Presentation on theme: "1 Public Expenditure Management Review (PEM/R) in Thailand Bureau of the Budget 15 December 2006."— Presentation transcript:
1 Public Expenditure Management Review (PEM/R) in Thailand Bureau of the Budget 15 December 2006
2 Last year, Thailand commenced our Public Expenditure Management Program. Previous year presentation… Thai PEM Framework –Strategic Performance based Budget System –Decree on Good Governance and Government Administrative Plan –OECD Best Practices for Budget Transparency –IMF Code of Good Practices on Fiscal Transparency Thai PEM Main Focus –Linkage between national priorities and budgeting within the framework of sustainability –Legal framework and Institutional arrangements for public spending PEM Review Implementation Plan –Mid term review in early 2006 –Start with Fiscal Sustainability component
3 Three Principles –Maintaining aggregate fiscal discipline –Allocating public resources in accord with strategic priorities –Promoting the efficient delivery of services Coverage –Formulation of policies –Planning –Allocation of resources –Implementation Implementation of the Thai PEM abides by the three fundamental principles of Best Practiced PEM and covers the whole process of delivering public services.
4 In the past year, Thailand has made progress in the five main components of PEM/R.
5 Critical tools have been identified in order to successfully reach each of the key PEM objectives. PEM Objectives TOOLS Maintain Long-term Aggregate Fiscal Discipline Maintain Long-term Aggregate Fiscal Discipline Strengthen Strategic Allocation of Resources Strengthen Strategic Allocation of Resources Increase Operational Efficiency Increase Operational Efficiency Enhance Managerial Flexibility and Accountability Enhance Managerial Flexibility and Accountability Enhance Fiscal Transparency National Strategic Target Ministerial Strategic Plan & Budget Ceiling Integrated agenda based Budget Plan MTEF Top Down/Bottom up Fiscal rules Budget Ceiling Ratio of Capital/ Operating Budget Mid-Term Review Service Delivery Targets & Public Service Agreement Output Profile Performance Indicators Increasing roles of front line manager PPP & other Public financial innovations Performance measurement Realignment of Program-Activities-Outputs GFMIS Improve Performance and Financial Report Improve the Format of Budget Documents Improve Budget Information System
6 Tools for each objective are under various stages of development; some key ones have been implemented. PEM Objectives TOOLS Progressive Status Init iati ve Desig n & Devel opme nt Pilot Testin g Use in Budge t Proce ss Refine & Instituti onalize 1. Maintain Long-term Aggregate Fiscal Discipline 1.1 MTEF Top Down / Bottom up 1.2 Fiscal Rules 1.3 Budget Ceiling 1.4 Ratio of Capital /Operating Budget 1.5 Mid – Term Review
7 MEDIUM-TERM BUDGET PLANNING FRAMEWORK National Economic and Social Development Plan National Economic and Social Development Plan Government Administrative Plan Government Administrative Plan MTEF (Top-Down) MTEF (Bottom-Up) Government Policy National Investment Plan National Investment Plan Annual Budgeting Ceiling Fiscal Policy Formulation Fiscal Policy Formulation Budget Allocation Strategy Budget Allocation Strategy ANNUAL BUDGET PLANNING FRAMEWORK Annual Budget Preparation Annual Budget Preparation Macro-economic Outlook Macro-economic Outlook Revenue Forecast Revenue Forecast Public Debt and Fiscal Risks Public Debt and Fiscal Risks Fiscal Rules Fiscal Rules Demand of Funds Supply of Funds Tools for long-term Fiscal Discipline have been integrated into the Budget Process.
