Transcript The PRSP and Its Contribution to Medium

Medium-Term Budgeting in Moldova
Progress and
Future Challenges
February 2008
General context
In 2002 Government introduced MTEF as
a method of strategic budget planning
MTEF reform was introduced with the
World Bank and DFID support
MTEF – one of the main elements in the
agenda of strengthening public finance
management
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Key objectives under the MTEF Initiative

Policy Linkage – the National Public Budget is a key
instrument through which government policies are
realised.
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Comprehensiveness – medium-term budget planning
covers all public revenues and expenditures.
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Realism – government programmes must be planned
against a realistic assessment of available resources.
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Prioritisation – programme planning must recognise
budget constraints, include cost analysis, and allow for
reallocation of resources to higher priority areas.
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MTEF – Core Elements
Macro-fiscal framework
 Macro-economic forecast
 Public revenue framework
 Deficit and financing resources
Analysis of inter-sector budget issues
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EGPRSP implications for expenditure allocations
Wage bill analysis
Inter-government financing
Public Investments
Expenditures priorities analysis
 Between the sectors
 Within the sectors (expenditures strategies)
Expenditures ceilings
 By types of budgets
 By sectors and central Public Authorities (state budget)
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MTEF schedule
January – Launching the process, the issuance of
methodological indications
January to March – Development of the macrofiscal framework, sectorial expenditure strategies, and
the establishment of resource ceilings
March - Finalisation of MTEF and discussions with
the MTEF Coordination Group
April – Submission of MTEF to the Government
By 1st May – approval of MTEF by the Government
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The link between MTEF
and the Yearly Budget
It is an integrated part of the yearly
budget planning cycle
It is prepared before the development of
budgeting instructions
It sets the strategic framework for the
further budget planning
It is updated and extended yearly, in
order to keep a three-year perspective
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MTEF – Linking Policy and Budget Processes
Sequencing
Jun-Nov
Strategies
and
Programme
Priorities
Dec-May
National
Policy
Update
Resource
Framework for
Public
Expenditure
MTEF
Sector Resource
Ceilings and
Spending
Priorities
Detailed
Resource
Allocations
Jun-Nov
Annual
Budget
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MTEF Coverage
State Budget
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Basic Component
Special Funds
Special means
Foreign financing of the
projects (besides technical
assistance)
ATU Budgets
State Social Security Budget
Health Insurance Fund
Sectoral coverage
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Education
Health care
Social protection
Agriculture
Culture and tourism
Defense
Justice
Science
Environmental protection
Road and transport
Sport and youth
ATU level (territorial)
 10 ATU-s
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MTEF and External Financing
MTEF includes primarily externally financed
investment projects
Grants financed technical assistance that is not
administered by the MoF is not part of the
MTEF.
Uncertainties over future aid commitments has
made it difficult to forecast external financing in
outer years of MTEF.
Increased levels of donor support requires better
harmonization and integration of external
financing into the National Public Budget.
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Organizational Chart of the MTEF Process
Government
MTEF Coordination Committee
Responsible – Ministry of Finance
Working Group for
macroeconomic framework
Responsible – Ministry of Economy
Working Group for fiscal policy
and resource framework
Responsible – Ministry of Finance
Sector Working
Groups
(education, health, social
protection, agriculture,
culture, defense and s.o.)
Responsible – Relevant
Line ministries
Working Group for public expenditure
policy and priorities
Responsible – Ministry of Finance
Public investment
Sector Finance Divisions
of the MoF
Wagebill
Budget Synthesis Department within Ministry of Finance
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Stakeholder involvement
MTEF Coordination Group
 a consultative body in the decision making process
 wider participatory approach (Parliament, Presidency,
Government, public authorities, trade union, syndicate)
 detailed discussions and regular meetings
Government involvement
 takes final decision on the MTEF proposals
 a earlier involvement in the decision making process and a
better coordination with MTEF Coordination Group proposal
is required
Parliament engagement
 MTEF provides context for discussion of annual budget
 a more strategic approach to budget debate in Parliament is
required
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Sector Working Groups (SWG)
Participatory approach (inter-ministerial)
 Representatives of different public authorities, obligatory MoF and
MoET
 It is recommended to include representatives of Local authorities,
social partners and civil society (NGO)
 Nominal composition is revised annually at the beginning of MTEF
process
Line ministry – key role
 Leads and manages the activity of SWG
 Takes decision and is responsible for sector expenditure
strategy preparation
 A strong collaboration between policy formulation units and
budget units is required
Submit sector expenditure strategies and reports to the MTEF
coordination Group and MoF
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Sector Working Groups –
Main Functions
Help line ministries in development of
sector expenditure strategies within MTEF
Monitoring of MTEF sector strategies and
programs
Participate in discussion of main sector
policy issues, linked to the budget, and
Changes in the priorities in resource
allocation at sector level
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How has the MTEF Changed the Budget
Planning Process in Moldova?
 MTEF is an integrated part of the extended
annual budget cycle (initial phase)
 Provides a strategic and comprehensive
framework for budget development (3 year
perspective)
 Covers all the National Public Budget Components
 Includes sector and inter-sector analysis
 Budget process has become more transparent
and participatory
 Is approved by the Government in a participatory manner
 Is published in the Official Gazette (Monitorul Oficial) and on
the WEB site
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The Challenges Ahead
Although much progress has been made since the MTEF initiative was
first introduced five years ago, policy-based budgeting in Moldova is
still at an early stage of development.
 Institutional capacities and processes for policy development, programme
planning and budgeting require further development.
 Policy frameworks should take more account of capacity and budgetary
constraints.
 Constraints and prioritisation issues must be more explicitly addressed at
the political level.
 More space has to be created within budgets to accommodate new policy-
led spending initiatives.
 Political level engagement in the budget planning process has to be
broadened and strengthened.
 Presentation of the governments budgetary plans has to be improved –
both to Parliament and to civil society.
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Priorities in Taking Forward the MTEF
Initiative
 Better integration between policy development and budget planning
processes and calendars.
 Introduction of improved procedures for assessing fiscal impact in
policy decision making processes.
 Development of policy units in sector ministries.
 Introduction of a budget programme classification linking resource
allocations to policies and strategies.
 A stronger emphasis on identifying efficiency reforms in order to
create the space within budgets to fund new initiatives.
 Improvements and better integration in MTEF and Budget
presentation – a greater focus on what ministries plan to achieve.
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