Improving Budget Preparation in KR Geoff Dixon World Bank PPER consultant Mark Silins DFID Senior Consultant

Government is reforming budget preparation MTBF Program budgeting BUT PEFA assessment of budget process is mixed Question: does this mean reform is not working well?

Answer: YES! Reform is parallel and subordinate to deeply entrenched old budget preparation process Instead of good annual budget preparation we have three parallel processes deeply entrenched input focused line item budgeting beginnings of a program budgeting results focus MTBF submissions which do not connect with either of the above

Program budgeting has been a parallel process to budget preparation line ministries are confused AND their capacity is over-stretched MOF plays post office role

Weak MTBF submissions due to weak sector strategies costing is weak submissions fail to prioritize proposals due to weak sector strategies costing is weak

Consequences of parallel processes Existing spending is reviewed each year from input perspective rather than results perspective Resulting lack of budget flexibility means existing spending rolls forward year by year, crowding out new spending priorities

Conclusion 1: Connecting the parallel processes requires sector ministries to improve their internal spending planning identifying results of their activities assigning costs to these results managing sector policy priorities ABOVE ALL line ministries need to use cost and results information in preparing their budget requests to MOF

Conclusion 2: Connecting the parallel processes also requires MOF to require both economic line item and results information in ministry budget requests bounce submissions which don’t conform

They now need to be used as intended. The necessary processes (program budgeting, MTBF) are in place. They now need to be used as intended.

Four Separate Budget Processes - Reform in isolation

Policy Driven Budgeting This diagram shows the relationship from the strategic policy setting right through to the inputs which are required for each ministry/agency Not just the NPRS but all strategic processes of government and of the specific ministries/agencies should be consulted in formulating the budget The MTBF provides the processes by which the budget is determined and ensures the budget reflects the strategic priorities of poverty reduction and enhanced economic performance A program is simply a grouping of similar services or activities performed by an agency or ministry to achieve an objective. Each program has a goal. A goal is a broad statement describing a desired outcome for an agency or program In contrast to goals, objectives are specific, quantified, and time-based statements of accomplishment or outcome An objective is measurable statement about the end result that a service or program is expected to accomplish in a given period of time consistent with the resources available. Objectives emphasize the results of agency actions Inputs are the resources consumed or proposed to be consumed in achieving the objectives eg the staff, and other costs consumed Measurement of inputs, outputs and outcomes will be discussed later in the presentation

What is the Progress In 2005 MoF led workshops with budget institutions focussing on linking the budget to strategic processes Review of Programme submissions for compliance with the Budget Circular In each of the five sectors in the MTBF process, improvements were noted in submissions for 2006

Review of the MTBF Seeking to better align the three budget formulation Processes Focussing on presentation of baseline data – eg 2004/2005 data Comprehensiveness of presentation –examine whether capital budgets can be allocated to sectors for presentation purposes

2006 Better integration of the three budget formulation processes Chart of Accounts anomalies addressed MoF, with support of donors, will convene more bilateral educational processes around the budget cycle – these will be focussed on addressing practice rather than theory

Early Thoughts on 2006 Budget Process