PRS – Budget linkages in Tanzania Making Budget Reform Matter for Poverty Reduction 27 April 2006 Allister Moon

PRS-Budget linkages : some questions Effectiveness of PRS budget linkage depends on…  effectiveness of policy – budget linkage in general…  building national planning,budget, M&E systems in a context of significant capacity constraints….  building domestic accountability in a context of major donor intervention

Tanzanian reflections on the first PRS,  too focused around a few priority sectors (associated with high donor financing/leverage)  need for greater focus on growth  need for broader base, greater integration in national policy  need to focus on ownership of instruments not just policy content  need to embed the PRS in comprehensive national processes for policy formulation, costing, prioritization, implementation and monitoring

National Strategy for Growth and Poverty Reduction - MKUKUTA  Broadening of policy base  Integrating MKUKUTA in budget preparation  Strategic Budget Allocation System (SBAS)  MTEF as primary implementation framework  Poverty monitoring/national monitoring

Strategic Budget Allocation System  a response to PER recommendations on tightening policy budget linkages  inputs : cluster strategies/objectives from MKUKUTA/Strategic Plans  line submissions : allocations tied to specific objectives/activities  reviewed by interministerial Budget Guidelines Committee, > IMTC> Cabinet  >2nd yr :SBAS performance reviewed internally and in PER each year  Next steps : streamlining activity classification, strengthen links to output monitoring

MTEF : selected issues  Excessive detail in early stages of strategy formulation  Outer year estimates insufficiently robust: weak predictors of base for following year (partly reflecting weak external financing projections)  Lack of political level consultation at earliest stages, more explicit role of Cabinet, Parliament  Need for improvements in transparency of public documents, accessibility to Parliament, domestic stakeholders

Policy budget linkages in a high aid context Challenges for institutional design  Donor presence :catalyst or substitute for domestic accountability ?  Decisions on external financing within comprehensive budget process  Design of budget support  Design of review processes : sector, Mkukuta,

External financing  Formal inclusion of aid on budget is only a first step  Medium term aid projections : poor quality/coverage, adopted passively in MTEF, obvious consistency problems with MKUKUTA (eg weak growth linkage) and with JAS principles (eg projected increase of project finance)  Sector financing : financing decided in sector level dialogue, risk of fait accompli for Cabinet, MTEF  Using the annual PEFAR process to review overall external financing plans, consistency with MKUKUTA, JAS

Aligning budget support to MKUKUTA  Redesign of multi donor Poverty Reduction Budget Support (PRBS) Three priorities  simplification/ greater focus on key outputs  closer fit of the Performance Assessment Framework(PAF) to MKUKUTA,  assessment based on national monitoring and review processes

Sector reviews Use of sector reviews as : (1) Performance feedback as input for national planning and budget process (and building blocks for MKUKUTA review) (2) Forum for donor dialogue on sector performance, financing (3) Instrument for greater domestic accountability  No clear cross country evidence that these functions are compatible  Need for sector specific design to optimise balance, fit to domestic stakeholder capacity,

Balancing the roles of Government, donors, domestic stakeholders  Domestic stakeholder participation in sector reviews, PEFAR process, MKUKUTA review,  Shared analysis: eg PEFA indicators, core PEFAR program,  Divergent analysis within shared dialogue : civil society assessment included in annual PEFAR assessment  ‘Harmonisation’ – consolidating donor intervention or planned transition to domestically driven monitoring systems?  Role of Parliament : developing complementarity with participatory process, use of open dialogue as prior consultation, informing formal scrutiny by Parliamentary committees,etc