Presented by: Coburg Gadabu Samuel Grundler (NAURU) Medium Term Expenditure Planning for National Sustainable Development 2-6 November, 2015 (Novotel hotel, Nadi). Presented by: Coburg Gadabu Samuel Grundler (NAURU)

Contents: Introduction Background Budget Policy Framework Budget Process Public Expenditures Public Revenues Key Drivers Key Achievements Challenges

Introduction Annual Budget (cash basis) Financial Year - 1st July to 30th June Budget Paper 1 Fiscal Strategy and budget priorities Estimates of Revenue and Expenditure Budget Paper 2 Economic outlook Economic Statistics Public Sector Reform State Owned Enterprises Debt Management Finance Sector Reform National Sustainable Development Strategy Nauru Development Partners Development Fund Partners Annual Projection

Background The fiscal strategy guiding the Budget has four central interrelated elements: 1. Fiscal Restraint The Government will maintain the budget in surplus through a focus on maximising and diversifying revenues, reducing unnecessary costs and focussing spending on the core areas of government services that meet the goals of the NSDS. 2. Sustainable Service Delivery The Government will ensure essential services are maintained and improved with a focus on improving efficiency and productivity. 3. Debt Management In the medium and longer term, the Government will continue to generate small surpluses to continue structured and achievable repayments towards outstanding debts. 4. Investing in our Future The Government will begin building a new Trust Fund to provide a source of revenue in the future, whilst investing in infrastructure and human resource development for ongoing economic growth.

Budget Policy Framework National Sustainable Development Strategy (2005) Annual Operational Plan (2011) Nauru Economic Infrastructure Strategy Implementation Plan (2011) Millennium Development Goal (2000) Procurement Framework (2013) Public Finance Management Policy Development Fund Projection (2011) Cash Flow Plan (2014)

Budget Process Budget process is guided by the Financial instructions and the Public finance management act Cash flow plan was introduced recently to meet the expenditure targets We have a budget process manual to guide the preparation of the budget. Nauru policy or act is that the department can do inter sub head transfer but there is no impact to the expenditure bottom line. Is to train the departments to set indicators to achieve the government strategic plans. The budget should formulate to achieve the national policies. The government estimates payments for local and abroad debts. Annual estimation to meet these obligations. The Nauru government is working to implement the medium or long term plans.

Public Expenditures Budget comparison expenditure as a % of GDP: FY2012-13 49% FY2013-14 61% FY2014-15 73% Therefore Government spending has been increasing as a proportion of GDP GDP growth has been large and is volatile Current Year Budget: Health $11m Ministerial $8m Educational $7.4m Justice $6.6m Main sources of government expenditure are the travel, plant and equipment, business travel, repairs and maintenances, salaries for locals and expats and consultancy fees

Public Revenues Phosphate Sales Fishing Licensing Visa Fees Custom Duties/Excise Employment Taxes Budget Support (Donor Partners) Development Funds

Key Drivers Current main spending pressure Public wage bill Travel business, Salaries and other benefits, Consultancy fees, Government projects Public wage bill This is well monitored by the Treasury department. Cash flow was implemented to control spending by all departments Maintenance and capital assets The government next project is to update the asset register and upload on the FMIS system the main Accounting system and 20% of the budget are for physical assets such vehicles and furniture Economic and social trends The staffing is the problem in Nauru. The shortage of human resources in the public services is the major concern Natural Disasters Mitigation costs on sea swells and sand erosion Implications of existing policies. Yes, the government planned multi year projects funded by donors and annual projects funded by the local budget New policy proposals The government put new proposals to donors to fund the new port and improve the infrastructure Procurement policy framework All procurement (goods/services) are centralized and channelled through a Procurement Agent

Key Achievements Bendigo Bank Agency (2014) Peer Reviewed (2010) Preparing for the 2015 review of the National Sustainable Development Strategy (NSDS Elements of Medium Term Expenditure Framework (MTEF) have been introduced into the preparation of the FY2014-15 national budget. National debt sustainability analysis has been completed Review of the Nauru Economic Infrastructure Strategy & Investment Plan (NEISIP) Design work and funding arrangements for investments (eg. hospital, ports) are being finalised. A Program Monitoring Action Group (PMAG) comprising experts from Australia, ADB, Pacific Financial Technical Assistance Centre, meets bi-annually to formulate and review recommendations for greater aid effectiveness and provide support towards operational planning and monitoring. Introduction of the Financial Management Information System(FMIS) A Fixed Asset Register for all government assets has been established. Roll out of Employment tax in October 2014 and the Business Tax in July 2015. Establishment of a Bendigo Bank branch Development of a Policy Reform Matrix, it captures key policy reform initiatives, benchmarks and indicators for general budget support.

Challenges Capacity Building Development Partner’s Commitments Inter-Department collaboration (submitting reports) Refugee Processing Centre (ongoing/future) Trust Fund (donor commitments) Development Infrastructure (Ports, Hospital, Airport Runway, etc.) Mitigation on Climate Change Implications on new Policies Political Will

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