Management of financial resources , participation Management of financial resources , participation and pro-poor budgeting :challenges and and pro-poor budgeting :challenges and

opportunitiesopportunities

Mrs. Yanembal Moorghen

Mauritius

October 2006

Antananarive

Madagascar

Objective of presentation Objective of presentation

To provide a forum for the exchange of views in respect of the evolution of financial management in the public sector , theories and principles of people’s pro-poor budgeting in different countries and some useful insights to promote pro-poor strategies to address MDG and NEPAD goals

overviewoverview

• PART I• Evolution of financial

management and its applicability to date

• Role of government • Types of budgets • Challenges of the public sector • PART II• Participatory budgeting • Peoples’ budget case study of

different countries including Mauritius

• Part III• Monitoring and

evaluation of the budget

• The way forward • Lessons learned/

Critical success factors

• Questions and answers

Challenges Challenges

• Globalization• MDG goals to halve poverty by the year 2015• NEPAD Objective /Stellenbosch Declaration /charter for

Africa• Challenges of governance and public administration :

– Consolidation of democracy and the rule of Law;– Enhancement of implementation of public sector reforms that are

based on adaptations to socio-economic and cultural contexts– Enhancement of citizens ‘participation in the decision- Making

process – Promotion of good governance ,ethics, transparency and

accountability

The first jobs of statesThe first jobs of states

• Getting the fundamentals right: five fundamental task lie at the core of any government ‘s mission without which sustainable shared , poverty-reducing development is impossible :

• A foundation of Law• A benign policy environment including macro-economic stability• Investment in people and infrastructure• Protection of the vulnerable• Protection of the natural environment

World Development Report 1997:The States in a changing World:P50

Role of government Role of government

• Government has through the budget to determine the level of public activity in the economy, a reasonable distribution of income and wealth and to provide some control over the overall level of economic activity

• The 1980’s have seen an array of changes in the public sector including unprecedented cut-back strategies in expenditure , the drive for efficiency and the various forms of privatisation

New Public Management (NPM)New Public Management (NPM)

• In response to the inadequacies of the traditional model of administration , the NPM brought the focus on the achievement of results and the personal responsibility of managers towards the achievements of the three Es’ namely Economy ,Efficiency and Effectiveness

NPM cont NPM cont

• As regards the financial aspect of reforms , countries took different approaches but the objective was the same .

• The 1982 Financial Management Initiative of the United kingdom , the 1987 “ Management Improvement Programme of Australia , the “Government Management “ in New Zealand brought about sweeping reforms depending on the state of development of their respective countries , the state of their economy and their accounting standards coupled with their own philosophy.

Role of budget within the Financial Role of budget within the Financial Management (FM)Management (FM)

• The budget is the most important part of FM with the following functions:

• Economic: allocation and distribution of resources and stabilisation

of the economy• Financial : evaluate the total

government and public activity expenditures within budget receipts and expenditures

Traditional financial management Traditional financial management

• Focused mainly on the budget called line-item or input budget .

• Control mechanism to limit expenditure and provides areas of flexibility.

• easier and more manageable and adaptable to all economic circumstances and conditions

• problems associated are as follows:– Emphasis more on input than on output– Short-term (one year) – Incremental budgeting with out critical appraisal – Limiting linking costs to achievements

Evolution of the Public BudgetEvolution of the Public Budget

• Line-item budgeting

• Performance budgeting

• Planning-programme budgeting

• Zero-based budgeting

• Result-based budgeting

• Medium Term Expenditure framework

cautioncaution

• Public Financial management reforms should strengthen basic financial controls before adopting ambitious modernization efforts namely credible budget that delivers resource reliably; improved internal controls, budget execution and performance accountability

• The scope and sequencing of a PFM capacity development strategy can be informed by a performance assessment of the existing system

• the type of accounting standards depends on • Sholu align

Experience of MTEF in Africa Experience of MTEF in Africa

• MTEFs are receiving renewed attention as they constitute the ideal tools for translating poverty reductions programs within a coherent macro-economic and fiscal framework

• However following a a comparative assessment of the design and impact of MTEFs on public finance and economic management in nine African countries namely : Ghana ,Guinea , Kenya , Malawi , Mozambique, Rwanda , South Africa, Tanzania and Uganda the following conclusions were reached :

Experience of MTEF in AfricaExperience of MTEF in Africa

• MTEFs alone cannot deliver improved public expenditure management (PEM) in countries where other aspects of budget management , budget execution and reporting remain weak

• To integrate MTEFs as part of a package of bundle of reforms programmes • To effect detailed diagnosis of budget management systems and

processes• To sequence the overall PEM and to phase the MTEFs in terms of

technical dimensions and pilot in terms of scope • To integrate MTEF in the budget document • To set up appropriate structures to handle MTEF• To designate the Ministry of Finance as the responsible organisation to

both steer and row the project • Political motivations and incentives are primordial for the successful

implementation of MTEF

Washington state Budget Washington state Budget • Washington state headed by Governor : 112 Agencies , Boards and Commissions

representing a range of services for a population of 6 million and a workforce of 56,000 Public officers

• Priorities of Government namely: education, health, Government Accountability, environment , economic development

• Office of Financial Management responsible for the overall financial management systems including the following:

– central procurement – Smart Buying Initiative– Strategic plans – Risk management – Accounting system-cash/ accrual/capital accounting systems

Monitoring mechanism Government Management Accountability Framework (GMAP)

Role of engaged societyRole of engaged society

• “Participates in public decision-making, contributes to the provision of public goods and services and hold authorities accountable for the means and results of public action . Societal engagement is thus both an end and a means”

