Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Madagascar PER Helping to link the Budget to the PRSP Christos Kostopoulos, ECSPE Dieudonne Randriamanampisoa, AFTP1 Madagascar PER: PRSP Budget A. COUNTRY PROFILE B. PRSP – Objectives, Implementation challenges, Recommendations i. Macro ii. Allocative iii. Budget management C. ACCOMPLISHMENTS (modest), LESSONS, AND NEXT STEPS Madagascar PER: PRSP Budget A. Country Profile Population of 17 million, 80 percent live in rural areas (2004); size of France and Belgium, Kenya, Thailand Great underexploited potential for economic growth and development - including a rich natural resources, fisheries, tourism, textiles Declining growth, due to poor policies – 10 1.4 Left scale 5 1.3 1.2 0 1.1 -5 1 0.9 -10 0.8 -15 -20 1966 Right scale 0.7 0.6 1971 1976 1981 1986 GDP per capita (% growth) 1991 1996 2001 relative to SSA x So. Africa Source: Live Database and IMF Early 1990 reforms gradually pay off between 1997-2001; GDP gr. 4.6 avg. per. Madagascar PER: PRSP Budget A. Country Profile PRE-PRSP INDICATORS 2001 Poverty Indicators Incidence of poverty (national) (%) Rural (%)/ Urban (%) 70 77/44 Service Delivery Indicators Roads on poor cond / sh of paved rds 80/11.6 Net primary school enrolments[1](%) 67 Repetition rate in rural primary school, 11th grade (%) Pre-natal consultation, % 37 Infant mortality (out of 1000) 86 Immunization rate[2](%) 36 Electricity connections (% of households) 15 Water connections[3](% of households) 21 Source: EPM 1997, 1999, 2001. 63 Madagascar PER: PRSP Budget A. Country Profile ..as if that’s not enough.. 2002: A political crisis in the first half of the year severely disrupted the economy GDP contracted by 13 percent, inflation was 16 percent, drop in investment and collapse of revenues Destruction of economic infrastructure (bridges, roads) and sharp rise in urban poverty EPZs closed Poverty rose to 81% (simulation) ..respects ~10-political/reform cycle 2003: Economic recovery (9.8 percent of GDP growth – brought real incomes to 90% of pre crisis levels ); 2004: Two cyclones, a sharp depreciation in the MGF and a collapse of vanilla prices Madagascar PER: PRSP Budget A. Country Profile Extended dialogue on PEM issues and excellent GOM-WB relationship PEM-PFM Related activities 2001 2002 IPRSP Crisis AAP-1 02Bgt 2003 BPs> CPAR 03Bgt PRSP CFAA EUaudit 2004 PEMAP> PRSC1 PER PER 2005 PEMAP2 PER PrgBgt Bud Cal 04Bgt PER PRSC2 05Bgt PER 2003/04 was an opportunity for follow- up on previous PEM/PFM and stock-taking exercise; ask of service delivery Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges PRSP Objectives: To promote rapid and sustainable development to reduce poverty by half in 10 years from 70% to 35% PRSP Priorities Improving Governance Broad-based Growth (Transportation initially) Bringing Social and Material Security (Education; Health; Security) Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges PRSP Challenges Implementation Challenge 1: Macro framework restrained Implementation Challenge 2: Expenditure composition not fully aligned with PRSP priorities Implementation Challenge 3: Budget process (preparation and execution) still poor and capacity is limited, despite efforts Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges Implementation Challenge 1: Macro framework restrained PRSP was ambitious: 2004-2006 GDP gr 7.5%; Cap exp 10.2% GDP; high deficit despite high debt: end 2001 101% Nominal GDP; But PRGF was more cautious: 2004-2006 GDP gr 6%; Cap Exp 8.7% GDP Year 2003 turned out better than expected, and set GOM on a higher expenditure path; although poor consensus on macro undermined MT planning Need post 2006 framework. Macroeconomic Frameworks PRSP and PRGF 4th Rev PRGF (Jul 03) Average 2000-2001 PRSP Jul 03 Average 5th Rev PRGF Dec 04 Average Average 2002 2003 2004-2006 2003 2004-2006 2003 2004-2006 GDP gr. 5.4 -12.7 6.0 6.0 6.0 7.5 9.8 6.3 CPI eop 6.7 13.5 7.0 5.0 8.0 5.1 -0.8 8.3 I/GDP 16.8 14.3 7.5 20.4 17.5 22.4 17.9 24.6 Rev + Grants 14.7 10.2 14.9 15.0 15.0 14.9 15.4 18.9 10.9 8.0 10.6 12.0 10.6 12.0 10.3 12.4 Expenditures 16.8 15.7 18.2 18.5 18.2 20.1 19.5 22.5 Capital exp 7.0 4.8 7.3 8.7 7.3 10.2 7.8 