Information Flow For MTEF Operation and its implication to the Korean Government March, 19, 2004 Seoul, Korea Junghun Cho World Bank

MTEF, FMIS and Other PS Reforms – MTEF 73% of OECD Countries 73% of OECD Countries Different Objectives of MTEF In Countries Different Objectives of MTEF In Countries Sweden – Fiscal Sustainability Sweden – Fiscal Sustainability UK - Sectoral Allocation UK - Sectoral Allocation Korea : Linking Budgetary Allocation with National Policy Priority Korea : Linking Budgetary Allocation with National Policy Priority

MTEF, FMIS and Other PS Reforms – FMIS Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003) Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003)

MTEF, FMIS and Other PS Reforms Sub-national Government Sub-national Government Sub-national Government Sub-national Government FormulationExecution Reporting/ Evaluation FMIS for Fiscal Decentralization FMIS for Performance Management FMIS for Medium Term Expenditure Framework (MTEF) - Central

New Information Needs for MTEF Operation Sectoral Budget Preparation Macro- economic forecasting Sectoral Ceiling Setting for multi years Fiscal Target Total Expenditure Setting For multi years New sectoral demand for t+2 (priority/cost) Annual Budget Formulation Updated cost estimate of existing policy/program

Information Flow For Budget Formulation (1) Macroeconomic Forecasting Macroeconomic Forecasting Fiscal Target and Total Expenditure Setting for Multi-Years Fiscal Target and Total Expenditure Setting for Multi-Years Sectoral Ceiling Setting for Multi-years Sectoral Ceiling Setting for Multi-years Annual Budget Formulation Annual Budget Formulation

Information Flow For Budget Execution and Reporting Relatively Few Changes Relatively Few Changes MPB’s In-year access to Line Ministries’ Detailed Spending Information MPB’s In-year access to Line Ministries’ Detailed Spending Information Information Coverage of Agencies and Sub- national governments Information Coverage of Agencies and Sub- national governments Budget Classification and Charts of Account Budget Classification and Charts of Account

Analysis of Current FMIS to Support MTEF (1) Fragmented Systems Among Ministries, Agencies, and Sub-national Governments Fragmented Systems Among Ministries, Agencies, and Sub-national Governments Low Utilization for High-level Budgetary Decision Making Low Utilization for High-level Budgetary Decision Making Lack of Capacity to Record/Monitor Costing and Performance Information Lack of Capacity to Record/Monitor Costing and Performance Information

Analysis of Current FMIS to Support MTEF (2) Inappropriate Regulatory Framework Inappropriate Regulatory Framework - Complex budget classification and charts of accounts - Complex budget classification and charts of accounts - Narrow budget coverage - Narrow budget coverage - Inappropriate government statistics for internal transfers - Inappropriate government statistics for internal transfers

1 Political commitment/ownership 2 Right skills in project team 3 Proper institutional reform/change 4 More narrowed project focus 5 Close project supervision by the Bank 6 Coalition building with key players 7 Flexible project management 8 Comprehensive diagnostic study and clear implementation plan 9 Coordination among key agencies projects Coordination among key agencies projects FMIS Success Factors Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003) Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003)

Implementation Strategy for Improving FMIS and MTEF Leadership and Management Support Leadership and Management Support Inter-Ministerial Coordination Inter-Ministerial Coordination Institutional Mindset Institutional Mindset Risk of Reform Fatigue Risk of Reform Fatigue