Periodic Development Plan and MTEF Practice in Nepal

Dhruba Prasad DahalJoint secretary

National Planning CommissionNepal

Content of the presentation• Background• Periodic Development Plan in Nepal• Linkages between planning and budgeting through

MTEF • Institutional arrangements• MTEF Process• Prioritization criteria of the programs and projects• Issues in MTEF • Key lessons learned from MTEF

Background

• Government expenditure plays a significant role for economic growth and sustained peace in Nepal

• Proper prioritization and effective management of development programs and projects constitute the basic requirement for government expenditure planning.

• The MTEF helps the Government to manage government expenditure more efficiently and effectively.

Periodic Development Plan in Nepal

• The planned development process in Nepal has completed five decades.

• The Tenth plan (2002/03-2006/07) has focused on broad-based economic growth with prioritized development projects and program through MTEF for guaranteeing resources.

• In the plan period MfDR introduced in some piloted government agencies to make planning and budgeting result oriented.

• Twelfth Three Year Plan's (2010/11-2012/13) long term vision is to create a prosperous, peaceful and just Nepal by transforming from a least developed country into a developing nation within two decade period.

• GON is trying to institutionalize and internalize MTEF and MfDR approaches to public sector agencies gradually to achieve national goals .

Linkages between planning and budgeting through MTEF

• MTEF is being prepared in line with the long-term vision, goal, objective, strategy and policy of periodic development plan.

• MTEF is the major tool to link annual programs and budget with the periodic plan at central level.

Periodic plan Sectoral Plan

MTEF

Yearly Budget

Institutional arrangements

• GON has formed different committee at different levels for effective implementation of MTEF.

• MTEF Steering Committee chaired by Vice-chairman of NPC to steer MTEF function

• MTEF Resource Committee chaired by NPC member who looks after macro-economic policies and budget determines the budget framework for 3 years. This committee comprises representatives from different ministries including Ministry of Finance.

• MTEF Technical working Committee is overall responsible for smoothly carrying out MTEF activities in the NPC .

• MTEF focal point and working committee in the respective ministries and agencies are responsible for preparing detailed program and budget of their respective sectors.

MTEF Process

• A wider public expenditure management cycle• The MTEF process is both top down and bottom up

in Nepal. • Top down process determines resource availability

and resource allocation between sectors, whereas bottom up process estimates actual requirements for each sector.

• Different steps follow to prepare MTEF budget from projecting resource availability to finalizing MTEF budget with parliament approval.

Prioritization criteria of the programs and projects

• On the basis of MTEF criteria the programs and projects categorized in priority one (P1) priority two (P2) and priority three (P3).

• Criteria and weightage to prioritize programs and projects a. Contribution to inclusive economic growth for poverty alleviation b. Contribution to peace promotion c. Contribution to MDGs d. Inclusion and engendering (regional, social and engendering) e. Contribution to productive employment f. Participation in project design, implementation and cost sharing g. Contribution to capital formation h. Sustainable environment i. Project status in terms of previous performance and completion stage

Issues in MTEF• Delay in MTEF preparation in budgetary formulation even from NPC and

MOF• Not fully synchronize with budgetary calendar• Parallel exercise has reduced its importance because MTEF is not a legally

binding document as budget document. • Focus only to prioritize ongoing projects• MTEF not fully applied in budget allocation• Synchronization between recurrent and capital budgeting• Recurrent budget yet to be fully prioritized• Resource gap not properly reflected in MTEF for upcoming projects• Allocation is yet to be tied up with performance result• Lack of proper monitoring of the performances• MTEF is not practiced yet at the local level• Absence of political commitment • Low absorbing capacity of implementing agencies

Key lessons learned from MTEF

• Strengthened inter-linkages with strategic focus• Helped to attain the result-oriented planning process through

MfDR.• Unit cost-based programming has enabled the Government to

analyze and assess efficiency and effectiveness of its projects and programs.

• Performance-based budget allocation and budget release system

• Maintaining fiscal discipline: - Reduced or eliminated low priority projects - Prioritization of projects in line with the PRSP - Fiscal deficit has been reduced significantly - Budget preparation has been made transparent and predictable - Re-assured the budget for priority projects - It has helped to focus more on effective monitoring

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