This training activity will be delivered as part of the Strategic Planning and Budgeting (SPB) project, funded by the European Union. The overall objective of the project is to contribute to strengthening of beneficiary countries' capacity to design and implement medium-term macro-fiscal policy.
What you will learn
The following topics will be discussed during the workshop:
- Recent developments in medium-term budgeting
- Regional and international practice in medium-term budgeting
- Medium-term budgeting in the context of fiscal rules and Fiscal Councils
- Medium-term budgeting, strategic planning, and public investment management
- Importance of medium-term budgeting to EU convergence programs
How you will benefit
The objective of the workshop is to help participants to better understand objectives and features of medium-term budgeting, to identify the challenges and bottlenecks in introducing MTBFs and to share experiences with colleagues in other South East European countries on how these challenges are being addressed.
After attending this workshop, participants will be able to:
- Explain the recent developments in medium-term budgeting and the link to fiscal rules;
- Understand the relationship between the medium-term budget framework and strategic/sectoral planning; and how the two should be linked;
- Describe the implementation challenges and the factors that are necessary to make medium-term budgeting work in practice;
- Identify how medium-term budget frameworks related to the work of Fiscal Councils and to the EU convergence agenda.
Who should attend
The workshop has been specifically designed for mid to senior level public finance officials who actively deal with budget formulation, strategic planning and budget decision-making. Three participants per beneficiary country will be financed through the CEF's Strategic Planning and Budgeting project, which is EU funded. Ideally, one participant per beneficiary country would come from the macro-fiscal analysis department of the finance ministry, the second one from the budget department of the finance ministry, and the third one, a budget officer in one of the more budget-intensive line ministries.
Your contributions
The workshop will be highly participatory. Participants are encouraged to be active in discussions throughout the three days and to share their country experiences and challenges in introducing medium-term budget frameworks. The workshop will include a group exercise to give participants a hands-on opportunity to design and present an MTBF using case study data.
Requirements
Event will be in English only. Participants should have sufficient knowledge of English language.
About this learning learning event
Many budget decisions have impacts that extend well beyond the current budget year or that even arise mostly in later years. To make rational budgetary decisions, decision-makers must focus on their medium- and long-term implications. Most importantly, new spending initiatives often kick in only after the budget year in which the decision is taken. Conversely, important saving measures usually take longer than a year to take effect. This realization has prompted many countries to introduce medium-term budget frameworks (MTBFs), a set of institutional arrangements for prioritizing, sequencing, and managing revenue and expenditure in a multiyear perspective.
The MTBF enables governments to demonstrate the impact of current and proposed policies over the course of several years, to signal or set future budget priorities, and ultimately to achieve better control over public expenditure. An effective MTBF is not solely focused on numerical for revenue and expenditure projections to be presented alongside the annual budget, rather it should provide the systems, rules and procedures to ensure that the government’s fiscal plans are drawn up with regard to their impact over several years. The MTBF therefore requires a participatory effort by all parts of government, not just the Ministry of Finance.
The potential benefits of effective medium-term budgeting are well documented. A well-designed and well-managed framework for medium-term budgeting should contribute to better control over the evolution of the aggregate fiscal position, to more effective allocation of expenditure between sectors and priorities, to more efficient use of resources by budget managers, to clarity of policy objectives and greater predictability in budget allocation, to increased comprehensiveness of budget information, and to enhanced accountability and transparency in the use of resources.
In practice, however, countries rarely have a free hand in designing a coherent MTBF as they are confronted with the tension between the three basic objectives of medium-term budget planning, notably: (a) maintaining aggregate fiscal discipline which requires the broadest possible coverage of government expenditure; (b) promoting effective allocation of resources which require detailed breakdowns to be provided to decision makers; and (c) encouraging efficient use of resources which requires certainty of future funding. These tensions arise because of the inherent uncertainty of future demands on government, making it difficult for governments to commit themselves credibly to a comprehensive, detailed and binding multiyear expenditure plan.
Many attempts to introduce medium-term budgeting have therefore failed to realize the full potential benefits. The main challenge is the binding nature of MTBF projections. The more successful MTBFs often focus mainly on aggregate fiscal ceilings, providing limited guidance on the sectoral distribution of future resources. Even in those countries where medium-term sector ceilings are fixed, revisions are often made each year, if required and subject to a rigorous process. However, many countries have not progressed much beyond indicative ceilings which are reset each year, often without any real reconciliation against previous vintages. In some countries, the MTBF has become little more than a ritualistic resource-consuming process of little practical value, often divorced from the annual budget preparation process. Under these circumstances, budget agencies frequently do not regard aggregate expenditure ceilings as binding during budget negotiations. This undermines the value of the top-down budget estimates produced by the Ministry of Finance at the start of the budget cycle and removes any incentive for budget institutions to prioritize their expenditures and to use public resources efficiently.
Other common MTBF challenges include: limited coordination with national and/or sectoral strategies, including public investment programs, where these exist; policy initiatives that are adopted without due consideration of the fiscal realities associated with their implementation; and basic weaknesses in annual budgeting capacities, both within the line ministries as well as the Ministry of Finance.
