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Building Budget Credibility. Collaborative Africa Budget Reform Seminar. 1 st to 3 rd December 2004 FARM INN, Pretoria, South Africa. Outline. Background Ownership of Priorities Predictability of R esources Budget Should Deliver with Minimum deviations Lessons Learnt. Background.

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building budget credibility
Building Budget Credibility

Collaborative Africa Budget Reform Seminar.

1st to 3rd December 2004

FARM INN, Pretoria, South Africa

outline
Outline
  • Background
  • Ownership of Priorities
  • Predictability of Resources
  • Budget Should Deliver with Minimum deviations
  • Lessons Learnt
background
Background
  • PEAP defines government macroeconomic and poverty policy objectives: Economic Management, Enhancing production, Competitiveness, and Incomes, Security, Conflict resolution and Disaster Management, Good Governance, Human development
  • A credible budget should be consistent with agreed PEAP priorities and deliver projected targets.
building budget credibility4
Building budget credibility
  • Institutionalisation of a harmonised framework to sustain a credible budget through:
      • Identification and consensus and priorities (Ownership)
      • Link Budget with agreed priorities(Assurance)
      • Predictability of resources (Trust)
      • Deliverance of budget with minimum deviation.
  • A framework that promotes synergy between policies, legislation and processes
ownership of priorities
Ownership of Priorities
  • Participatory approach: strategic role by stake holders thru SWAP, working groups
  • National consultations take 18 months at national , sectoral and local government levels
  • Action oriented research, studies on sector specific,institutional and cross cutting issues (operational efficiency, equity)
  • Outcomes of studies inform the decision making process
  • Revision of PEAP ever three years
trust level 1 linking national budget to agreed priorities
Trust level 1: Linking National Budget to Agreed Priorities
  • Poverty focused & equity concern in policies and programmes
  • Outcome & Output Orientation
  • MTEF
  • Budget Consultations at national, local government and sector levels
  • Parliamentary involvement (Budget Act 2001)
  • Donor sub groups and PER
se ctor wide approach swap
Sector Wide Approach (SWAP)
  • Identification and agreement of Priorities , targets and monitorable indicators by all stake holders
  • Promotes intra-sectoral linkages and synergy within the sector
  • Strategic allocation of resources
  • Facilitates monitoring and minimizes transaction cost on behalf of the donors
  • Minimize on duplications and wastage
slide8
MTEF
  • The MTEF resource envelope is consistent with macroeconomic objectives
  • The MTEF is three year rolling expenditure framework, it prioritizing the expenditures within constrained resources.
  • It enhances fiscal discipline and provides strategic allocation of resources.
  • The MTEF operationalises the PEAP and SWAP at both center and local government levels.
  • MTEF provides sectors with predictable and stable projection of budget resources.
the consultative budget process

May 15

April 1

June 15

The Consultative Budget Process

Parliament

Submission of Indicative

Plan/MTEF

Budget

Speech

Cabinet Approval

of BFP/MTEF

Final Budget

Approval

Cabinet

  • National Budget Workshop
  • Indicative Sector Ceilings
  • Budget & SWG Guidelines

Compilation of National BFP

And Updated MTEF

Finalisation of Budget

Allocations/MTEF

MFPED

PER

Inter-ministerial

Consultations

Preparation of Sector

BFP and Revised

MTEF Allocations

within the Ceiling

Preparation of Detailed

Budget Estimates

Line Ministries/

Spending Agencies/

SWGs/Donors

Apr - June

Oct - Dec

Jan - Mar

sectoral shares in the mtef 1994 5 2005 6
Sectoral Shares in the MTEF: 1994/5-2005/6

Education

PA

Security

Health

Interest

JLO

Agric.

Water

paf expenditures 1997 98 2005 6
PAF Expenditures 1997/98-2005/6

Other (Land Reform, Adult

900

Literacy, Restocking, LGDP)

Accountability

800

Rural Roads

700

Agricultural Extension and

Exports

Safe Water and Sanitation

600

PHC

500

Universal Primary Education

Shs Bn

400

300

200

100

0

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

(Pre-PAF)

trust level 2 predictability of resources
Trust Level 2: Predictability of Resources
  • Fiscal Policy Objectives
  • Forecasting Resource envelope
  • Improving resource predictability
  • Execution of the Budget with minimum deviations
fiscal policy objectives
Fiscal policy objectives
  • Economic growth (7%). To fund the public goods and services needed to run a modern state and meet the objectives identified in the PEAP
  • Low inflation (no more than 5%). To maintain a fiscal stance which is consistent with macroeconomic objectives. To avoid unsustainable public debt
  • Competitive exchange rate
  • Foreign exchange reserves at least 5 months of imports
  • Growth in private sector credit. To raise domestic revenues in a manner which does not distort incentives for the private sector or discourage work and investment
resource envelope
Resource envelope
  • MTEF = Total Inflows (Tax and non tax revenues + donor inflows) – Total outflows ( external debt servicing) - (domestic arrears payments) .
  • MTEF distributes the resources into sectoral and institutional allocations
  • Improving resource predictability
budget should deliver financial front
Budget should Deliver (Financial front)
  • Fiscal discipline by maintaining the agreed budget domestic deficit thru:
      • Manage expenditures within realized resources (cash budgeting).
      • Cut expenditures to match underperformance of domestic revenues.
      • Reduce foreign reserves to match under disbursements of donor funds
  • Supplementary expenditures are approved by parliament
  • Ring fencing of priority expenditures
  • Enhance financial management, monitoring and accountability
budget should deliver physical performance front
Budget should Deliver (physical performance front)
  • Periodic monitoring of the PEAP (Poverty assessment; House hold integrated surveys, demographic survey, integrity survey,National Service Delivery Survey)
  • Annual Budget Performance Report
  • District and sector reports on PEAP targets
  • National Integrated Monitoring and Evaluation System
lessons learnt
Lessons learnt
  • Homegrown responding to Emerging Issues
  • Substantial investment in awareness raising and capacity and institutional building or restructring
  • Budget a Potential but Not sustainable Means to All Political Aspirations: role of Govt Intervention and Balancing spending between social and productive sectors.
  • Targeted and Cost effective consultations versus bottom up approach.
  • Measures to counter political interference (necessity for ring fencing the poverty priority programmes)
  • Clarity on Principles of collaboration