1. OVER VIEW OF PUBLIC FINANCE REFORMS IN ETHIOPIA
(Presented for the Seminar on “Strengthening budget practices in Africa”, April 7-9,2009 Dakar, Senegal)
Prepared by
Demelash Megersa and
Desu Gebre

2. Background of Expenditure Management & Control Reform (EMCP) in Ethiopia
One of the five sub-programmes of the Civil Service Reform Programme:
Top management
Human resource management
Service Delivery
Expenditure management & control
Ethics
EMCP VISION
‘create an efficient, effective, accountable and transparent financial management system that will contribute to the economic development effort of the Government’

3. There are 8 Projects under the EMCP
The Legal Framework
Government Procurement Reform Project
Budget Reform
Cash Management Reform
Accounts Reform Project
Internal Audit Reform
Government Property Management Reform
Integrated Financial Information Management system
At present major reform activities of the above projects are implemented

4. Budget Reform Project Objectives
Reforming the chart of accounts and develop new single series of expenditure codes with the view to replacing the previous three series of codes
Introducing a financial calendar with detailed steps for the expenditure planning and the budgeting processes
Introducing cost center budgeting through the budget classification and integrate the preparation of recurrent and capital budget
Introduce a new system of budget classification that will map the budget to organizations more consistently and in detail

5. … cont’d
Achievements
A new budget structure that has uniformity with the regions has been developed.
The budget reform has been implemented in federal, regional and sub-regional levels
Budget information system is up-grade to IBEX and installed in federal institution
Currently 20 ministries are selected to test the program budgeting system

6. Recent Budget Reform Measures
However, there is still shortcomings in the current budgeting:
The budget provides little information about what the budget is spent on
Recurrent budget is on the whole an incremental line item budget approach developed within a one year horizon
Hence for a new budgeting process:
The gov’t has opted to introduce program budgeting moving from line item budgeting to program based budgeting through which activities and their associated expenditure will be categorized according to the intended outputs.

7. The budget must move from an input to an output focus.
… cont’d
Aim is to improve the allocation of resources to strategic priorities and strengthen expenditure management.
The budget must move from an input to an output focus.
Program budget requires.
The existence of strategic planning
Formulation of vision, mission and objective of each public body
Defining programs with objectives and outputs

8. Advantage of Program budgeting
Program budget tend to present more useful information on service delivery
Allows for transparency and accountability in service delivery
More useful for:
Determining whether allocations reflect priorities
Planning the delivery of services
Monitoring the use of resources with each program
Identifying areas where savings can be made or where more funds are needed.

9. Program budgeting … At Federal Level
20 ministries are selected to test the program budgeting system.
Training was given
To understand the features & characteristics of program budget.
To compare program budgeting with traditional line item budgets
To understand the advantage and disadvantage of program & line item budgeting

10. … cont’d
Remaining tasks
Finalizing the program budget procedural manual and preparing of the training module, and training of staff will continue to implement the reform
Full implementation of program budgeting at federal level
Rollout to federal regions

11. Issue to be consider There will be confusion during transition
Changes in responsibility for managers
It is cumbersome and time consuming
It is information intensive
It is costly
It has a large capacity requirement

12. Thanks for your attention