Country Case Presentation: Bangladesh

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Country Case Presentation: Bangladesh. The Medium Term Budgetary Framework Course : Performance Based Budgeting in Governments Venue : Civil Service College, Singapore 13 October 2008 Team Members: Mohammad Nurul Islam, Deputy Secretary, MoP Md. Rezaul Karim , Deputy Secretary, MoP - PowerPoint PPT Presentation

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<ul><li><p>The Medium Term Budgetary Framework</p><p>Course: Performance Based Budgeting in GovernmentsVenue: Civil Service College, Singapore</p><p>13 October 2008</p><p>Team Members:Mohammad Nurul Islam, Deputy Secretary, MoPMd. Rezaul Karim, Deputy Secretary, MoPGautam Kumar Ghosh, Deputy Secretary, MoEMd. Rizwanul Huda, Sr. Asstt. Secretary, MoFShirajun Noor Chowdhury, Sr. Asstt. Secretary, MoFDelwar Hossain, Assistant Chief, MoF</p><p>Country Case Presentation: Bangladesh</p></li><li><p>*The Economy &amp; the Budget of BangladeshSome Geographic, Social, and Economic Indicators:</p><p> Capital: Dhaka Area: 147,570 Sq. Km Population: 140.60 million (2007)Population (annual growth rate): 1.41% Density of Population (per Sq. Km.): 953 (2007) Per capita national income: US $ 599 (2007) GDP growth at constant price: 6.2% Agriculture as share of GDP: 20.87% (2007) Export as share of GDP: 18% (2007) literacy rate (age 7+): 52.5 (2006) Life Expectancy: 64.5 (2007) People below the poverty line: 40% national, 43.8% rural, 28.4 urban (HIES 2005)</p><p>Budget at a Glance (2008-09): </p><p> Non-Development Expenditure: US $ 10.06 Billion Development Expenditure: US $ 4.22 Billion Total Expenditure: US $ 14.28 Billion Total Revenue as % of GDP: 11.17 Total Expenditure as % of GDP: 17.27 Budget Deficit as % of GDP: 6.1 Net External Financing as % of GDP: 2.4 Net Domestic Financing as % of GDP: 3.7 </p></li><li><p>*The key Differences between the MTBF and the Traditional BudgetThe MTBF integrates both recurrent and investment expenditure rather than the two traditional budgets of development and non-development.Traditionally a budget has been formulated for 1 year - the MTBF introduces a multi-year time horizon for budget planning - in Bangladesh that is 3 years.MTBF brings together the policy planning and budgeting processes. Resource allocation is linked to the policies and priorities of the Ministry. The traditional budget approach is incremental i.e. a percentage added to last years allocation.The traditional budget focuses on inputs only. Under the medium term framework the output and outcome expected from the budget allocation is considered. Under MTBF line ministries are given enhanced authority to allocate funds according to their specific needs.</p></li><li><p>*Background and Timeline of PFM Reforms in Bangladesh19901989 1990Committee on Reforms in Budgeting and Expenditure Control1993 2002 Reforms in Budgeting and Expenditure Control Project 2009 - ? PFM Vision 2003 - 2009 Financial Management Reform Project 1995200020052010Experience tells us that maintaining impetus for the reform process is key minimise the gaps</p></li><li><p>*MTBF - Background The 1st phase of public financial reforms in Bangladesh, which originated from the CORBEC report in 1989 focused on technical improvements, examples:Computerisation and consolidation of financial data;New classification of accounts;</p></li><li><p>*MTBF - Background The 2nd phase of public financial reforms focused on improvements to resource management, through:Macro modelling, debt management;Strengthening the linkage between policy planning and budgeting;Devolution of responsibility for planning and budgeting to the line ministries;Increased focus on monitoring and evaluation both internal and external. </p></li><li><p>*Debt ManagementInstitutional support for the Comptroller and Auditor GeneralSystems based financial auditingTreasuryManagementMacro economic frameworkInstitutional support for the planning and budgeting processandissuesBudget Call notice supportGender poverty Performance MonitoringBudget Management CommitteesMinistry Planning FunctionsauditInternalSupport to District &amp; Upazilla Accounting OfficesComputerisation of the accounting system Institutional support for the Controller General of AccountsSystems maintenanceSocial performance auditingEntity based auditingOperational Components of the Financial Management Reform ProgrammeComponent 1Component 3Component 2Component 4TrainingCapacity BuildingInformationTechnology</p></li><li><p>*MTBF The Main FeaturesA medium term outlook to budget planning 3 years</p><p>Linking policy priorities to resource allocations NSAPR to budget</p><p>Emphasizing the efficient use of limited public resources </p></li><li><p>*The Objectives of MTBF in Summary:</p><p>Operationalising the NSAPR;</p><p>Enhancing line ministries capacity to formulate policy and programmes;</p><p>Delegating more responsibility for budget setting;</p><p>Performance measurement;</p><p>The Objectives of MTBF </p></li><li><p>*Success Achieved: MTBF Approach</p><p>RESOURCESOUTPUTSACTIVITIES</p><p>NSAPR/National Policy Documents</p><p>Macro economic forecastingOUTCOMESPRIORITIESMinistry Objectives</p></li><li><p>*Success Achieved: MTBF Approach (Cont.)