Top-Rated Free Essay

life is cool

Powerful Essays
Moving towards policy oriented budgeting in Bangladesh through the Medium Term Budget Framework (MTBF)
Medium Term Expenditure frameworks are increasingly used as a means to overcome the shortcomings of traditional annual budget processes. The Medium Term Budget Framework (MTBF) in Bangladesh has now been rolled out to all ministries and is a great leap forward in terms of quality of the budget process. Yet, the coexistence of MTBF and traditional budgeting dilutes the achievement of reform objectives; much remains to be done to ensure ownership from line ministries and real institutional changes in budget preparation as well as a more coordinated budget and planning process.

The shortcomings budgeting of

traditional
What can be achieved with an MTEF?

Many developing countries have experienced the shortcomings of traditional annualized budget processes. Many case-studies reveal that traditional annual budgets do not fully take into account the future costs and benefits of spending programs. Also, traditional budgets are known to pay too much attention to compliance with detailed central controls of inputs and too little on achievement of outputs and outcomes; they often lack a comprehensive macrofiscal framework to guide resource availability for the medium term and are not able to effectively control aggregate expenditures; allocations are often increments based on previous year‟s budget making it difficult to shift spending to changes in priorities and are often de-linked from national development plans and policy priorities.
In 1998, the Public Expenditure Management
Handbook of the World Bank acknowledged that poor budget outcomes are the results of failure of developing countries, especially in Sub Saharan
Africa and South Asia, to link policy and budgeting.
Medium Term Expenditure Frameworks (MTEFs) have since become popular as a means to overcome some of the shortcomings of traditional budgeting and improve planning of government expenditures.
MTEFs have formed the basis of public financial management (PFM) reform in about 132i countries, including South Africa, Malawi, Uganda, Pakistan and Nepal. An analysis reflected that Public
Expenditure and Financial Accountability (PEFA) scores are better for countries with MTBF than those without itii. Bangladesh has implemented an MTEF since FY 2005-06.

The MTEF is a tool for improved budget planning over a period of typically 3-5 years. While objectives may differ depending on the country context, they are typically formulated in terms of enhancing fiscal discipline, achieving better predictability of funding and more strategic budget allocations aligned with national policies.
A recent comprehensive international study (note) divides the MTEF into three distinct phases: Medium
Term Fiscal Framework (MTFF) – where there is a medium term macro fiscal framework which provides the basis for budget formulation; Medium Term
Budget Framework (MTBF) – where spending ministry expenditure ceilings are set based on a coordination between top-down resource availability
(MTFF) and bottom-up resource needs from ministries based on their plans; and Medium Term
Performance Framework (MTPF) – where the focus is shifted to inputs, outputs and outcomes of ministries with distinct program objectives and strategies. As indicated by the diagram below, refining the MTEF is a lengthy process. Out of 132
MTEFs worldwide, only 19 have evolved into MTPF, while 71 and 42 are either at the MTFF or MTBF stages respectively.
MTEFs also differ in their design, but if implemented well they should display the following characteristics:
 A medium term macroeconomic framework to enable credible forecasts of revenues and expenditures.  Fiscally sustainable medium term resource envelopes formulated on the basis of clear fiscal rules or directives, e.g. for debt and deficit levels.
 A top-level policy process – typically at cabinet level - to identify new and changed policy priorities  A translation of resource envelopes and policy priorities into top-down sector or ministry level budget ceilings within which sectors/ministries plan their expenditures.
140
132
120
110
100
86

80
60

62
46
44
34
33

40
20
0

71

65

12
1

13
8 9

1990
MTEF

15
3

1994

16
10
6
1998

MTFF

42
25

22
14
8

13

2002

in terms of budget allocation and fund reallocation between some selected budget heads. Again, line ministries find that outer year ceilings often change and provide little valid basis for forward estimates.
These issues are largely attributable to the relatively early stage of MTEF, with the quality of forward estimates still evolving. Greater autonomy to reallocate funds between different budget heads also demands improved PFM capacity in line ministries.
The necessary institutional changes are sometimes delayed or not implemented at all and in some cases the MTEF reforms lack ownership and commitment from line ministries.
Some of these issues can at least partly be addressed by carefully working on the design of the reform.
While budget ceilings may be revised yearly or at other intervals, at any point in time, they should constitute a hard budget constraint for the full medium term period and not just the coming fiscal year. Line ministry forward estimates should also be formulated with a starting point in the forward estimate from previous year rather than last year‟s budget. Such a rolling budget mechanism may help to ensure that the MTEF is fully integrated with the annual budget process.