11.4 -2.1 -5.5 -3.3 -3.5 -3.3 -5.3 -4.2 -3.6 Revenue Deficit Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges Implementation Challenge 1: Macro framework restrained (cont) Recommendations Raise revenues Improve revenue forecasting Prepare annual budget framework papers to link resource availability to PRSP objectives Prepare a post-2006 macro framework Implementation Challenge 2: Expenditure composition not fully aligned with PRSP priorities Implementation Challenge 2: Expenditure composition not fully aligned with PRSP priorities Despite efforts to prioritize within ..changes relative to the envelope… GDP are modest Budget Allocations Percent of non interest expenditures Pre-PRSP 2001 2003 2004 Percent of GDP (data note) Pre-PRSP 2001 2003 2004 Total 100 100 100 15.6 17.3 20.1 Governance General Administration o/w budget, fin. admin Defense Public security 43.9 37.9 25.1 2.4 3.5 44.6 35.5 26.0 3.9 5.2 42.1 32.8 24.5 4.1 5.2 6.8 5.9 3.9 0.4 0.5 7.7 6.1 4.5 0.7 0.7 8.5 6.6 4.9 0.8 1.0 Growth Energy Agriculture Environment Transport & Communication o/w Transport Others (incl Industry) 28.2 1.7 5.8 2.5 13.3 13.0 4.9 25.3 1.5 4.9 2.4 11.2 10.8 5.3 26.4 1.3 5.2 2.3 12.9 12.6 4.8 4.4 0.3 0.9 0.4 2.1 2.0 0.8 4.4 0.3 0.8 0.4 1.9 1.9 0.9 5.3 0.3 1.0 0.5 2.6 2.5 1.0 Social Education o/w Primary Education Health o/w Primary Health care Others 27.9 12.5 2.3 9.0 2.8 6.5 30.1 15.2 6.4 8.4 2.9 6.5 31.5 18.4 6.1 7.4 3.4 5.7 4.4 2.0 0.4 1.4 0.4 1.0 5.2 2.6 1.1 1.5 0.5 1.1 6.3 3.7 1.2 1.5 0.7 1.1 Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges Implementation Challenge 2: Sectoral expenditure composition not aligned with PRSP priorities (cont) Allocations not aligned with Business Plans/PRSP Marginal changes made in composition in favor of priorities (government, transport, education) BUT.. ..impact on GDP ratios is minimal Excessive allocations to administration; Health sector allocation is still far behind the need; Agricultural sector is neglected; Not enough to Justice and environment sectors; High Degree of Centralization Recommendations: (i) further prioritize (!!??), but this not easy except for some MOF expenditures (ii) increase envelope by raising revenues and receiving more external assistance (iii) look at sectoral policy issues that can affect intra-sectoral expenditures (education, transport, environment) Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges Implementation Challenge 3: Budget process still poor and capacity is limited, despite efforts Recent achievements Prepared Public Finance Priority action plan (2004/05) and established coordination committee in the Ministry of Finance to coordinate, monitor and evaluate reform agenda Introduction of program budgets for 2005 Implementation of the recommendation of an audit on the treasury Putting in place of an integrated financial management system is ongoing Preparation of the new procurement code Establishment of the General Inspectorate for Finances (IGF) Introduction of a results matrix for all ministries and departments Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges Implementation Challenge 3: Budget process still poor and capacity is limited, despite efforts (cont.) Outstanding issues Preparation A weak macro and fiscal framework Restricted role of cabinet (in preparation and in accountability) Marginal involvement of line ministries in budget preparation process Line ministry capacity in preparation is weak Need well elaborated strategies (objectives, institutional arrangements, costing - funding availability) Available programmable envelope limited-inadequate non salary expenditures (e.g. education, transport and environment) Execution - Disbursement of funds: Many processing steps to make payments (11 from commitment to execution) Limited time for budget execution: between April to October Weak cash management in place Procurement problems related to investment budget (accounting/accountability) A flawed system of financial monitoring (execution data of donor funded investment, budget reporting system of line ministries, accounts of treasury; reliability of expenditure data) Madagascar PER: PRSP Budget B. PRSP Objectives and