Modernising government
budget operations:
Case studies from Europe
Lewis Hawke
World Bank
The Exchange
Abu Dhabi, UAE
May 13-15, 2013
About the presentation…
 Why should we modernise government budget operations?
 How to do it
 Selected case studies from Europe
 Integrated strategic planning and budgeting (Albania)
 Medium term budget framework (Russia)
 Performance based budgeting (Austria)
 Fiscal responsibility arrangements (Serbia)
Modernising government budget operations
Making budget operations fit the needs of
modern government:



Sustainable finances
Cost effective results
Efficient management of resources
How are operations modernised?
Change
information
Change
processes
and
structures
Change culture
and behaviour
Case studies
Integrated Strategic Planning
and Budgeting (Albania)
Integrated Strategic Planning
and Budgeting (Albania)
National Strategy for
Development & Integration
EU Integration Plan
(Stablisation and Association Agreement)
Medium Term Budget
Framework
Performance based monitoring and reporting
Albania Integrated Planning:
Institutions and processes
EU Integration Strategy (SAA)
Sector Strategy
Program
Management
Teams
National Strategy (NSDI)
MTBP
Line Ministries
Coordination Units
Department of Strategies
and Donor Coordination
Ministry of Finance
Ministry of EU Integration
Council of Ministers
EU Delegation
Parliament
Albania Integrated Planning:
Strengths and Challenges
STRENGTHS
CHALLENGES
Integration of national, sectoral and
EU integration goals
Aligning priorities with budget policy
Clarifies priorities and defines
monitoring framework
Limited flexibility in a changing
economic environment
Firm basis for setting performance
goals
Measuring and assessing
contribution to outcomes and costs
Medium term focus with
intermediate milestones
Monitoring and evaluating progress
Medium Term Budget Framework
(Russian Federation)
Medium Term Budget Framework
(Russian Federation)
Highlights:
 3 year budget approval
 rolling annual revisions (covers 100% Federal, 61% GG)
 In-year flexibility, end-year rollover
 10% discretionary items, 5% mandatory items
 Fiscal rules
 total deficit, non-oil deficit, wealth fund transfers
 Program budgets
 Sovereign Wealth Funds
 Reserve Fund and National Welfare Fund
Expenditure limits
Register of existing expenditures
Room for
new policy proposals
Investment
objects
Existing
expenditures
Long-term earmarked
expenditure programs
State Arms program
Public sector pay & fringe benefits, military pay and allowance
Pensions and benefits (Public liabilities)
2013
2014
2015 2016
3-year budget
2017
2018
2019
Impact of reforms
Performance based budgeting
(Austria)
Performance based budgeting
(Austria)
Performance based budgeting
(Austria)
Performance based budgeting
(Austria)
Performance based budgeting
(Austria)
Strengths
Challenges
Comprehensive and integrated
with budget plans
Strengthen performance
information and budget link
Gender dimension
Coordination across ministries
Central training, monitoring and
assurance unit
Better links to national priorities
Published reports on results,
discussed with the draft Budget
Fiscal responsibility arrangements
(Serbia)
Fiscal Responsibility Arrangements
(Serbia)
Revised Budget Law 2010
 NEW Fiscal responsibility principles
 NEW Fiscal strategy
 NEW Fiscal targets for debt and deficits
 NEW Fiscal Council
Revised budget calendar
Revised accounting and reporting
Revised internal audit and control
Fiscal Responsibility Arrangements
(Serbia)
 Fiscal principles






Separate roles of central and local government
Fairness – intergenerational welfare
Accountability for fiscal sustainability
Stability – avoid rapid change over time
Transparency of non-security information
Responsible fiscal risk management
Fiscal Responsibility Arrangements
(Serbia)
 Fiscal strategy report












Mid-term projects for macroeconomic and fiscal aggregates
Objectives and guidelines for fiscal policy
Report on tax policy, including tax expenditures
Overview of priority areas for financing
Mid-term expenditure framework and consolidated budget
Fiscal implications of structural reforms
Assessment and quantification of risks and potential liabilities
Public debt management strategy
Opinion of Fiscal Council on the strategy report
Opinion of the National Bank of Serbia
Progress report on implementation for previous year
Overview of transfers from central to local government
Fiscal Responsibility Arrangements
(Serbia)
 Fiscal rules

Medium term annual fiscal deficit should not exceed 1% GDP



General government debt shall not exceed than 45% GDP



Government must prepare plan to reduce excess debt level.
Fiscal Council provides opinion to Parliament before budget vote
Local government deficit rule


Formula-based calculation of medium term GDP and required deficit
designed to achieve anti-cyclical fiscal deficit for the budget year
Transitional arrangements to reduce annual deficit (4%) gradually
expenditure not exceed revenues by 10% each year, MoF control
Exceptional circumstances deviation permitted
Fiscal Responsibility Arrangements
(Serbia)
 Fiscal council

Independent body appointed by Parliament



Reports directly to Parliament
Report on:

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



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
Council chairperson and members proposed by Republic
President, Minister of Finance and Governor of National Bank.
Opinion on national draft Fiscal Strategy report
Draft annual budget law
Final accounts
fiscal impact of other laws and amendments
Provide advice to government on fiscal policy and management of
public finances
All reports published
Six year terms
No political affiliations or other employment permitted
Fiscal Responsibility Arrangements
(Serbia)
 Results since 2010





Fiscal Strategy Reports prepared and
reviewed by Fiscal Council
Deficits have exceeded 1% GDP
General Government debt as exceeded
45% GDP
Local governments have met deficit targets
Fiscal Council has been a vocal advocate
for fiscal responsibility
Key lessons
 Modernisation involves broad-based, long-term reform
 Fundamental change is a slow process

BUT positive outcomes do happen, sometimes unexpectedly
 Changing information, processes and structures are not
sufficient

Change in behaviour and culture are necessary
 Behavioural change is difficult and takes time
 The crucial ingredients are demand for, and effective use of, the
modernised operations