PRSP and Budget Links: Emerging Evidence from Case Studies

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PRSP and Budget LinksEmerging Evidence from
Case Studies

• Find materials at PSGO site
• http//www-wbweb.worldbank.org/prem/premcompass/kn
  ow_learn/psgo.htm

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PRSP and Budget LinksEmerging Evidence from
Case Studies

• Jeni Klugman
• Rosa Alonso
• Oct. 12, 2004

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Presentation Summary

• Overview and Motivation
• PRSPs and Budgets
• Lessons Learned
• 1. Aggregate
• 2. Data
• 3. Process
• 4. Allocations
• 5. Donors
• Conclusions
• Challenges Ahead

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OverviewMotivation

• PRSP process and associated policy and program
  commitments have the potential to increase the
  pro-poor focus and accountability of
  policy-making and budgeting, through improved
  availability and use of information, and better
  incentives and processes.
• Indeed realizing this potential is central to
  expectations about PRS effectiveness as an
  instrument to promote pro-poor policy and
  programs.

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OverviewThe PRSP and Budget Potential Linkages
Identify Priorities
MTEF
PRSP Process Policy Commitments
Annual Budget
Evaluation
PEM
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BudgetsA Key Disciplining Tool for PRSPs

• Budgets are a key implementation tool for PRSPs
  and provide discipline
• Link to the fiscal envelope and discipline of
  costing
• Absorptive constraints
• Need to prioritize and sequence policies
• Rigorous application of technical criteria to
  judge trade-offs

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PRSPsA Strategic Framework for Budgets

• PRSP approach promotes
• A focus on poverty reduction
• A needs-based reference for fiscal policy
  decisions
• Greater transparency of process and more
  participation of line agencies and CSOs
• Emphasis on results and indicators
• Donor commitment to align external finance with
  government priorities

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Key Themes

• The case studies aim to assess
• The contribution of the PRSP process to more
  accountable and pro-poor budgeting
• The degree of implementation of PRSPs via the
  budget
• Questions on PRSP implementation (JSA)
• Is the financing plan adequate and credible?
• Are fiscal choiceson expenditure and revenue
  sideconsistent with strategic priorities and
  institutional capacity?
• Is public financial management adequate to ensure
  effective implementation?

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Lessons Learned (1) Aggregate Financing--Potentia
l

• PRSPs-budgetstension between needs and resource
  availability
• Needs-based PRSP can provide
• Strategic orientation and goals
• Impetus to improve tax collection
• Increased ability to leverage external finance to
  deliver agreed results
• Resource availability as determined by realistic
  macroeconomic projections and overall budget
  envelope provide the needed discipline for PRSP
  implementation

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Lessons Learned (1) Aggregate--Limitations

• Significant gaps in funding in MTEFs (TZ, BF)
• Failure to tackle the revenue side and slower
  than expected growth means lower revenue
  out-turns
• Difficulty in prioritizing can put pressure on
  the aggregate

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Lessons Learned (2)Data Production, Availability
and Use

• Data productionGreater coverage and
  disaggregation of data
• Improved coverage of donor financing in TZ
• Gender-disaggregated targets in education and
  health in BF with impact on budgets
• Disseminationimproved availability
• Useimproved poverty analysis. Overall weak
  feedback loops to policy-making
• In TZ, use of poverty-data for elaboration of
  local transfers formula
• Improved results-orientation and ME, e.g. of
  MTEFs, sector strategies and program budgets

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Lessons Learned (2)Improved use of Data,
Results-Orientation of Budgets and ME

• Budget allocations increasingly informed by data,
  analysis and costing of priority programs
• Poverty diagnostics is a key building block
• Spending by level of service (primary, tertiary,
  etc.)
• Regional composition of spending and poverty maps
• Benefit incidence analysis average and marginal
  
• Program evaluations
• Use of quantitative and survey information

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Lessons Learned (3) More Open Process

• Improved accountabilityinside and outside
  government
• Enhanced dialogue within line ministries and b/n
  line ministries MoF due to
• WGs and PRS review processes
• Results-orientation of PRSP process and budget
  support
• But, much more efficient when finance and
  planning under one ministry!
• PRSP process can support decentralization--Local
  governments key to improve service delivery

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Lessons Learned (3) Budget Process Tanzania

• PRS working groups
• Working groups in priority sectors and budget,
  macro and energy groups
• Participation from MoF, line ministries, donors
  and civil society
• Role--scrutinize links between PRS, sectoral
  strategies, MTEF and budgets
• Government leadership/ownership key!

