PFM Reform and Program Budgeting in Cambodia

By

Mr. LAY Sokkheang

Director, Budget Formulation Department

General Department of Budget

Ministry of Economy and Finance

12th OECD-ASIA Senior Budget Officials Annual Meeting

Bangkok, 15th December 2016

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Content

1. Progress in PFM Reform

2. Result of the Assessment of two Year PB Implementation

3. Other Issues

4. Way Forward for Cambodia’s Budget System Reform

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Content

1. Progress in PFM Reform

Our journey in

Public Financial

Management

Reform for a

better and

greater result.

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1.1 PFM Reform Program

• Stage 3: CAP3 (2016 – 2020)

• Stage 4: CAP4 (2020 – 2025)

• Stage 2: CAP2 (2009 – 2015)

• Stage 1: CAP1 (2005 – 2008)

Platform 1: Budget

Credibility

Platform 2: Financial

Accountability

Platform 3: Budget-Policy

Linkages

Platform 4: Performance

Accountability

Cambodia’s Approach:

4 Platforms in 4 Stages

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1.2 What we have done since 2005 Getting ready for stage 3

Started developing a framework and guideline for piloting Program Based Budgeting (PB)

Amended Public Financial System Law in 2008 to change budget cycle and allow PB implementation

Introduced Budget Strategic Plan (BSP) in 2008

Put in place a guideline for BSP

Put 8 Ministries to pilot a partial PB (2008-2014)

Put in place a General Guideline for PB Preparation

Assessment on the PB implementation in 2012 and set direction for 2013-2020

Introduced Budget Entity (BE) in 2013

Put in place a guideline for BE

Pilot Full Program Budgeting and Budget Entity in 2015 (starting with 10 LMs, 15 LMs, 11 LMs and Final 3 LMs, in 2015, 2016, 2017 and 2018 respectively)

Put in place a guideline for PB execution procedure in 2015

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1.3 Budgetary Reform Initiatives

Line Items

(1993-2016)

Partial PB

Full PB Programs

(2008 – 2014)

Performance

Accountability,

(2020 – 2025)

• Input based

• Incremental

• Detailed control

• Pre-Audit

• Policy lined budget

• Budget Ceilings

• Program Activities

• Performance indicators

• Monitoring/Performance

Report

• Program Activities

• Program indicators

• Pilot 8 Ministries

Programs &

Performance

(2015 – 2020)

• Performance

based budget

• Budget Ceilings

• Program

Agreements

• Monitoring &

Evaluation

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Content

2. Result of the Assessment of two Year PB Implementation

Our journey in

Public Financial

Management

Reform for a

better and

greater result.

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2.1-Lessons for Cambodia

1. Define what PB means for Cambodia

•PB is not a clearly defined concept. Countries have often set expectations too high.

•Recommend defining a modest set of goals for PB in Cambodia and then tracking them. Suggest focus on:

• Improving consistency between strategic plans and budget

•Budget transparency – publish program objectives and performance.

•Accountability for results (very limited)

•Program M&E – feedback loop to budget decision making

2. Consider a Differentiated Approach

•PB is more relevant in some areas of government than others. One size fits all approach doesn’t work well.

•Recommend creating two tracks, “full PB” and “PB light”, according to the program. Full PB would apply to programs where Government is the main service provider and there are M&E frameworks in place: e.g. roads, school education, health, water and sanitation, rural development, tax admin. PB light would apply to programs where the link between spending and policy outcomes is indirect or weak (e.g. foreign affairs, women’s affairs, internal audit) 8

Content

3. Other Issues

Our journey in

Public Financial

Management

Reform for a

better and

greater result.

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Issues to be considered for CAMBODIA

Cambodia’s Strategic Planning

• Lack of linkage between Ministry Level to National Level

• Integrated Budget Plans

MTEF and BSP

• Top Down at National Level (MTEF ) vs Bottom Up at

Ministerial Level ( BSP)

Budget Planning and Budget Preparation (E-Budgeting)

• Pre-ceiling

• Formulation of Budget Ceiling

• Budget Revision Stage

• Budget Formulation Stage

Budget Execution ( GFMIS )

• High level of power delegation but Punishment on

slow disbursement

• Rules of Virement

• Carry-over budget managed by the Treasury

(Malaysia has no liquidation law)

M & E (EV MIS) : Need a framework ( lead by GD of

Policy and GDB)

• Monitoring from Input to Process to output level

• Evaluation from Output to Outcome and Impact

level

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Content

4. Way Forward

Our journey in

Public Financial

Management

Reform for a

better and

greater result.

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3.1-Way Forward for Cambodia’s Budget System

Reform

Revisit the Concept note on Budget Strategic

System Reform (2013-2020) :

• A New Budget System Reform Strategy 2017-2025

Updating the current guidelines to a new

guideline for Performance Informed Budgeting

• Merging the current BSP, PB, and BE Guideline into

a manual for budget preparation and execution

• Capacity building

Review the Financial System Law (2008) :

• Having a new broad law with only basic principles,

and leave the detail for Sub-decree and Prakas?

Like Financial Act of 1959 of Malaysia, Thailand

• Having a comprehensive law with partial revision ?

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Thank you

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