1. Ministry of Finance of Russia Alexandra Smirnova, Ministry of Finance of the Russian Federation APEC FISCAL SPACE SEMINAR REVIEWING, ASSESSING AND PRIORITISING GOVERNMENT EXPENDITURE Performance Budgeting

2. Ministry of Finance of Russia Fiscal Space: Does Performance Budgeting help To create it? To use it properly? 1.PB is not first and easiest way to create fiscal space; 2.PB does not create much fiscal space; 3.PB certainly helps to use fiscal space efficiently; 4.PB is only helpful at the certain level of fiscal space available

3. Ministry of Finance of Russia PB is not first and easiest way to create fiscal space ALLAN SCHICK’S PRINCIPLES OF BUDGET REFORM SEQUENCING: Foster an environment that supports and demands performance before introduction of performance and outcome budgeting Control inputs before seeking to control outputs Budget for work to be done before budgeting for results to be achieved Enforce formal contracts in the market sector before introducing performance contracts in the public sector Have effective financial auditing before moving to performance auditing Adopt and implement predictable budgets before insisting that managers efficiently use the resources entrusted to them

4. Ministry of Finance of Russia Russian Budget reforms of 2000s Input-based short-term budgeting (1991 - 2000)  establishment of budget procedures and regulation (organic budget law - Budget Code (2000)  cash execution  Federal Treasury  fiscal dicsipline and expenditure control  equalization transfers Results-based medium- term budgeting (from 2008)  Long-term budget stability and sustainability  Revenue and expenditure assignments for federal, regional and local budgets  Meduim-term budget planning  Performance budgeting  Public sector restructuring 2001-2007

5. Ministry of Finance of Russia PB does not create much fiscal space Zero-based Budgeting All expenditure items are revised every budget period Incrementalist Approach Only new commitments are discussed (5-10% of total expenditure every budget period, only …% of which is inefficient) VS 1. Gain on allocative efficiency 2. Gain on technical efficiency Spending bodies’ efficiency gains are usually not more than the inflation rate

6. Ministry of Finance of Russia 2014 2015 20112012 Factoring of Public Expenditure Commitments into the Mid-term Budget Salaries and emoluments, Military pay and allowance 20082009201020072013 Register of the expenditure commitments Resource for new commitments Expenditure limits Acting commitments Pensions and benefits (Public liabilities) 3-year budget State Arms program (till 2015) Long-term Targeted Programs Investment objects

7. Ministry of Finance of Russia Russia’s case: Structure of Expenditure commitments in 2008

8. Ministry of Finance of Russia New commitments (5-10%) new legislation new programs approval inclusion in the budget Acting and new commitments Acting commitments (90-95%) public transfers (calculation) debt service (schedule) governance, maintenance of the facilities (indexation) acting programs (plan)

9. Ministry of Finance of Russia Russia’s case: Sequence of budget planning

10. Ministry of Finance of Russia Expenditure Inputs Activities Output Outcome Traditional Output budgeting Outcome budgeting Economy Technical efficiency Models of Performance Budgeting Intermediate outcome Effectiveness Efficiency

11. Ministry of Finance of Russia Russia’s case: Policy area - Transportation Expenditure65 bln roubles Inputs …… ActivitiesConstruction of roads, maintaining of roads Output Proportion of national motorways satisfying international standards Outcome Decrease of transportation costs share in average production costs (from 15-20% to 7-8%) Goal 1 Development of modern and effective transport network, providing reduction of transport costs in economy Implementation Results

12. Ministry of Finance of Russia Russia’s case: Policy area - Transportation Expenditure37 bln roubles Inputs …… ActivitiesConstruction of year-round ways to remote and difficult access areas Output Increase in proportion of settlements with year- round access road (per year) Outcome Mobility level of Russian citizens compared to developed countries average Goal 2 Increasing availability of transport service for population Implementation Results

13. Ministry of Finance of Russia Russia’s case: Policy area - Competition policy Expenditure5 bln. roubles Inputs88 regional commissions, 2 000 employees ActivitiesControl and supervision of competition law adherence Output Decrease in number of competition law violations OutcomePlace of Russia in international rating of efficiency of competition authority Goal 1 Promoting competition by means of prevention and control of anticompetitive behavior Implementation Results

14. Ministry of Finance of Russia Russia’s case: Performance budgeting tools

15. Ministry of Finance of Russia Budget programs, Justifications of budget appropriations (public, assessed by MoF) Long-term Economic Program (public, approved by Parliament) Line Ministries’ Results and Activities Reports (public, approved by Government) Traditional budget supporting documents (confidential, presented to MoF) Expenditure Inputs Activities Output Outcome Russia’s case: Performance budgeting tools Intermediate outcome

16. Ministry of Finance of Russia Performance Budgeting on all the stages of budget cycle: Macroeconomic Planning Budget Preparation Budget implementation Accounting and Reporting Oversight Revenue policy Debt policy Internal audit Performance audit Outcome planning Outcome reporting Medium-term planning Management accounting Budget programs Delegation and accountability

17. Ministry of Finance of Russia Platforms of Performance Budgeting implementation

18. Ministry of Finance of Russia PB is only helpful at the certain level of fiscal space available During last budget cycle Russian Federal Budget expenditure been raised by 28% without any efficiency assessment

19. Ministry of Finance of Russia So the question is: Whether to implement Performance Budgeting? Yes Because if you don’t set the rules you could not use it when the time comes

20. Ministry of Finance of Russia Russia’s case: Budget Reform Matrix 3 waves for decentralization of public finance management

21. Ministry of Finance of Russia Russia’s place in World’s Budget Reform Ukraine Australia New Zealand, Great Britain, Nederland, Sweden USA Medium-term Budgeting Performance Budgeting Russia (2006) Russia (2003) Bulgaria Russia (2008) Vietnam 2006 France 2006

22. Ministry of Finance of Russia Alexandra Smirnova asmirnova@minfin.ru Thank you for your attention APEC FISCAL SPACE SEMINAR REVIEWING, ASSESSING AND PRIORITISING GOVERNMENT EXPENDITURE