Public Expenditure Review Workshop
December 1-2, 2010
The Planning and
Budget Process
Andrew Bird
Mokoro Consultants
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Overview
• Strengthened planning and budgeting architecture:
• Reinstatement of NDP process
• More realistic and strategic approach to budget planning
• MPSA budgets now activity based
• But, in practice, reforms not sufficiently linked:
• NDP sector action plans not linked to the budget
• Insufficient analytical work to guide resource allocation
• Medium-term focus of the budget remains weak
• Issues over the transparency of the Planning and
Budgeting Processes
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Lessons of International Experience
• Review and evaluations have raised questions about:
• The realism and rigidity of national planning exercises and their
ultimate usefulness.
• Whether MTEF reforms have resulted in improved budget
outcomes.
• Whether the necessary conditions are in place for successful
implementation of performance oriented budgeting initiatives.
• Main lessons:
• Proceed gradually and stepwise – similar reforms in advanced
economies have often taken over 10 years.
• Learn from experience – if things are not working, find out why and
implement changes
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1. National Development Plan
and Strategy
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Reinstatement of the NDP Process
• PRSP in 2000 marked return to medium-term economic
policy and planning.
• 2006 National Vision 2030 to be operationalised though
five year development plans and annual budgets.
• Fifth National Development Plan 2006-10 more realistic
than predecessors emphasising:
•
•
•
•
macroeconomic stability,
improved economic governance,
administrative and regulatory reforms, and
improved public service delivery.
• Broad based consultative process in preparing NDP.
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Issues
• Difficult to link to the budget planning process:
• No multi-year fiscal framework .
• Used different sector classification to the budget
• Analysis tended to be reflective, policy prescriptions and
program plans not sufficient developed.
• No process for updating and adapting strategies and
plans to reflect changes in economic circumstances and
the government priorities.
• FNDP quickly became outdated and less relevant in
guiding government decision-making.
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Recommendations
• SNDP an opportunity to address weaknesses of FNDP:
• Include 5 year fiscal accounts projection within which the NDP
proposals have been developed.
• Better elaborated sector strategies and priorities that link to
NDP objectives.
• Fully costed sector action plans linked to resource allocations
that are consistent with the fiscal accounts projections.
• Introduce process for regular review and updating of
NDP linked to the MTEF/Budget process:
• NDP strategy review and update at beginning of each year
• Updating and rolling forward of sector action plans as part of
integrated NDP/MTEF/Budget Process.
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2. Medium-Term Expenditure
Framework
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Zambia’s MTEF Process
• Comprehensive and unified Budget
• Includes nearly all fiscal actions
• Single budget process for capital and current spending
• Two stage MTEF process, that reflects practice in many countries
• Strategic phase leading to Green Paper
• Medium-Term Macro-Fiscal Framework
• Review of sector programmes and priorities (SAGs)
• Resource ceilings for budget implementation
• Budget formulation phase – ABB
• MPSA Budget Framework Papers
• ABB submissions
• Consultations at key stages in process:
• MTEF/Budget Cabinet Consultation Paper
• Green Paper
• Finalisation of draft Budget
• Budget now approved by Parliament by beginning of FY.
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Issues
• No formally agreed MTEF and budget planning calendar
• MTEF and budget process starts late leafing insufficient time for
analytical work
• Little input from MPSAs during the strategic phase
• Little guidance for sector reviews, SAGs not functioning effectively.
• Outer year resource ceilings lack credibility and have failed to
bring a medium-term perspective to MPSA budget planning
• MPSAs continue to plan their budgets for a single year.
• Procedures for capital investment management problematic
• Project selection/appraisal procedures fail to exclude wasteful projects
• Commitments for on-going capital investment projects not tracked by
MoFNP or fully taken into account in setting resource ceilings.
