1. The MTEF in Practice - Reconciling Conflicting Claims Malcolm Holmes

2. Implementing an MTEF n Pilot or whole of Government n Budget unification (PIP elimination) n Reduction of the number of budget line items n Link between line items and objectives and impact n Introduction of a 3 year perspective n Mission statements and strategic plans for sectors

3. Implementing an MTEF (Cont.) n Use of strategic plans for budget preparation n Emphasize costs of activities n Merging of external and domestic financing n Withdrawal of MoF from details of budget allocations in LM n Engaging cabinet n Focus on performance

4. Ghana: Explaining progress n Commitment from Minister and Ministry of Finance, line ministers and donors n MTEF based on GOG-led PER n Consensus building efforts (losers and winners) n MTEF becomes budget process

5. Ghana: Explaining Progress (Cont.) n Consistency between MTEF and sector approaches n Link to other reforms n Performance focus - matching authority and accountability

6. Ghana: Sustainability Tests n Predictability of funding (domestic and external) –predictable macro/fiscal framework –cash flow estimates –cash available on time –budget voted on time by parliament n Predictability of policies - Cabinet Engaged n Controlling expenditure n Focus on outcomes

7. Ghana: Sustainability Tests (Cont.) n Dynamic process of evaluation of policies n Autonomy and accountability of LM n Civil service management - pay policy, authority n Decentralization

8. Uganda n Sequential progression through 3 levels n Using MTEF-style approach since early 1990’s –Fiscal discipline –Predictable sectoral expenditures that reflect stated strategic policies n MTEF reinforcing goals n Provides framework for implementing Poverty Eradication Action Plan

9. Sequencing the MTEF in Uganda n 1992/93: Medium-term expenditure planning with goal of fiscal discipline –Cash-flow management with monthly expenditures n 1996/97 Linking sectoral allocations to policies n Linking policy and funding predictability to technical efficiency

10. Reforming the budget process n 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

11. Extending the MTEF n Extending MTEF to district government –Provision of technical expertise from central Ministries n Defining roles in budgeting –Budget administrators propose envelopes –Sectors propose policy choices and allocations –Cabinet and parliament make political choices

12. Uganda: Sustainability Tests n Implementation of strategic allocations –Deviation between budgeted expenditure and actual spending 25% –Line Ministries overspending MTEF ceilings n Revenue unpredictability –Shortfall of tax revenues –Inability of donors to provide medium-term commitments –Impacts on expenditure disbursement

13. Uganda: Sustainability Tests (contd) n Limited flexibility with expenditure readjustments –Statutory expenditures –Politically important areas –Areas with donor conditions n Continued separation of donor-funded project from Consolidated Fund

14. Uganda: Sustainability Tests (contd) n Sectoral planning issues –Little clarity of goals –Little quantitative analysis –Failure to link expenditure estimates to priorities –Few performance measures n Monitoring and evaluation of sectoral efforts is weak

15. Uganda: Sustainability Tests (contd) n Improving the quality and efficiency of service provision

16. n Hard Budget Constraint n Cohesive political executive n Sector Strategies n Forum within which decisions constrained by resource availability over medium term and policies compete n Programmatic decisions devolved to line ministers (within hard sector ceilings) PRIORITIZATION Institutional Arrangements

17. PRIORITIZATION Institutional Arrangements (Cont.) n Strategic priorities and sustainability drive aid n Information - Costs, Performance

18. Mechanisms for Prioritization n Case: Australia n Aggregate Fiscal Targets and Strategic Objectives n Medium-term Costs of Competing Policies

19. Australia: Medium-term Costs of Policies Mar 84 May 85 Nov 85 Dec 86 Aug 89 Real growth rate Projection dates

20. Mechanisms for Prioritization Case: Australia Case: Australia n Aggregate Fiscal Targets and Strategic Objectives n Medium-term Costs of Competing Policies n Arena for Contesting and Coordinating Policies - Cabinet: Strategic Priorities - Line: Spending-Savings within Hard Budgets n Ex-post Evaluation Outcomes: - Deficit 4% GDP to surplus of 2% GDP - Shifts in intra and intersectoral composition - Greater funding predictability

21. Australia: Changes in Expenditure Composition, 1983-94 Source: Dixon, 1993 : 32 $ Millions Net change New spending Savings from existing policy

22. n Sector-wide n Clear Strategy and Policy Framework n Program Focus n Sector Expenditure Program n Medium-term Perspective n Consistent with Macroeconomic Framework n Donor Coordination Sector-wide Approaches as Performance Based Budgeting

23. n Strategic Policy n Sector Envelopes n Program: Individual Ministers n Running Costs: Managers Getting Decisions in the Right Hands