Budget Reform and Policy Implementation

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Budget Reform and Policy Implementation

• General Course on Good Governance
• Centre for Human Rights
• 8 July 2002

2
What is the MTEF?

• MTEF sets out 3-year rolling spending and revenue
  plans for national and provincial government
• 2002 Budget is the 5th MTEF budget tabled in
  Parliament

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Advantages of a MTEF

• Greater certainty for depts to plan and budget
  for services in line with policy priorities
• Affordable spending in the medium term
• Strengthened political decision-making and
  accountability
• Greater transparency of budget and service
  delivery information for the public
• Improved management of public finances

4
Key players in process

• Cabinet
• Parliament
• Ministers Committee on the Budget
• Budget Council
• Budget Forum
• FOSAD
• Supporting technical committees

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Main steps in budget process
Policy priorities
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MTEF process and reforms

• Early discussion by the Ministers Committee on
  the Budget Cabinet on policy priorities (May-
  July)
• Preparation and submission of departmental MTEF
  budgets (May to Aug)
• Review of departmental budget submissions (Aug)
• Division of revenue medium term priorities
  (July-Aug)
• National provincial MTEC allocation process
  (Sept-Nov)
• Medium Term Budget Policy Statement (Nov)
• Preparation of budget documentation (Nov-Feb)
• Tabling of Budget in parliament (3rd week of Feb)

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Fiscal framework
Borrowings
Expenditure
Debt Servicing
Tax Revenue
Contingency reserve
Available Expenditure
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Division of Revenue
Available Expenditure
National Share
Provincial Share
Local Share
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Budget documentation

• Intergovernmental Fiscal Review (Sept)
• Medium Term Budget Policy Statement (Oct)
• Budget Review and Budget Speech (Feb)
• Estimates of National Expenditure (Feb)
• Provincial Budget Statements (Feb March)

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• New national and provincial budget formats
  developed in line with s215 of Constitution s27
  of PFMA
• New formats aim to
• Reduce duplication in budget documentation
• Move to Government Financial Statistics (GFS) in
  the new economic classification
• Strengthen link between planning and
  prioritisation, budgeting and service delivery

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Key Budget format reforms...

• Extension of medium term information
• 7-yr trend information enables comparative
  analysis
• Service delivery information - specifying outputs
  and output measures and indicators
• Emphasises value for money
• Move towards quantity, quality, timelines and
  cost measures and indicators in subsequent
  Budgets
• Tracking and making progress in service delivery
  is key message

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• Helps departments plan, budget and manage
  programmes better
• Improves accountability and control
• Informs policy- and decision making
• Provides information to the public about what
  goods and services government buys

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Policy priorities reforms

• Strengthening link between Govt policy priorities
  and public expenditure is key message of MTEF
  budgeting
• Spending plans translate policies into service
  deliverables - a key tool for public goals
• Budget reform aims to strengthen political
  oversight of policy and budget prioritisation
• Facilitates policy priorities for sustainable
  development

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Budgeting and policy choices

• Budget prioritisation policy choices and
  trade-offs against resource constraints,
  contributing to Governments strategic goals,
  incl
• Reducing poverty and vulnerability
• Increasing employment
• Increasing investment
• Lowering the costs of economic activity
• Improving safety and security of citizens

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Strengthens MTEF Budgeting..

• Strategic set of budget priorities strengthens
  credibility of MTEF budgeting
• Guides resource allocation decisions in budget
  process
• Strengthens political oversight of budget process
• Reinforces link between policies, spending
  service delivery
• Advances public goals of social and economic
  development

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Building on 2001 2002 Budgets

• In 3-year rolling MTEF
• Priorities decided on in 2001 2002 Budgets form
  basis for review of priorities for 2003
• Existing priorities evident in forward estimates
  of 2002 MTEF (i.e. year 2 year 3 estimates)
• Review of priorities is about guiding resource
  allocation at the margin within the new MTEF
• Additional available resources through economic
  growth, increased revenue collection and economic
  growth

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Existing Budget priorities

• Budget priorities reflected in 2001 2002
  Budgets include
• Investment in new infrastructure and
  rehabilitation maintenance of existing
  infrastructure
• Deepening the skills capacity of the economy
• Reducing poverty and vulnerability among our
  citizens
• Encouraging partnerships with communities to
  improve access to basic services
• Strengthening capacity to combat crime

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Infrastructure allocations
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Priorities reflected in DoR

• Budget priorities choices reflected in Division
  of Revenue to 3 spheres
• Strengthening capacity to fight crime increases
  the national share
• Extending coverage and raising the value of
  social security grants adds to the provincial
  share
• Improving access to basic services (water,
  sanitation, electricity, refuse removal) raises
  the local government share

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2002 Division of Revenue
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Process of prioritisation.

• Review of priorities for 2003 to evaluate
• How policy options and priorities contribute to
  Governments strategic social and economic goals?
• What factors should be taken into account in
  assessing trade-offs against resource
  constraints?
• How do various kinds of economic and social
  policy concerns complement each other or compete
  for resources?
• What should the sequencing of policy
  implementation be for sustainable economic and
  social development?

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Looking ahead to 2003 .

• Looking ahead to the 2003 MTEF
• The correct budget priority choices may be to
  deepen and strengthen existing priorities rather
  than introducing new priorities
• Questions often arise on how to implement these
  choices are just as NB as they determine how
  successful policy choices are in practice

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Policy implementation challenges

• Increase capacity to spend on infrastructure
• Lever private sector finance and expertise
• Enhance environment for step up in private sector
  investment
• Further tax reform
• Strengthen employment creation incentives
• Reinforce labour-based infrastructure and service
  delivery
• Address regulatory impediments to increased
  formal sector job creation
• Enhance support services to SMMEs and informal
  sector

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Policy implementation challenges

• Reduce poverty and vulnerability
• Improve access to services for the poor
• Extend coverage and improve quality of basic
  social service delivery
• Reinforce crime prevention capabilities
• Implement sector policing
• Improve prison management
• Rationalise courts
• Harness information communication technology
  improvements
• Options to complement telecommunications growth
  competition

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Budget Reform and Policy Implementation

• General Course on Good Governance
• Centre for Human Rights
• 8 July 2002