1. IMF Spring Meetings April 2011 Public Financial Management
Reforming Budget Preparation
Mounir Rached
Vice president
Lebanese Economic Association
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2. I. Introduction
Countries in MENA have made some progress (but fragmented) toward improving their public financial management (PFM):
Budget preparation
Budget execution
Accounting
Auditing
GFMIS
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3. Introd. Reforms were introduced
However unevenly and many challenges remain
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4. II. Budget Preparation Budget Preparation
Serious effort is still needed to address many shortcomings that face the process of
Budget Preparation
Absence of a fundamentally sound approach to budgeting
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5. II. cont…
Most countries are cognizant of what is needed to develop sound budgeting
Extensive technical assistance by the IMF and EU over the past 2 decades have been successful in introducing knowledge of the sound principles of budgeting and surveyed current weaknesses
TA effectiveness limited
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6. II. cont.
Capacity, administrative and political constraints have impeded progress
Human capacity remains an important retarding factor- but limited effort has been made to improve it.
There is a broad shortage in PFM capacity in nearly all countries
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7. III. Budgeting process A. Economic strategy
In many countries, there is an absence of full and complete economic strategy
An economic strategy calls for a full plan that takes into account (or establishes) clear medium –term objectives.
When designed, it is often fragmented and not carefully implemented
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8. III. cont Frame work (MTF) B. Medium-Term
Few countries have a medium-term macroeconomic economic framework
Not enough resources are allocated to the macroeconomic and strategic frameworks
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9. III. Cont. Such a framework would define : Targets,
Resource perspectives &
Sectoral priorities of the budget
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10. III. Cont..
MTF requires particular skills that can perform thorough economic analysis and financial programming- Are such skills available!!
MTF Provides a forward vision of the future fiscal and overall economic performance
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11. III. Cont…
Several countries have advanced their medium-term fiscal/economic outlook in recent years
( notably Algeria, Jordan, Morocco, Tunisia, Lebanon)
But all need to strengthen their methodology and techniques
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12. III.cont… Budgeting requires a Medium Expenditure Framework (MTEF)
Determines ceilings for line ministries
A prelude to top-down budgeting
Determines current & capital spending
Progress is partial as in many countries.
Budget preparation is not a key policy process yet
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13. III. cont Following sectoral allocation
Each Ministry prepares it budget based on the ceiling and current capital mix
performance based budgeting requires:
Development of performance indicators
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14. IV. Other weaknesses in Budget preparation
A. Coverage principle is not respected. In some
countries the budget is not unified and dual
budgets are practiced
Even when they appear unified:
B. Integration between the current budget and
the capital budget is week.
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15. IV. cont
C. Earmarking Some have resorted to earmarked budgeting to overcome the week coordination between current and capital budgets Leads to having fractured budgets
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16. IV. Cont D. The “annuality principle “ is not respected in some.
Spending in some cases is carried over to the
following year
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17. IV. cont E. In many a top- down approach is not practiced
F. Absence or weakness of prioritization at the national level and at the Ministry level
G. External financing is not well coordinated with
national plans
H. Debt service in some is not well projected and its
risk is played down
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18. IV. Cont.. I. Few have introduced performance budgeting
& performance indicators
J. GFMIS application remains limited in the budget preparation process only Jordan and Morocco are well advanced , ands some Gulf states (Dubai in particular)
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19. V. Challenges
Adopt an integrated approach instead of a fractured approach to reforming budget preparation
Evaluation of existing human resource capacity
Define needs for the coming 5 to 10 years
Availability of adequate financing to assure sustainability of reform & training
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20. V. Cont… Trainees selection Retention policy
A unified training program for MENA can economize and provide efficiency in capacity building
Thank you
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