Budget Reforms, Program Budgeting

and

Sub-national Budgeting in Afghanistan

(Presentation for Line Ministries, 2006)

Jean-Marc LEPAIN Budget Adviser Public Finance Specialist Ministry of Finance, Kabul jlepain@yahoo.fr

Budgeting and Development Strategy

Millennium Development Goals

National Development Strategy Poverty Reduction &

Development Strategy (PRSP)

Medium Term Expenditure Framework

Budget

10 Years

5 Years

3 Years

1 Year

From National to Provincial Budget

ANDS

MTFF Line Ministries’

Strategies

National Budget

Provincial Budgets

Budget Integration and Provincial Budgeting

There is only one budgeting process and provincial budget is part of it.

Provincial aspects of budgeting must be integrated at all level of budget discussion.

Programs that are part of the national budget must have a sub-national dimension.

Pilot Phase of Budget Integration

Pilot Ministries have been selected:

MRRD (program and provincial budgeting)

Ministry of Education (program and provincial budgeting)

Ministry of Public Health (program budgeting)

Ministry of Agriculture (provincial budgeting)

Pilot Provinces have been selected:

Balkh

Panjshir

Kandahar

What is Program Budgeting ?

Program Budgeting is a system of managing performance and accountability where expenditure is classified by program and common policy objectives.

A program is defined as a single group of activities and projects, which consumes resources to achieve a stated policy objective.

Rationales for Program Budgeting

Program budgeting will help align ministries’ projects and activities with Government priorities as defined in ANDS.

Program budgeting will help us formulate a more realistic budget by capturing all recurrent expenditures in projects.

Program budgeting will simplify project management.

Program budgeting will introduce more flexibility in fund allocation.

Program budgeting will better reflect activities of the provinces .

What is Provincial Budgeting?

Provincial budgeting is the allocation by line-ministries of resources by province, based on the National Development Strategy reflected in the ministries’ strategy at the national and provincial level, after consultation with the provincial authorities and an assessment of the local needs.

Objectives of Provincial Budgeting

Ensure an equitable allocation of resources across provinces to facilitate effective service delivery.

Increase Government level of spending in provinces to foster economic growth and employment.

Ensure that resources made available to provinces are

used effectively.

Ensure that local development issues are addressed and provincial budgets are linked to the National Development Strategy.

The New Budget

Program 1

Salaries

Goods & Services

Acquisition of Assets

Program 2

Salaries

Goods & Services

Acquisition of Assets

Balkh Panjshir Kandahar Ministry of Education

Consequence on Ministries’ Structures

The Ordinary and Development Budget are replaced by one single budget.

A Finance Department and a Policy and Coordination Department will replace the existing structure. (ToR of the 2 departments need to be prepared).

The new Policy and Coordination Department will focus on program design, policy issues and program coordination.

The new Policy and Coordination Department will be responsible for most aspects of provincial budgeting.

Budget Consultative Process (1)

The process to include Provinces in the budget consultative process is still under discussion.

Consultations with take place with Provincial Development Committees to finalize this consultative process.

The consultative process will include: provincial development forums, provincial departments of line ministries, working groups, and provincial development committees.

Budget Consultative Process (2)

At the National Level:

Sub-national input is taken into consideration by ANDS;

Provinces will be represented in Consultative Groups (which include representatives of the donors) either by the Ministry of Economy or by an ad hoc committee.

Budget Consultative Process (3)

At the provincial level:

Provincial Development Committees (PDC) will prepare a Provincial Development Plan in the context of ANDS

Ministries will prepare at the provincial level an implementation strategy, based on their national strategy and discuss it with the PDC

Role of the PDCs

Analyzing provincial needs in each economic sector;

Formulating provincial strategies for fostering economic growth and creating employment in line with ANDS;

Providing input to line ministries for budget discussion at the national level;

Consulting with provincial department of ministries and helping them in formulating their implementation strategy at the provincial level;

Budget Consultation and the Comprehensive Rural

Development Process

I. Planning

2a. Provincial

Dev. Plans

2b. Provincial

Investment Plans

- Provincial Dev.

Forum

- District Dev.

Assembly- District Dev.

Assembly- District Dev.

Assembly

1. District Dev.

Plans1. District Dev.

Plans1. District Dev.

Plans

II. Approval of Plans and Implementation Arrangements

National

Coordination

Committee

Provincial

Development

Committees

(PDCs)

3.

Recommendation

of Investment

Plans

4. Approval of

Plans &

Implementation

Arrangements

MRRD

1. Alignment of existing Gov. & Non-

Gov. Programmes/ Projects.

2. Allocation of New/ Additional

Funding & Resources

3. Promotion of Private Sector

Investment

III. Implementation of Plans

5. Contracting,

Monitoring,

Promoting

Projects

Private Sector

Investors

Implementing

Ministries &

Agencies

Implementing

Partners/

Contractors

Projects

Implemented

From rural development to provincial development

Provincial Budget Ceilings

Ministry Strategy

MTFF

Budget Ceilings

LM Provincial Implementation

Plan

Activity Schedule

Provincial Development

Plan

Ministry of Finance Line Ministries Central Level

Provincial Level

Development of the Provincial Development Plan

What needs to be done (1. Provincial Development Committee)

Align the Provincial Development Forum and the Provincial Development Committee structure with the ANDS structure in consultation with MRRD/NABDP (written instructions should be provided by MRRD).

Review draft sector (ministry) strategy through Working Groups, prepare comments and return the feedback to ministries or Working Groups.

Start consultation with pilot ministries for formulating a Provincial Development Plan that can be limited to Rural Development (MRRD), Agriculture, and education in a first phase.

Prepare recommendations for line ministries regional offices

What needs to be done (2. Ministries)

Provide their national strategy to their regional department and the PDC;

Inform provinces of the provincial ceiling;

Provide guidance to their regional department for consultation with the PDC;

Prepare gap analysis and communicate to the ministry planning department;

Prepare implementation strategy in line with PDC recommendations;

Role of the MoEco (1)

MoEco will monitor PDCs’ activities, analyze minutes of monthly meetings, organize field visits and provide instructions, guidance and support.

MoEco should advise on the preparation of the PDP and approve it.

MoEco will evaluate PDCs and prepare Year End Report of PDCs’ activities including PDP implementation.

Role of the MoEco (2)

MoEco will review line ministries’ strategies, check costing and approve performance indicators.

MoEco will ensure that implementation of LM Provincial Office activity schedule goes according to plan

MoEco, in cooperation with MoF, will analyze provincial expenditures, identify trends and gaps, and formulate recommendations for CGs.

Role of MoF

MoF will provide indicative multi-year ceiling for provincial development plans.

MoF will comunicate to provinces fiscal enveloppes for budget discussion

MoF will develop expenditure norms that will set minimum level of spending for non-wage expenditures in key sectors.

Long Term View

The new system of provincial budgeting will evolved into a system of sub-national budgeting that will include districts, cities and villages.

A system of intergovernmental transfers will be developed.

Expenditures assignments of line-ministries will be revised.