Main players in budget execution Allister Moon Budget execution course, Jan 16

Perspectives on the roles in budget execution Positive / normative Law,regulations/ practice ‘normal’budget implementation/ fiscal crisis

Legal Framework for Public Expenditure Management Constitution Fiscal Responsibility Acts Budget System Laws Local Government Laws Public Debt Laws Annual Budget Law Regulations

Central agencies functions in budget execution (1) Administering release of funds Monitoring expenditure flows Reporting Cash management Managing central payments

Central agencies functions (2) Monitoring macro/fiscal performance Review progress in sector programs Coordinating budget revisions as required

Varying configurations of central agencies Separate Treasury ministry Role of Office of President/Prime Minister /State Chancellry Ministry of Economy/Planning – monitoring macro, sector programs Public Service ministry – wagebill

Spending agencies functions Allocating funds to spending units Procurement ; commitment, purchase, verification Payments/prepare request for payments Progress reports, performance monitoring Review program implementation Reallocation within approved ceilings

Rules of the game in budget execution What kind of flexibility do spending agencies have : budget classification, appropriations, virement provisions Aggregate fiscal discipline, predictability and frequency of releases Quality of control systems: treasury function, commitment controls

Other players Central bank, banking system Legislature Revenue agencies External audit

Formal/informal practices Budget deviation : a useful indicator of informal allocations through budget execution Stable patterns of excess allocations to ‘power ministries’ Unrealistic budgets creating discretionary powers Evading aggregate discipline : exploiting weaknesses in commitment control

Out turn as % Budget for selected Ministries Recurrent expenditures, 1987/8-1994/95, Uganda

Case study : developing the Russian Treasury Background : esw on overall budgetary system, review of draft budget legislation, Treasury established, but major gaps in coverage, classification system, commitment control, inadequate information systems High budget deviation, low credibility Strong commitment to Treasury reform, little interest in broader budget management reform Problem : establishing an appropriate role for the Treasury through defining the interface with other players

Defining the role of Treasury with other players Central bank, the banking system: transferring to the Treasury single account Revenue agencies Line ministries Sub national government Chamber of Accounts Treasury staff

Case study : Uganda cash management Background : early 1990s macro crisis, inflation 100%, major fiscal imbalance Facing persistent revenue instability, external shocks High priority for stabilisation objectives, but need to maximise predictability for spending agencies Adapting budgetary institutions to context

Frequency Distribution of One Year Errors as a Percentage of GDP, 1980-2000

Revenue instability Index = standard deviation of year to year changes in tax revenue and grants as percentage trend GDP

Design issues in cash management timetable : long planning horizon, short review & intervention horizon scope of analysis : review all stabilisation instruments institutional issues: broad inclusion, joint commitment, accountability for forecasting, close coordination with central bank decision rules : feedback from macro outturn, protected expenditure

Dimensions of a cash management system