1. Modernising government budget operations: Case studies from Europe Lewis Hawke World Bank The Exchange Abu Dhabi, UAE May 13-15, 2013

2. About the presentation…  Why should we modernise government budget operations?  How to do it  Selected case studies from Europe Integrated strategic planning and budgeting (Albania) Medium term budget framework (Russia) Performance based budgeting (Austria) Fiscal responsibility arrangements (Serbia)

3. Making budget operations fit the needs of modern government: Sustainable finances Cost effective results Efficient management of resources Modernising government budget operations

4. How are operations modernised? Change culture and behaviour Change processe s and structures Change information

5. Progress on modernisation of government budget operations in Europe Why Europe?

6. Budget performance improved in absolute and relative terms over the last decade

7. Highest average score for each PEFA dimension

8. Case studies

9. Integrated Strategic Planning and Budgeting (Albania)

10. National Strategy for Development & Integration Medium Term Budget Framework EU Integration Plan (Stablisation and Association Agreement) Performance based monitoring and reporting 22 Sectors 17 cross cutting strategies

11. Albania Integrated Planning: Institutions and processes Council of Ministers Department of Strategies and Donor Coordination Ministry of EU Integration Ministry of Finance Line Ministries Coordination Units EU Delegation Program Management Teams Parliament Sector Strategy EU Integration Strategy (SAA) National Strategy (NSDI) MTBP

12. Albania Integrated Planning: Strengths and Challenges STRENGTHSCHALLENGES Integration of national, sectoral and EU integration goals Aligning priorities with budget policy Clarifies priorities and defines monitoring framework Limited flexibility in a changing economic environment Firm basis for setting performance goals Measuring and assessing contribution to outcomes and costs Medium term focus with intermediate milestones Monitoring and evaluating progress

13. Medium Term Budget Framework (Russian Federation)

14. Highlights:  3 year budget approval  rolling annual revisions (covers 100% Federal, 61% GG)  In-year flexibility, end-year rollover  10% discretionary items, 5% mandatory items  Fiscal rules  total deficit, non-oil deficit, wealth fund transfers  Program budgets  Sovereign Wealth Funds  Reserve Fund and National Welfare Fund

15. 20172018 Public sector pay & fringe benefits, military pay and allowance 20142015201620132019 Register of existing expenditures Room for new policy proposals Expenditure limits Existing expenditures Pensions and benefits (Public liabilities) 3-year budget State Arms program Long-term earmarked expenditure programs Investment objects

16. Impact of reforms

17. Performance based budgeting (Austria)

21. StrengthsChallenges Comprehensive and integrated with budget plans Strengthen performance information and budget link Gender dimensionCoordination across ministries Central training, monitoring and assurance unit Better links to national priorities Published reports on results, discussed with the draft Budget

22. Fiscal responsibility arrangements (Serbia)

23. Fiscal Responsibility Arrangements (Serbia) Revised Budget Law 2010 NEW NEW Fiscal responsibility principles NEW NEW Fiscal strategy NEW NEW Fiscal targets for debt and deficits NEW NEW Fiscal Council Revised Revised budget calendar Revised Revised accounting and reporting Revised Revised internal audit and control

24. Fiscal Responsibility Arrangements (Serbia)  Fiscal principles Separate roles of central and local government Fairness – intergenerational welfare Accountability for fiscal sustainability Stability – avoid rapid change over time Transparency of non-security information Responsible fiscal risk management

25. Fiscal Responsibility Arrangements (Serbia)  Fiscal strategy report Mid-term projects for macroeconomic and fiscal aggregates Objectives and guidelines for fiscal policy Report on tax policy, including tax expenditures Overview of priority areas for financing Mid-term expenditure framework and consolidated budget Fiscal implications of structural reforms Assessment and quantification of risks and potential liabilities Public debt management strategy Opinion of Fiscal Council on the strategy report Opinion of the National Bank of Serbia Progress report on implementation for previous year Overview of transfers from central to local government

26. Fiscal Responsibility Arrangements (Serbia)  Fiscal rules Medium term annual fiscal deficit should not exceed 1% GDP  Formula-based calculation of medium term GDP and required deficit designed to achieve anti-cyclical fiscal deficit for the budget year  Transitional arrangements to reduce annual deficit (4%) gradually General government debt shall not exceed than 45% GDP  Government must prepare plan to reduce excess debt level.  Fiscal Council provides opinion to Parliament before budget vote Local government deficit rule  expenditure not exceed revenues by 10% each year, MoF control Exceptional circumstances deviation permitted

27. Fiscal Responsibility Arrangements (Serbia)  Fiscal council Independent body appointed by Parliament  Council chairperson and members proposed by Republic President, Minister of Finance and Governor of National Bank. Reports directly to Parliament Report on:  Opinion on national draft Fiscal Strategy report  Draft annual budget law  Final accounts  fiscal impact of other laws and amendments  Provide advice to government on fiscal policy and management of public finances  All reports published Six year terms No political affiliations or other employment permitted

28. Fiscal Responsibility Arrangements (Serbia)  Results since 2010 Fiscal Strategy Reports prepared and reviewed by Fiscal Council Deficits have exceeded 1% GDP General Government debt as exceeded 45% GDP Local governments have met deficit targets Fiscal Council has been a vocal advocate for fiscal responsibility

29. Key lessons  Modernisation involves broad-based, long-term reform  Fundamental change is a slow process BUT positive outcomes do happen, sometimes unexpectedly  Changing information, processes and structures are not sufficient Change in behaviour and culture are necessary  Behavioural change is difficult and takes time The crucial ingredients are demand for, and effective use of, the modernised operations