1. Progress in reforming budget elaboration process
Republic of Moldova
Ministry of Finance
Progress in reforming budget elaboration process
Warsaw
February 2005

3. Transition Context Severe economic decline
In 2000 GDP represented 35% of 1990 value
Public spending fell by 9% GDP during
Total public debt exceeded 90% of GDP by 2000
Strong economic recovery since 2000
Budget deficit: -0.1% of GDP (2001), -1.8% of GDP (2002), +0.5% of GDP (2003)

4. Reform of the Budget System
1996 Budget Law
consolidated previous reforms
formalised budget planning arrangements
budget Concept
budget planning cycle
new budgetary classification
But slow progress with budget planning reforms
economic crisis and instability - short-term outlook
weak macro-fiscal framework
weak linkage between policies and budgets
unrealistic ministry budgeting

5. 2001 - Decision to introduce more strategic approach to budget planning – Introduction of MTEF
2 stage budget planning cycle: MTEF to be prepared prior to budget preparation.
Design of MTEF based on international good practice (assisted by WB and other donors)

6. MTEF Objectives Realistic macro-fiscal framework for budgeting
Greater predictability for budget planning
Policy-led resource allocation process
Multi-year perspective for budget planning
Greater transparency and wider participation 1.

7. Main Elements of MTEF in Moldova
Macro-fiscal framework
macroeconomic outlook
projections of revenue, budget deficit and financing
Analysis of cross-cutting budgetary issues
implications of EGPRSP for expenditure allocations
wagebill analysis
inter-governmental finance
Sector level analysis and expenditure priorities
Strategic expenditure strategies
Expenditure plans
sector resource ceilings for budget planning

8. Introduction of MTEF Required
Extended budget planning cycle
Effective management arrangements
Strong stakeholder involvement
Capacity building

9. Extended Budget Cycle MTEF – inseparable part of budget cycle
Macro-fiscal framework at centre of budget process
Sets out budget parameters and priorities
Allows annual updating of expenditure plans
Provides for greater stakeholder participation

10. Middle Term Expenditure Framework and Budgetary Cycle

11. Effective Management Arrangements
MTEF Coordination Group
chaired by Minister
meets regularly during MTEF preparation
Technical Working Groups
fiscal policy
macro-fiscal framework
wagebill
Sector Working Groups
education
health
social protection
MoF Budget Synthesis Department and Sector Divisions
Operational coordination
Preparation of MTEF document

12. MTEF Organizational Chart
MTEF Coordinating Group
Working Group responsible for the macroeconomic framework
Analyzes macroeconomic trends and developments
Assesses main macroeconomic aggregates
Elaborates alternative scenarios
Macro policies and budgetary implications
Sector Working Group
(education, health care and social protection)
Sector expenditure strategic plans
Assess current situation
Review policy objectives
State’s role in sector
Expenditure programs priority reform actions
Implications on public expenditures
Identify monitoring and performance indexes
Working Group responsible for public resource framework
Analyzes revenue trends
Revenue policy measures and objectives
Assesses and distributes the revenues
Financial equalization and financing sources
Working Group responsible for public expenditure policies and priorities
Cross-cutting expenditure policy issues
Analyzes expenditures on main economic categories
Identifies key problems and makes recommendations
Makes long term assessments
Branch expenditure priorities and policies;
Revise and analyze the allocations on branches
Government policy implications on public expenditures
Recommendations for future allocations
Incorporate strategic expenditure plans on branches
Branch Finance Divisions within the Ministry of Finance
Budgetary Synthesis department within the Ministry of Finance

13. Stakeholder Involvement
Membership of MTEF Coordination Group
Discussion of MTEF in Government
Briefing of Parliamentarians
Seminars for Local Government Officials

14. Capacity Building Macro-fiscal forecasting model
Formats and guidelines for sector analysis
Seminars and workshops
MTEF manual being developed

15. MTEF Experience – Expanding Coverage
State Budget
Special Means
Donor Projects
Local Budgets
Social and Health Care Funds
State Budget
Local Budgets
Special Means
Social and Health Care Funds
Donor Projects
Budget Coverage
State Budget
Local Budgets
Special Means
Education
Health
Social Protection
Wagebill Analysis
Risk Analysis
Sector Prioritisation
Education
Health
Education
Health
Social Protection
Scope of Analysis

16. MTEF Experience - Future Challenges
Strengthen linkage between EGPRSP and MTEF
affordability of EGPRSP proposals
sequencing of updating EGPRSP and MTEF
Policy and budgeting capacities in line ministries
stronger sector policy frameworks
linking policy and budget planning in line ministries
More detailed analysis of key budget issues
extended process of policy and expenditure reviews
spread work throughout year
Capacities for budget planning
enhanced training programme
staff retention issues

17. MTEF Experience - Impact on the Budget Process
On Budget preparation
has made budget preparation quicker and easier
greater realism in budget proposals
On involvement of Government
lengthy discussion of MTEF in Government
seen as key stage in budget decision-making
increasingly referred to by Prime Minister and President
On engagement of Parliament
MTEF provides context for discussion of annual budget
More strategic approach to budget debate in Parliament

18. Thank You!