</p><p>Strategic phaseResource Allocation phaseBudget Call Circular I</p><p>Issued OctoberBudget Call Circular II</p><p>Issued February</p></li><li><p>*The Strategic PhaseProvide a direction for the ministryInject a sense of purpose into the ministries activitiesDecide WHO we are, WHAT we do, and WHERE we are goingProvide a 3 year projection of total aggregate budget allocation development and non-development</p></li><li><p>*Budget Call Circular I Ministry Budget Framework (MBF) - Contents:Mission Statement to reflect the managements vision of what the ministry seeks to do and becomeThe medium term strategic objectivesThe key activities Key performance indicatorsTargets against which performance can be measuredPrioritisation of the use of resourcesAssess the poverty and gender impact of the strategiesInitial allocation of aggregate development and non-development resources for 3 years</p><p>The Strategic Phase</p></li><li><p>*Budget Call Circular IIThe MBF (BCCI) will be evaluated by FD and PC. Based on this evaluation, and considering any changes in macro economic trends the ministry resources ceilings may be slightly revised,Within the revised ceiling the ministry must undertake a detailed allocation of resources,The resources are applied to achieve the targets and KPIs contained in the MBF</p><p>Detailed Resource Allocation Phase</p></li><li><p>*</p><p>Once the budget has been set the Ministry has an obligation to turn it into action;One key element of this is to compare actual performance against what was expected;This requires the regular production of performance reports for discussion at management level;Periodic ReportsADP monthly reviewCGA/CAO monthly financial informationDepartmental performance informationAnnual ReportsMinistry Wide AccountingEntity Wide Audit</p><p>Budget Implementation and Monitoring </p></li><li><p>*</p><p>RESOURCESOUTPUTSACTIVITIESNSAPR/National Policy Documents</p><p>Ministry ObjectivesPerformance MeasurementOUTCOMESECONOMYEFFICIENCYEFFECTIVENESS</p></li><li><p>*Whos who in MTBF (Line Ministry)Leads the process as Principal Accounting OfficerActs as president of BMC Consists of Addl.Secs/ Jt. Secs, Organizational Heads, Representatives of FD, PC, IMED &amp; CAO Budget Approval authority within Line MinistryConsists of organizational representatives and representative from FD, PC- Assists BMC with necessary support for decision making- Coordinates the processDoes the groundworkCollects and compiles informationDrafts MBF with budget allocation Guides the process Acts as member secretary of BMC Presides BWG</p></li><li><p>*Budget Management CommitteeThe Chairperson of the BMC Secretary</p><p>RESPONSIBILITIES:Managing the entire budget Revenue and Development of the ministry/division;Developing a strategic plan to guide budget management;Preparing a medium term budget within the Resource Ceiling;Monitoring the performance of the ministry in both financial and output terms;Preparing and publishing annual report(s) on the financial and non-financial performance of the ministry/division;</p></li><li><p>*Working Groups and BMC Sub CommitteesBudget Working Group (BWG)</p><p>To assist the Budget Management Committee (BMC),</p><p>The BWG has specific terms of reference but it is not a decision making body. Key role is to prepare MTBF related reports for the BMC,</p><p>The chairman of the BWG is the Member Secretary of the BMC. </p></li><li><p>*Time line for Budget Preparation under MTBF ProcessFDInitial CeilingBCCIFinal CeilingBCCIIFinalizing ADPBudget Compilation and ApprovalLMFDLMPCFDLM = Line MinistryPC = Planning CommissionFD = Finance Division</p></li><li><p>*MTBF Line MinistriesYear 1 (2005-06): 4 Pilot MinistriesMinistry of EducationMinistry of Social Welfare Ministry of Women and Childrens AffairsMinistry of Agriculture</p><p>Year 2 (2006-07): 6 additional MinistriesMinistry of Primary and Mass EducationMinistry of Health and Family WelfareLocal Government DivisionMinistry of Fisheries and LivestockMinistry of Water ResourcesMinistry of Communications</p></li><li><p>*MTBF Line MinistriesYear 3 (2007-08): 4 additional MinistriesMinistry of Science and ICTRural Development and Cooperatives DivisionMinistry of Environment and ForestMinistry of Food and Disaster Management</p><p>Year 4 (2008-09): 2 additional MinistriesMinistry of ShippingMinistry of Land</p></li><li><p>*Total Budget &amp; the MTBF Ministries</p></li><li><p>*Gaps in PFM Reform</p><p>Involving senior officials in the MTBF process that is lack of ownership (what Finance Secretary is doing now by visiting line ministry with FD senior officers to motivate them in the process) Updating financial and administrative powers in line with MTBF process Insufficient training for MTBF related officials in the line ministry Absence of regulations for retention of trained/experienced officials No manual for MTBF process Consultant driven and dependent Lack of holistic approach </p></li><li><p>*Challenges Faced</p><p>Frequent transfer of key staffAvoiding duplication of other existing processes e.g. ADP preparation, reviewStrengthening the BMC role in budget implementation and monitoringMoving from input monitoring to output and finally outcome monitoringAvailability of timely monitoring information both financial and output but especially outcome</p></li><li><p>*Continue to extend the process to more line Ministries; Review and refine the process every year;Institutional change at line ministry levelStrengthen the performance reporting systems in the line Ministries:More effective Key Performance Indicators;Data collection and analysis;Impact evaluation;</p><p>Next steps? </p></li><li><p>*Improvements in the efficiency and effectiveness of Governments delivery of services will depend on building the policy analysis and financial management skills within all of the Ministries. Next steps? </p></li><li><p>* THANK YOU</p><p>*************************</p></li></ul>