Implementation Challenges Implementation Challenge 3: Budget process still poor and capacity is limited, despite efforts (cont.) Outstanding issues (cont) Execution-Management A highly centralized public administration (only 3-4 percent of the national budget is managed by the communes) Ineffective management and organizational structure (e.g. education, transport and environment) Recommendations Tremendous training needs in the area of program budgeting, procurement and integrated financial management system Developing a budget framework paper to strengthen macroeconomic framework preparation and make planning more transparent Enhancing the role of Cabinet and strengthen participation of line ministries at different stages of budget preparation process Introducing a coherent results-based management framework (linking business plans and program budgets to PRSP, regular implementation reports) Madagascar PER: PRSP Budget Summary of linkages b/w Budget and PRSP Presidential commitment to PRSP (end 02 for 03B) Including PRSP Business Plans (end 02 for 03B) Strengthening of revenues / fiscal framework (03B-05B) Continuous re-prioritization (03B-05B) Orientation/linking of Budget Reform towards implementing policies and getting results (03B-05B) via single government-owned PEM/PFM Action Plan New budget calendar (05B) Early macro framework with IMF/BFP More time for budget prep at line ministry level, coordinate with annual PRSP review (June) Strengthen Cabinet in prioritization and reform monitoring Later submission to Parliament Introduction of Program Budgeting (05B) to link Budget to PRSP Introduction of a results matrix (05B) Madagascar PER: PRSP Budget Summary of linkages b/w Budget and PRSP Generic Budget Cycle with some Madagascar “PRSP-Budget Preparation” Reforms in Red Budget Framework Paper PRSP Business Plans Program Budgets Macroeconomic Framework Budget Calendar Ceilings Ministry ceilings developed based on bottom up requirements Sector Review Ministries define their objectives, results indicators, activities and costs for three year period based on policies and priorities Cabinet Debates ceilings based on government priorities National Assembly Approves first year estimates, two forward years indicative Three Year Estimates Ministries finalise estimates based on approved ceilings for three year period Review of progress by central ministries to feed into setting of ceilings for next year Managing and Reporting on results Ministries use information on results to improve management and report progress Information on results is used in planning the next budget cycle PRSP Annual Review Results Matrix Madagascar PER: PRSP Budget D. Modest accomplishments, Lessons and Next steps Accomplishments (PER: GOM and WB) Raised awareness on resource issues Raised awareness on progress on reforms Reinforced links between PRSP and budget Gave ammunition to reformers Lessons Reforms take time Capacity building is critical Reform management is key to maintaining reform pace Next steps PRSP remains MT policy document and expenditure roadmap PER fed into 2005 PEM/PRM action plan GOM to lead PER in 2005 Implementation of recommendations Madagascar PER Team Guenter Heidenhof and Christos Kostopoulos (Task Team Leaders), Odile Keller, Emile Louis Rene Finateu, D. Randriamanampisoa, Sylke von Thadden, Gervais Rakotoarimanana, Sylvain Rambeloson (Public expenditure management); Jacob H. Bregman, Maria Eugenia BonillaChacin, Patrick Ramanantoanina (Education); Willem van Eeghen, Janet Dooley, Anna van der Wouden (Country Management Unit); Susanne Holste, Noroarisoa Rabefaniraka (Transport); Kirk Hamilton, Martien Van Nieuwkoop, Bienvenu Rajaonson, Jean-Christophe Carret (Environment); Robert Keyfitz, Luc Razafimandimby, Adam Schwartzman, Aurelien Kruse, Benu Bidani (Macroeconomic); Laza Razafiarison (Macro/Public Finance); Madeleine Chungkong, Mavo Ranaivoarivelo, Lanto Ramanankasina (overall support); Sanjay Pradhan, Brendan Horton and Stefano Paternostro are the peer reviewers. Helga Mueller was Sector Manager. Hafez Ghanem was the Country Director through mid 2004, and James Bond supported the PER as Country Director afterwards.