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Process Tanzania Institutionalizing a
Poverty-Focused Dialogue

• Contribution of working groups
• Institutionalize participation in PRS
  implementation
• Supports dialogue within govt. and b/n
  government, donors and civil society
• Increase poverty focus of sector dialogues
• Increase results-orientation of policy dialogue
• Help set up and monitor SWAPs

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Lessons Learned (3) Process CambodiaBuilding
Linkages

• Achievements
• Merging of PRSP and planning process
• Existing sector strategies (e.g. health and
  education) inform NPRS and sector expenditure
  frameworks
• Sectoral and structural measures subject to
  iterative consultations
• Some sectors show clear connection to budget
• PRSP process is enhancing connections b/n key
  Parliamentarians and CSOs

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Limitations in Cambodia

• Many activities in matrix not costed
• Line agencies take incremental approach and focus
  mainly on investment projects
• Weak role/ownership of Parliament in development
  of PRSP and budgeting processes and priorities
• Institutional disconnect as MEF involved
  relatively late in NPRS development

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Lessons Learned (4)Allocations Overall
Achievements

• Allocations to pro-poor spending have been
  increasing in countries with PRSPs, as percent of
  GDP and of total spending
• Especially true in countries that are more
  advanced in the PRSP process, have better
  budgeting processes, and more donor support
• Poverty-reduction spending increased by an
  average of 1.5 points of GDP across 20 countries
  from 2000 to 2004

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Allocations-Findings from Case Studies

• Rising share of current expenditures goes to
  priority sectors in Cambodia (share for health,
  education, and agriculture/rural development rose
  from 25 in 2000 to 36 in 2004)
• Priority expenditures (relatively) protected from
  budget cuts in TZ and BF
• In some sectors/countries improved intra-sectoral
  resource allocation (especially primary
  education)e.g. BF, Cambodia

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Allocations Findings
Tanzania Priority/Discretionary Spending

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Allocations Findings
Tanzania Sectoral Spending
Priority Real Spending Per Capita
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Allocations Findings

• Burkina-Faso Real Priority Expenditure

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Allocations Findings

• Improved geographical resource allocation,
  impetus to decentralization
• Allocations to municipalities in Bolivia grew
  from 9 to 13 percent of the budget between 1999
  and 2002
• New pro-poor regional transfer norms in Tanzania
  and for health sector in Cambodia

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Lessons Learned (4)Allocations Caveats

• Uneven increases across sectorsin education much
  greater than in health (EFA)
• And within sectors(e.g. curative vs. primary
  health and agriculture vs. rural roads in BF,
  within agriculture in Cambodia)
• And across expenditure categoriesonly small
  increases in goods and services
• Definition of priority often problematic
• Number of priority areas expanded in new PRSPs
  for both Burkina and Tanzania (now up to 70
  percent of non-debt expenditure in TZ)

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Donors and External Assistance--Potential

• The move to budget support that has accompanied
  the PRSP process has greatly increased incentives
  for
• Sound public expenditure management
• Costing and budgeting for sector strategies
• Solid accountability mechanisms (internal and
  external)
• Focus on accountability

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Donors and External Assistance Achievements and
Limitations

• Increase in budget support
• From 1.8 to 3.2 of GDP in Tanzania
• From 2.9 to 4 percent of GDP in BF
• Progress in
• Integrating foreign aid into the budget
• Medium-term aid commitments (in TZ, BF)
• Donor coordination around SWAps in priority
  sectors
• BUT No real increase in aid b/n 1999-2002 (TZ,
  BF)
• Need to meet international fiduciary requirements
  (esp. procurement regulations) can significantly
  slow down budget execution

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Donors and External Assistance--Limitations
Tanzania Predictability of Budget Support
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Donors and External Assistance--Limitations
Burkina-Faso Variability of Budget Support
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Overall Conclusions

• AggregateIncreased focus on available resources
  and scope to increase mobilization
• DataImproved production, dissemination and use
  of data
• AllocationsEnhanced pro-poor focus of budget
  allocations
• ProcessGreater openness, results-orientation,
  accountability of budget process
• DonorsImproved donor coordination and alignment
  with country priorities

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Challenges Ahead--Dataand Results-Orientation
of Budgets

• Improve
• Comprehensiveness--coverage of budget data
• Disaggregation--budget classifications
• Skills in the statistics and PFM areas
• Timeliness, availability and readability of
  budget information
• Feedback loops from poverty analysis to budgeting
• Monitoring of program budgets and other
  results-oriented policy-making tools to encourage
  evidence-based budgeting

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Challenges Ahead--Process

• Foster the involvement of line ministries,
  Parliaments and CSOs in budget process
• Better align the PRSP and budget timetables
• PRSP monitoring data could usefully inform inter-
  and intra-sectoral allocations and mid-term
  adjustments
• PRSP Progress Reports should be timed to inform
  the budget cycle
• Integrate the MTEF, PIP and annual budget
• Integrate MTEF with sector budget and planning
  cycles
• Integrate responsibility for MTEF with MoF unit
  preparing annual budget
• Improve budget execution so that planning becomes
  serious process

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Challenges Ahead--Allocations

• Protecting prioritization and greater specificity
  on what being a priority expenditure means,
  e.g. clarify degree of priority in budget
  allocation process and of protection during
  revenue shortfalls
• Sticking to good process-PRSP priorities should
  be respected and reviewed at PRS review time
  reflecting
• Empirical evidence--results of NPRS ME, PSIA,
  other analytical work
• Participatory processes for PRS elaboration,
  including Parliaments!

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Challenges Ahead--Donors

• Need for improved
• Predictability of commitmentsmore long-term
  forecasts
• Reliability of disbursementssmaller gaps b/n
  commitments and disbursements
• Variability of aid flows--across and within years
• Timeliness--better synchronization with
  government budget cycles

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PRPS Budget Links

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