• Report of the World bank Task Force on Capacity Development In Africa

People’s budget? Pro-poor policy People’s budget? Pro-poor policy

• “Recent moves towards “participatory” budgeting have raised hopes and expectations that spending and revenue generation can be made more pro-poor if informed citizens and their non-traditional political organizations participate directly in budgeting decisions “

Deborah Brautigam: the People's budget? Politics, Participation and Pro-Poor policy : Development Policy Review 2004,22(6): 653

Associate Professor .school of International Service , American University ,Washington DC

Citizens participation and pro-poor budgetingCitizens participation and pro-poor budgeting

•Are citizens consulted for a budget exercise ?Are citizens consulted for a budget exercise ?•consultation with different target groups are held prior to consultation with different target groups are held prior to the announcement of the budget with the private the announcement of the budget with the private sector , trade unions, NGOs, sector , trade unions, NGOs, • press coverage/ media press coverage/ media •In the U.S and in Washington State in particular , there In the U.S and in Washington State in particular , there are a series of talks , citizens ‘for an evalaution of state are a series of talks , citizens ‘for an evalaution of state government actions .government actions .• bottom-up approach through the citizens' initiative bottom-up approach through the citizens' initiative

Participation in the budget Participation in the budget

• Citizens participation in economic policy is advocated as a way of making government spending more “pro-poor”

• Three central issues stand out :

• Who participates?

Civil society organizations, tripartite organizations of labor and business, donors, Unions and political parties

Participation in the budget(2)Participation in the budget(2)

• What kind of institutional framework is necessary for participation to be pro-poor?

• pro-poor political parties in power

• independent auditing mechanisms

• Institutions – media, public meetings

Participation in the budget(3)Participation in the budget(3)

• 3. participation focused on the social expenditure side of the budget may neglect the revenue side : this might miss opportunities to strengthen the sustainability of the pro-poor spending as well as accountability .

• A sustainable pro-poor economic strategy may require the inclusion of the business sector as a partner in participation

Analytical framework Analytical framework

Participation can assume different forms:• Direct -when informed citizens debate fiscal priorities

and submit conclusionsExamples of Brazil’s Porto Alegre and Ireland ‘s National

Economic and Social Council as direct participation in fiscal policy

Direct participation of democratic pro-poor economic policy –Cases of Mauritius, Costa Rica and Chile

• Indirect when citizens elect members of Parliament • Formal and informal-mechanisms through civil society

organizations / protest and other forms of voice

Participatory budgeting Participatory budgeting

• Increases flow of information and promotes greater transparency

• Serves an important education function• Can influence policy when combined with

informed media and civil society organizations at every stage of the budget cycle namely formulation ,implementation auditing and evaluating the impact and outcome of pro-poor strategies

Alternate budgetsAlternate budgets

• Represents a new and important form of resistance

• Critique of policies of government

• Embody more democratic vision

• Provide new information and new insights to the public

• Case study : CANADA

ICT as an enabler ICT as an enabler

• For citizens: ICT improves the delivery and easy access of services to citizens

• Facilitates the transmission of information reduces transaction costs

• Connects citizens and adds value to the transaction

• For government : ICT provides a central management information system for informed decision-making

•

EvaluationEvaluation

• The MTEF framework facilitates monitoring and programme evaluation as the future predictions provide a baseline for assessing the effectiveness of past years programme .

• Differ rent types of evaluation can be effected . • The World bank has developed a series of good

practices to carry out Poverty and Social Impact Analysis to support development policy options .

• Such evaluation will analyze intended and unintended consequences of policy interventions (ex-ante, during implementation and ex-post) on the well-being of different social groups with a particular focus on the poor and the vulnerable .

Mauritius caseMauritius case

• Has parliamentary democracy since 1968

• has institutionalised consultations prior to the budget with major stakeholders such as the Unions , business associations , social welfare NGOS, the private sector as represented by the Joint Economic Council as well as other meetings and accepting written submissions

Budget 2006/2007Budget 2006/2007case study Mauritiuscase study Mauritius

• Challenges

• External shocks: oil, sugar and textile crunches

• Internal shocks : government debt , budget deficits, high rate of unemployment and Low investment

Pro-poor budgeting -MauritiusPro-poor budgeting -Mauritius

• Prioritization of projects to address the needs of the poor through the following:– Financial assistance to the needy (old age,

handicapped and others not gainfully employed)– Empowering those who are active to develop their

skills by providing training and retraining for multi-skilling jobs, incentives , grants and loans

– Ensure that the redistributive policy is fair and equitable that meets targeted vulnerable groups

– Create an enabling environment and minimize administrative hassle to start a business

Mauritius Mauritius

• Budget casted within MTEF framework • 40 fundamental reforms in areas of economic

restructuring , investment and business environment , fiscal stewardship and social justice and equity

• Reorganization of the Ministry of Finance and Economic Development

• review of existing regulations and elaboration of Finance Act and Business Facilitation Act

The way ForwardThe way Forward

• Diagnosis/Needs assessment taking into consideration Nepad and MDG goals as well as local needs and external challenges

• Develop a vision for development –strategic plan – beware paralysis by analysis

• Creation of a data base management system • Develop a training plan for different target groups following training

needs analysis and to include pro-poor training• Catalytical role of international agencies to assist in the

development of home-grown strategies • Financial reforms should be part of a broader reform initiative • Setting up of high level monitoring mechanism like GMAP • Setting up of Implementation and Monitoring mechanisms both at

central and departmental levels• Setting up of a Monitoring and Evaluation mechanism to ensure pre

and post evaluation and base –line data

Lessons learned /Critical success Lessons learned /Critical success factorsfactors

• Political commitment• Leadership role of Administrators• Availability of resources• Role of change agents• Administrative capability /expertise• Institutional capacity • Communication strategy with stakeholders• Timing• Participation ( public officers /citizens)• use of statistics for analysis • Data management information system

Questions time Questions time

Thank you