Government Resource Estimation and Allocation Tool - GREAT Presentation – June 2015

What is GREAT GREAT (Government Resource Estimation and Allocation Tool) has been coined to describe the package of documents and templates that will support a State to produce a document containing:  Economic and Fiscal Update (EFU);  Fiscal Strategy Paper (FSP); and  Budget Policy Statement (BPS).

Funded to a What is in the GREAT Package Popular Guide Detailed EFU-FSP-BPS Guidelines Example EFU-FSP-BPS Document MS Excel Template (for graphs and forecasts) MS Word Templates (main document and Executive Summary) Economic Commentary (as at June 2015)

Purpose of GREAT Presentation Five Key Questions which we aim to answer:  What is an EFU-FSP-BPS?  Why produce it?  When should a state produce the EFU-FSP-BPS?  Who is responsible for producing it?  How is it produced – what are the key steps?

What is the EFU-FSP-BPS Key part of Top Down Budgeting First major output of the budget preparation process, containing three main sections Economic and Fiscal Update (EFU) – backwards looking:  Provides Context  Recent economic performance (global, national, state) and fiscal (state) performance Fiscal Strategy Paper (FSP) – forwards looking, including:  Macroeconomic Assumptions underpinning Revenue Estimates (Medium Term Macroeconomic Framework)  Estimation and Justification – forwards looking estimates for major Revenue and Expenditure aggregates (Medium Term Fiscal Framework)  Fiscal Targets, Constraints and Risk Assessment Budget Policy Statement (BPS) – forwards looking, including:  Sector Ceilings  Budget Policy Thrust (Medium Term Budget Framework)  Should define linkage to Annual Budget Call Circular (BCC)

MTEF Process

Why Produce an EFU-FSP-BPS There are numerous reasons for producing the EFU-FSP-BPS document:  Discipline to start budget process earlier  Pressure to produce final accounts for previous years  Ensures that all relevant data is collated and presented clearly  Provides a reference point for civil society when reviewing the final approved budget  Required under Fiscal Responsibility Legislation

Why Produce an EFU-FSP-BPS 2  Assists ExCo and SHoA to appreciate the latest Fiscal and Economic trends  Helps enforce a multi-year perspective to the budget  Clearly lays out the assumptions and the calculations used to derive the aggregate budget breakdown  Provides Sectors with an early indication (prior to the budget call circular) of the three year envelopes – to update MTSS’s

When to prepare the EFU-FSP-BPS As noted previously, preparing the EFU-FSP- BPS should be the first task of the budget preparation process Requires state final accounts and macroeconomic performance from previous budget year to be complete (not necessarily audited) Ideally, should be prepared in by end of April / early May, but at least prior to the issuance of the call circular

Who Prepares the EFU-FSP Responsibility should be assigned to the Planning / Budget Ministry primarily Will require data from key departments of Ministry of Finance: Treasury Department Debt Management Internal Revenue Statistics Should be presented and approved by ExCo and SHoA (appropriate Appropriations Committee)

How 1 – Data Requires Data – to be collated in an excel spread sheet: - Prior Year (5-7 years) Budget and Actual Data for main revenue and expenditure items - Expenditure by Sector - Global, National and where possible state Macroeconomic Performance (Real GDP Growth and Inflation) and Projections - Nigerian Mineral Sector Performance

How 2 - Estimations Calculations  Statistical/Time series based Forecasting of Aggregate Revenue and Expenditure Items - Moving Averages - Elasticity Based Forecasting  Ratio Based Analysis for Debt Sustainability, Expenditure Composition  3-Year Sectoral Allocations

How 3 - Narrative Brief Background on the State PFM Systems, Laws, Processes Commentary on Key Economic and Fiscal Trends Medium Term Fiscal Targets/Constraints (including Debt) Basis for Aggregate Revenue and Expenditure Estimates Fiscal Risks Basis for Sectoral Allocations and Budget Policy Thrust

How 4 – Rolling Forward The first time development of the EFU- FSP-BPS requires significant effort Subsequent years will be easier:  Rolling forward dataset by one year (not a whole new data-set)  Some narrative text needs only to be reviewed and validated  Some of the fiscal analysis will still stand

Interrelation with Annual Budget Must be a clear linkage between Aggregate Revenue Estimation in FSP and Budget Call Circular (BCC)  Alterations explained Must be a clear linkage between sector envelopes in BPS and any envelopes in the BCC  What is included  How is it divided (Sector to MDA)