Program budgeting in the Kyrgyz Republic Ministry of Finance of the Kyrgyz Republic Program budgeting in the Kyrgyz Republic Bishkek, 2017

Program Budgeting—Definition Program budgeting attempts to apply cost-benefit analysis to the allocation decision, allocate expenditures by program, and assess results of programs in relation to objectives. IMF, Manual on Fiscal Transparency, 2007

Key Features Resources are allocated by programs; Lower control over spending items in the economic classification; Performance information is used to inform decisions on allocating public expenditures.

Design of program classification of expenditures Reform components: Design of program classification of expenditures Managerial and financial flexibility and performance budgeting Aligning medium-term expenditure projections with program budgeting Adopting IT systems to gather information on performance indicators Aligning accounting with outputs Integrating performance information with resource allocation decisions

Introducing Program Budgeting in the Kyrgyz Republic – Objectives Closer alignment between medium-term budget forecast and annual budget; Defining spending priorities; Enhancing spending efficiency; Enhancing performance of government agencies; Improving public service delivery.

Historic Background 1997 – 2004 – initial theoretic background; 2005 – 2010 – first instruction materials and their practical application; 2011 – 2017– a more balanced approach adapted to the budget framework in the Kyrgyz Republic; design and implementation of a comprehensive methodology, gradual increase in the number of agencies covered.

Initial Challenges Lack of political will coupled with resistance to reforms and a formalistic approach to program budgeting among line ministries/agencies; Absence of a regulatory framework underpinning program budgeting; Lack of technical knowledge on program budgeting; Low quality of information inputs; Absence of program classification; Absence of program budget monitoring.

Selected Approach to Implementation

Program Framework Objective 1 Objective 2 Objective 3 Program 1 Sector Goal Objective 1 Objective 2 Objective 3 Program 1 Program 2 Program 3 Program 4 Action 1 Action 1 Action 1 Action 1 Action 2 Action 2 Action 2 Action 3

Steps Taken Improving budget legislation, inter alia, on program budgeting Continuous improvement of instruction materials Continuous capacity building among civil servants Introducing program budget monitoring

Regulatory Framework Budget Code of the Kyrgyz Republic (2017) Methodological Guidelines for Medium-Term Expenditure Strategies (2012) Program Budgeting Rulebook (2007) Instruction on Submitting Performance Reports (2013)

Measures to Enforce Program Budget Execution Integrating program classification in the Treasury Automated System 4 pilot ministries to produce reports on program classification Mapping organizational charts to corresponding budget programs

Example Center for Grain Evaluation (МСХ и М) performs Evaluation of Grain and Grain Products under the Government Program for Crop Farming Support, and this action is mapped to the corresponding action and program Funding for the Center for Grain Evaluation is treated as a program expense and is captured in the Performance Report.

Current Status Regulatory framework is in place; Unified methodological framework is in place; 87% of budget expenditures are covered by the program format; Program budgets are presented in the Budget Law; Applying agency approach; Performance information is not used to inform decision-making on resource allocation; Presentation format for program budgeting.

Outstanding Issues Weak motivation among government agencies; Lack of technical knowledge on program budgeting among line ministries and agencies; Uneven quality of information; Lack of automated and integrated information systems; No database for performance indicators; Weak spending revision mechanism.

Plans Going Forward Improving regulatory framework and instruction materials for program budgeting; Capacity building for ministerial and agency staff; Improving program classification; Improving monitoring of program budget execution; Introducing performance evaluation of budget programs.

Reform components: Reform components: Reform components: Thank you! Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes. Reform components: . Developing program budget classification and/or developing knowledge of the program base. Managerial and financial flexibility and performance budgeting Linking medium-term expenditure frameworks with performance budgeting Developing performance information and the design of information systems, Integrating accounting systems with performance information systems I Integration of performance information into budgetary decision-making processes.