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Recommendations 1:
An Integrated NDP, MTEF and Budget Calendar
• Expand MTEF/Budget Consultation Paper to include review of NDP
cross-cutting strategies and priorities (Feb)
• SAGs review and update NDP/MTEF sector action plans (May)
• Update macro-fiscal framework (end May)
• MTEF/ Budget Green Paper finalised (end June)
• Budget guidelines and resource ceilings issued (July)
• MPSAs prepare detailed budget proposals (end Aug)
• Budget hearings (end Sep)
• Update macro-fiscal framework (end Sep)
• Draft budget finalised and sent to National Assembly (Oct)
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Recommendations 2:
Strengthening the Technical Basis of the MTEF
• Strengthen capacities for macro-fiscal analysis
• Updated macro-economic forecasts at key points in MTEF/Budget cycle
• Review of fiscal policies and priorities
• Revitalise SAGs and provide guidance and instructions for
reviewing and updating NDP/MTEF sector action plans:
•
•
•
•
Incorporate policy and strategy developments
Review implementation progress
Initiatives/measures to improve program effectiveness and efficiency
Updated action plan consistent with macro-fiscal framework.
• Progressively increase credibility of outer year resource ceilings
• Include forward spending commitments on capital investment
projects as Annex to the Budget
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Integrated NDP/MTEF/Budget Calendar
Jan-Mar
Apr-Jun
Oct-Dec
Draft Budget
Approved by
National
Assembly
Green Paper
provided to
National
Assembly
Parliament
Cabinet
Jul-Sep
NDP Strategy
/Budget
Consultation
Paper discussed
Update Macro –
Fiscal Framework
(Macro forecasts; aid
forecasts; aggregate
MTEF ceiling)
Ministry of
Finance and
National
Planning
Finalisation of
MTEF and
Budget Green
Paper
Finalisation of
Draft Budget
and MPSA
Budget
Estimates
Budget
Guidelines
Issued to
Ministries
Final Update of
Macro-Fiscal
Framework
Preparation of NDP
Strategy/MTEF
Consultation Paper
(Sets out NDP/Budget
issues and priorities
for next 3 years)
Ministries,
Provinces
and Other
Spending
Agencies
Cabinet
Approval of
Draft Budget
Cabinet
Approval of
Green Paper
MoFNP/SAG
Review
Meetings
NDP Action Plan/MTEF
Sector Spending Reviews
(Review and roll forward of
NDP Action Plan and MTEF
sector spending plans)
MOFNP/MPSA
Budget Hearings
MPSAs Prepare Detailed Budget Proposals
(Budget Framework
Paper and Detailed
Budget Estimates).
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Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
3. Preparation of MPSA Budgets
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Activity-Based Budgeting
• ABB introduced in 2000 replacing previous line-item
budgeting process
• Utilises two tier classification breaking down spending
allocations by program and activity
• Outputs identified at program level and included with targets in
the budget estimates.
• ABB seen as having:
• Improved transparency of the budget (both officials and
Parliamentarians)
• Made it less easy to divert resources to other activities
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Issues
• Risk of strategic focus and management of the budget is
being undermined:
• Excessive number of programs/activities.
• Overly detailed breakdown of expenditures by economic item
• Inconsistencies in the basis under which ABB has been
applied in different ministries (Large variations in the number
of programs).
• Some major Economic items shown as programs and
activities (personal emoluments, utility costs, capital projects)
• Excessive number of outputs and indicators but output
information not used in budget presentation and monitoring.
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Recommendations
• Undertake a detailed review ABB implementation to:
• facilitate a more strategic approach to budget planning
• develop a consistent institutional ly or functionally linked
classification of programmes and activities that links to the NDP
• reduce the complexity of budget preparation
• introduce a stronger budget monitoring element
• Streamline the use of the economic classification in the
budget
• distinguish between control items to be shown in the budget;
• and accounting items that would only be used in recording
expenditure
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4. Transparency Issues
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• Stakeholder Consultation: Stakeholder consultation does
take place, but formal processes often not working effectively
(e.g. through the SAGs). Consultation around the Budget is
often informal and at too late a stage in the process.
• Internal Transparency: Compressed deadlines reduce
MPSA engagement in planning and budgeting processes.
Undermines link between MPSA inputs and final plans and
budgets.
• External Transparency: Zambia scored 36 out of 100 in the
2010 Open Budget Survey, ranked 60 out of 94 countries
surveyed. Classified as providing minimal information about
the budget.
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Improving Transparency
• Formally adopt, publish and implement an annual
planning and budgeting cycle setting out the key
processes, outputs and deadlines.
• Identify key documentation to be placed in the public
domain and establish deadlines for its publication on the
MoFNP website.
• Look at how the format, content and presentation of
public documents can be improved to make them less
impenetrable and make them more widely accessible.
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