8 CURRENT BUDGET PLANNING PROCESS TASK CabinetMOFNESDBBOTBOBLine Ministry 1. Macro Fiscal Framework Prepare baseline economic forecastP/RL Prepare baseline revenue estimatesLPPP/R Project MTEF and future commitmentsSLS Prepare aggregate fiscal targetsAL S S 2. Budget Allocation Policy Develop Govt Adm Plan and set policy themes ASLP I/ S Define spending prioritiesALP Set public debt, fiscal risk projections, and identification of capital projects ALSP/R 3. Budget Ceilings Set ministry spending limitsALP Set departmental spending limitsALP A =Approve L=Lead P= Participate I=Initiate R= Review S=Support All key agencies are involved to some degree in the utilization of various tools to ensure fiscal sustainability in the budget planning process. MOF = Ministry of Finance, NESDB = National Economics and Social Development Board, BOT = Bank of Thailand, BOB = Bureau of the Budget
9 1.Ratio of Public Debts to GDP not more than 50% 2.Debt service not exceeding 15% 3.Budget Deficit not more than 2% of GDP 4.Annual borrowing not more than 20% of total annual budget plus not more than 80% of the principle repayment budget 5.Capital expenditure no less than 25% of total budget The Thai Government has abided by a set of publicly announced Fiscal Rules, and the rules are consistent with the Sufficiency Economy policy principle
10 Thai PER will be conducted every two years, at the beginning and mid-term of the government cycle. Year 1Year 4Year 2Year 3 GOVERNMENT CYCLE PER Cycle Starts PER Mid-Term PER Cycle Ends to ensure the effectiveness of the review to maximize the use of information in policy & implementation adjustment. Previous Year Hypothesis
11 Results of the first Mid-term review is useful, but the process is interrupted by unforeseen circumstances. Macro economics assumptions must be scrutinized to ensure solid foundations. Assumptions of major government policies must be realistic. Report on Public Debts do not cover all existing risks. Fiscal decentralization needs to be reviewed urgently. Financing for Mega Projects must be well-planned. Some key issues will increase fiscal pressure –Income Contingent Loan for education –Demographic trend of an aging population –Capitation Rate for healthcare
12 Holistic structure of plans and targets have been installed from national level down to operational level. PEM Objectives TOOLS Progressive Status Initi ativ e Design & Develo pment Pilot Testing Use in Budget Proces s Refine & Institutio nalize 2.Strengthen Strategic Allocation of Resources 2.1 National Strategic Target 2.2 Ministerial Strategic Plan & Budget ceiling 2.3 Integrated agenda based Budget Plan
13 Public policies are run in three dimensions simultaneously to effectively drive key policies, provide public services, and enhance area specific competitive advantages. National Economic and Social Development Plan National Economic and Social Development Plan Government Administrative Plan Government Administrative Plan Government Policy Ministry Strategy Line Agency Strategy 4-year Operational Plan Annual Operational Plan 4-year Operational Plan Annual Operational Plan Function Based Provincial Cluster Strategy 4-year Operational Plan Annual Operational Plan Provincial Strategy 4-year Operational Plan Annual Operational Plan Area Based Government Agenda Agenda Based
14 Performance indicators become the focus of the dialogue in budget scrutiny process. PEM Objectives TOOLS Progressive Status Initi ativ e Design & Devel opme nt Pilot Testin g Use in Budge t Proces s Refine & Institutio nalize 3. Increase Operational Efficiency 3.1 Service Delivery Target & Public Service Agreement 3.2 Output Profile 3.3 Performance Indicators
