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The MTEF in Practice - Reconciling Conflicting Claims Malcolm Holmes Implementing an MTEF Pilot or whole of Government Budget unification (PIP elimination) Reduction of the number of budget line items Link between line items and objectives and impact Introduction of a 3 year perspective Mission statements and strategic plans for sectors Implementing an MTEF (Cont.) Use of strategic plans for budget preparation Emphasize costs of activities Merging of external and domestic financing Withdrawal of MoF from details of budget allocations in LM Engaging cabinet Focus on performance Ghana: Explaining progress Commitment from Minister and Ministry of Finance, line ministers and donors MTEF based on GOG-led PER Consensus building efforts (losers and winners) MTEF becomes budget process Ghana: Explaining Progress (Cont.) Consistency between MTEF and sector approaches Link to other reforms Performance focus - matching authority and accountability Ghana: Sustainability Tests Predictability of funding (domestic and external) – predictable macro/fiscal framework – cash flow estimates – cash available on time – budget voted on time by parliament Predictability of policies - Cabinet Engaged Controlling expenditure Focus on outcomes Ghana: Sustainability Tests (Cont.) Dynamic process of evaluation of policies Autonomy and accountability of LM Civil service management - pay policy, authority Decentralization Uganda Sequential progression through 3 levels Using MTEF-style approach since early 1990’s – Fiscal discipline – Predictable sectoral expenditures that reflect stated strategic policies MTEF reinforcing goals Provides framework for implementing Poverty Eradication Action Plan Sequencing the MTEF in Uganda 1992/93: Medium-term expenditure planning with goal of fiscal discipline – Cash-flow management with monthly expenditures 1996/97 Linking sectoral allocations to policies Linking policy and funding predictability to technical efficiency Reforming the budget process Annual budget framework process: – Identifies medium-term priorities, resource constraints and sectoral ceilings – Consultation with line Ministries and external stakeholders – Links with civil society through more transparent budgeting documents Extending the MTEF Extending MTEF to district government – Provision of technical expertise from central Ministries Defining roles in budgeting – Budget administrators propose envelopes – Sectors propose policy choices and allocations – Cabinet and parliament make political choices Uganda: Sustainability Tests Implementation of strategic allocations – Deviation between budgeted expenditure and actual spending 25% – Line Ministries overspending MTEF ceilings Revenue unpredictability – Shortfall of tax revenues – Inability of donors to provide medium-term commitments – Impacts on expenditure disbursement Uganda: Sustainability Tests (contd) Limited flexibility with expenditure readjustments – Statutory expenditures – Politically important areas – Areas with donor conditions Continued separation of donor-funded project from Consolidated Fund Uganda: Sustainability Tests (contd) Sectoral planning issues – Little clarity of goals – Little quantitative analysis – Failure to link expenditure estimates to priorities – Few performance measures Monitoring and evaluation of sectoral efforts is weak Uganda: Sustainability Tests (contd) Improving the quality and efficiency of service provision PRIORITIZATION Institutional Arrangements Hard Budget Constraint Cohesive political executive Sector Strategies Forum within which decisions constrained by resource availability over medium term and policies compete Programmatic decisions devolved to line ministers (within hard sector ceilings) PRIORITIZATION Institutional Arrangements (Cont.) Strategic priorities and sustainability drive aid Information - Costs, Performance Mechanisms for Prioritization Case: Australia Aggregate Fiscal Targets and Strategic Objectives Medium-term Costs of Competing Policies Australia: Medium-term Costs of Policies Mar 84 15 Projection dates 10 May 85 Nov 85 5 Dec 86 Aug 89 0 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 Mechanisms for Prioritization Case: Australia Aggregate Fiscal Targets and Strategic Objectives Medium-term Costs of Competing Policies Arena for Contesting and Coordinating Policies - Cabinet: Strategic Priorities - Line: Spending-Savings within Hard Budgets Ex-post Evaluation Outcomes: - Deficit 4% GDP to surplus of 2% GDP - Shifts in intra and intersectoral composition - Greater funding predictability Australia: Changes in Expenditure Composition, 1983-94 Spending Saving Net change $ Millions 5000 New spending 4000 3000 Net change 2000 1000 0 -1000 -2000 -3000 Savings from existing policy -4000 Defense Educ Health Source: Dixon, 1993 : 32 Socsec Transp. Other Sector-wide Approaches as Performance Based Budgeting Sector-wide Clear Strategy and Policy Framework Program Focus Sector Expenditure Program Medium-term Perspective Consistent with Macroeconomic Framework Donor Coordination Getting Decisions in the Right Hands Strategic Policy Sector Envelopes Program: Individual Ministers Running Costs: Managers