
1986-1996
•Reduction of double digit inflation to
single digit
1996-2005
2010
2005-2010
•Poverty Reduction Action Plan (97)
•Continued roll out of IFMIS.
•Creation of Uganda Revenue Authority
• Medium-term Expenditure Framework
and budget reforms
• Automation of the Output based
budgeting(OBB)
•Merger of MoF and MPED in 1992.
• Fiscal Decentralization
•External debt management strategy.
• IFMS introduced all LM & few LGs
•Public Investment Program
mainstreamed into Budget
• Budget Act 2001
•MTFF and Cash budgeting
• Independent Auditor General
•Strengthening of planning and
budgeting function/cadre.
• Treasury Department upgraded to
Accountant Generals office
• PFAA 2003
•Procurement Law. Regulations,
Institutional Development
Have the budget reforms been effective? Budget Credibility
Performance Indicator
Liberia 2008
Uganda
2005
2008
PI 1 Aggregate expenditure outturn
compared to original
approved budget
B
B
B
PI 2 Composition of expenditure
out-turn compared to original
Approved budget.
D
C
C
PI 3 Aggregate revenue out-turn
compared to original approved
budget.
A
A
A
PI 4 Stock and monitoring of
expenditure payment arrears
D+
D
D+
9
Have the budget reforms been effective? –
Policy-based budgeting
Performance Indicator
Liberia 2008
Uganda
PI-11 Orderliness and
participation in the budget process
B
2005
C+
2008
C+
PI-12 Multi-year perspective in fiscal
planning, expenditure policy, and budgeting
D+
B
C+
PI-24 Quality and timeliness of in-year budget
reports
C
D
C+
No score
C+
D
D-2 Financial Information provided by donors for D
budgeting & reporting on project and program aid
D+
C
D-3 Proportion of Aid that is managed by use of
national procedures.
C
D
Donor practices
D-1Predictability of donor funds
D
10
Have the budget reforms been effective?
Comprehensiveness &Transparency of the budget
Performance Indicator
Liberia 2008
Uganda
PI 5 Classification of budget
C
2005
B
2008
A
PI 6:Comprehensiveness of
information included in budget
PI 7 Extent of unreported
Government operations.
C
B
A
D+
C
D+
PI 8 Transparency of
intergovernmental fiscal relations
No score
C
D+
PI -9 Oversight of aggregate fiscal
risk from other public sector entities
D
D
C
PI- 10 Public Access to key fiscal
information
C
B
B
11
Lesson 1: Inadequate coordination of external resources
undermines credibility of the budget…...
• A wide range of donor interests & expectations are difficult
to harmonize at national level:
• Confusing and conflicting: MDGs versus poverty goals
• Costly and not sustainable ( project implementation units)
• Numerous conditionalities & obligations prevent
compliance with legitimate rules, processes,
accountability
• Fragment budget decision making(dual budgeting)
• Ultimately undermining optimal allocation of resources
within the MTEF.
• Policy framework, including guidelines, to
mainstreaming aid management into the budget
process is an urgent priority
Lesson 2: Enhancing the credibility of the Budget requires
a holistic approach ……….
Ownership
Agreement on Priorities:
Translation of political
aspirations and developments
needs into policies, actions &
budgetary policies
Assurance
Confidence:
Link policy making and
budgeting
MTEF and Budget reflect
agreed priorities.
Ouputs and Impacts:
Conversion of expenditure
into public goods.
Demonstrated impact as
desired.
Effective monitoring,
reporting and oversight
Trust
Enhanced predictability of
resources.
Minimise deviation between
appropriation and expenditures
Better use of available cash.
Lesson 2: What are the common challenges to a
holistic approach ?(ctd)
• Political ownership/consensus of priorities is undermined
by the:
– Multiple national development plans( PRSP, Visions, MDGs)
– Numerous institutional mechanisms without effective coordination.
– Inadequate engagement of policy makers.
• Translation of policies into resource allocation is
challenged by the:
–
–
–
–
Multiple strategic plans driven by different stakeholders
Lack of or poor costing of on-going or new policies
Ambitious targets not guided by realistic resource ceilings
Budget classification hinders meaningful analysis of resource
allocation.
Lesson 2: what are the common challenges to a
holistic approach……..? (ctd)
• Enhanced predictability constrained by:
– Poor commitment control
– Poor cash management
– Emergencies and political directives.
• Monitoring, reporting and accountability is
undermined by
– Too many mechanisms/systems by different
stakeholders
– Hardly influence decisions
– Overload the spending agencies.
– Reports neither consistent nor provide strategic
direction.
Lesson 3: Reforming the functionality of a
Budget Directorate
•
Ownership, commitment and technical competence
•
Understanding of the reform agenda:
– Clarity on reform concept and principles, institutional roles etc
– Intensive sensitization program (medium-term).
– Simplified guidelines and instruments, training materials.
– Training strategy should be mainstreamed within budget process.
•
Coordination with relevant departments in MoF and MPEA.
•
Technical support and mentoring sectors/LMs.
•
Strengthen the “challenge function”: strategic allocation and use of public
funds, economy, efficiency & effectiveness (impact)
•
Capacity enhancement in policy analysis (budget and sector specific), program
design, appraisal and evaluation etc
•
Streamline the institutional set-up of the Directorate, including execution of
duties.
In conclusion, a reform is a long drive that
requires…..
• Steady and focused driver:
strong and competent leadership
• A map: a shared vision including
SMART deliverables for a credible
reform
• Keep to the road: A mutual
commitment to work consistently
within a coherent framework
(guidelines and incentives).
• New passengers : will be
motivated and board at various
stages.
17
Thank you