15 Public Service Agreements between Ministry and Agency have been signed, but currently they are not fully enforced.
16 1.Government Strategic Target (Government Administrative Plan) 2.Strategic Target (Government Administrative Plan) Agenda/Function/Area 3.Ministry Service Delivery Target (Expected Result)(4-year Operational Plan) 4.Agency Service Delivery Target (4- year Operational Plan, Annual Operational Plan) 5.Agency Mission (4-year Operational Plan, Annual Operational Plan) 6.Outputs & Performance Indicators in each level including main responsible person and supporting responsible person - Ultimate Outcome – Key Success Factors - Intermediate Outcome & KPIs - Immediate Outcome & KPIs - Output (Quantity,Quality,Timeliness,Cost) 7.Output/Service Delivery Process (Operational plan/Budget Management Plan) - Output Target (Agenda, Function, Area) - Primary/Secondary/Support Activities - Budget Output Profile 8. Budgeting Management -Budget Planning -Budget Allocation Plan -Budget Execution 9. Output Costing 10. Efficient Resource Management -Key Success Factor and Constraints -Organization Management System (Operation Expense) -Organizational Structure and Human Resource Management (HR Expense) -Facilities and Investment Management -Risk Management 11. Performance Reporting in each level -Performance and budget used compared to whats indicated in the plan -Monitoring -Evaluation -Problems, Obstacles, and Recommendation Output Profile has been designed to improve the information structure in the budget process.
17 Performance indicators are attached to each agenda, strategy, tactic, and activities in the budget documents. National level: Achieve knowledge-based society for people with solid ethical values and good morals Ministry level: People receive education and lifelong learning with quality assurance –Quantity measurement: Years of education of the population Educational institutions with support for strengthening –Quality measurement: Target students with compulsory and higher education External students with ability to apply their knowledge Agency level –Quantity: number of students/researches in each field –Quality: quality of standardized tests, employment, ability to continue education
18 The trend to increase managerial flexibility and accountability continues in the past year; PPP is being tested. PEM Objectives TOOLS Progressive Status Initi ativ e Design & Develo pment Pilot Testing Use in Budget Process Refine & Institution alize 4.Enhance Managerial Flexibility and Accountability 4.1 Increasing roles of front line manager 4.2 PPP & other Public Financial Innovations Performance Assessment Rating Tool 4.3 Performance Assessment Rating Tool 4.4 Realignment of Program-Activities-Outputs
19 Front line managers have been given more authority on operation planning and budget matters. New Draft Budget Procedures Act – Strategic performance based budget process – De-concentration: Empowering ministries and departments – Comprehensive coverage & Good governance New Budget regulations –Flexibility Transfer within Budget Plan Spending within budget category Spending of left-over budget –Conditions Achievement of objectives No multi-year commitment No new government employment No land acquisitions Constructions of not more than 10 million baht Equipment of not more than 1 million baht –Reporting
20 PPP has provided lessons learned, and it is now encouraged for projects that can generate sufficient cash flow. Key issues must be addressed –Prioritization and preparation of good projects –True improved value for money –Well thought of risk/benefits assessment & transfer –Actual acceleration of delivery –Transparent off-budget treatment Issues under considerations –Clear legislation Legality to enter contract Dispute settlement –Government institutional capability –Development of Key Processes project viability assessment private sector pricing Realistic government support
21 Performance Assessment Rating Tool (PART) is used to ascertain the capabilities of public agencies. Pre evaluation (before budget spending) Interim evaluation (during operations) Post evaluation (after implementation)
22 Fiscal transparency is enhanced by improved budget information system on a more integrated platform. PEM Objectives TOOLS Progressive Status Initi ativ e Design & Develo pment Pilot Testing Use in Budget Process Refine & Institution alize 5. Enhance Fiscal Transparency 5.1 GFMIS 5.2 Improved Budget Information System 5.3 Improved the Format of Budget Document 5.4 Improved Performance and Financial Reporting
23 BOB e-Budgeting BIS (Budget Information System) EIS (Executive Information System) BBOC (BB Operating Center) BBOA (BB Office Automation) Planning Preparation Evaluation GFMIS Prime Minister Operation Center BOB ICTs integration with the public sector platform enhances accessibility for users and increase transparency overall.
24 Increase fiscal inter-relationship among government agencies in all levels Increase roles of government agencies concerning Public Expenditure Management Review Refine design & structure of all PEM Components and move forward with the operational plan for each PEM component Emphasize the Integration of Fiscal Sustainability Framework and MTEF in Budget Planning process Capacity Building and System Support Program The Next Step is to ascertain that PEM become standard operating procedure in the Thai Budgetary Process, and Thai PEM must continue to be improved.