19

2006

MTBF

MTPF

Figure 1: Roll out of MTEF to countries
Source: MTEFs: Lessons from County Case Studies, PRMPS

 Detailed forward spending estimates from line
Ministries formulated within budget ceilings and based on a costing of ministry/sector strategies.
 A mechanism for systematically monitoring and reviewing the efficiency and effectiveness of ongoing spending programs to feed into policy priorities and setting of budget ceilings.
While many countries have adopted the abovementioned characteristics in their budget process, implementation often turns out to be shallow. A typical problem is that the annual budget process
“lives on” as the main process while the MTEF becomes a separate exercise with no real impact on resource allocation. One of the key reasons is the limited awareness among line ministries about the full potential of MTEF as a policy and budgeting tool, and a perception that the MTEF has not brought about as much autonomy as was generally anticipated

Achievements of the MTBF reform in
Bangladesh
The MTBF in Bangladesh is the centerpiece of budget reform efforts carried out under the SPEMPproject and acts as a vehicle for a number of attempts to improve the budget process. Bangladesh has developed the MTBF following a successful and still evolving Medium Term Macroeconomic Framework
(MTMF). A complete roll out of the MTBF was achieved across all 57 ministries, divisions and constitutional bodies at the end of FY11 with the addition of 2 newly created divisions at the end of
FY12. Budget documentation has improved with
Bangladesh‟s Ministry Budget Frameworks (MBFs) which contain strategic objectives, outcome targets and key performance indicators (KPIs). However, they are yet to evolve into a proper basis for MTPF.
Institutional changes have been initiated to make sure the MTBF has a real impact on the way line ministries conduct their business during budget preparation. Budget Management Committees
(BMCs), Budget Working Groups (BWGs) and
Budget Management Branches (BMBs) are now operational in all line ministries. The capacity of line ministry budget officials has also been significantly enhanced in MBF preparation, with gradual

emergence of champions in a number of ministries.
Moreover, Finance Division‟s capacity to guide and support line ministries in the budget process has also improved. budget allocations with actual outturns – increased during the period indicating that the budget implementation led to changes in original budget composition making the original budget a less accurate indicator of policy priorities.

Reviewing the Bangladesh MTBF
While recognizing commendable achievements, a
World Bank review of the MTBF in Bangladesh in
FY11-12 revealed that there is still some ways to go before the MTBF reform will have a noticeable impact on the overall PFM-objectives of fiscal discipline, allocative efficiency and technical efficiency. Despite pressures on public resources, Bangladesh has maintained strong fiscal discipline over the last decade. The Public Expenditure and Financial
Accountability (PEFA) assessment 2010 rated the domestic revenue forecast capacity of Bangladesh as
„B‟ which was an improvement from 2005. Also, the deviations between the originally budgeted and actual expenditures have decreased since the MTBF was introduced. There is little clear evidence of the
MTBF‟s direct contribution to this development, but the MTBF has been associated with maintaining the record of fiscal discipline. The formation of a
Macroeconomic Wing (MEW) within Finance
Division in 2008-09, and the gradual capacity building and evolution of a more credible macroforecasting function is also likely to have improved the institutional basis for maintaining this record in the future.
The MTBF is supposed to provide for more strategic budget allocations to achieve allocative efficiency.
However, tools normally associated with more strategic allocations are yet to find their way into the budget process in Bangladesh. For example, systematic reviews of on-going spending programs are practically non-existent and monitoring and evaluation systems weak. While real allocations to almost all sectors have increased since 2006, the review found that priority sectors - notably health, education, and fuel and energy – have received a smaller share of the annual budget since the MTBF was introduced, see figure 2 below. Conversely,
„Public Services‟ consisting of some entities of the executive as well as subsidies, interest payments, investment on shares and equities, and structural adjustments has received a disproportionately increasing budget share from 24 percent in 2006 to
36 percent in 2013. In addition, the sector budget composition variance – a comparison of sector

While not attempting to measure technical efficiency directly, the review of the MTBF tested for the existence of processes and tools normally found to facilitate cost-effectiveness in the production of government services. This analysis showed a mixed picture. 40%
36%

36%

35%

33%

30%
29%

24%

25%

22%

20%
15%

15%
10%

13%

12%

7%

5%

13%
6%

6%
6%

5%
5%

4%

5%

0%
2006

2008

2010

2012

Public Services

Education and Technology

Health

Fuel and Energy

Figure 2: Gross allocations for key sectors as a % of total budget (FY2006-2013)
Source: Sectoral shares of annual budget, Bangladesh MTBF
Review, 2011-12

On the one hand, the quality of line ministry forward estimates has improved markedly since the introduction of the MTBF implying that line ministries have a better ability to plan their expenditures. This is a necessary although not sufficient condition for technical efficiency. As seen from the diagram below, the absolute deviations between budget and latest forward estimate for that year have decreased since 2009. FY13 shows a rise in the absolute deviation, but that may be attributed to the inclusion of 24 new ministries in the MTBF.
Other observations from the review, however, point to a great need for improvement with respect to technical efficiency: there are no methods in place to

systematically achieve cost savings such as benchmarking exercises, across-the-board savings or minimized cost standards. In addition, the public investment management (PIM) system displays several weaknesses indicating potentially large inefficiencies in the selection and implementation of development projects.
60%

the total budget (FY13) remains an annual exercise, and is poorly coordinated with the MTBF and the non-development budget (NDB). The paradox is that the ADP is where the MTBF is most needed: development expenditure is less predictable and much more prone to considerations of reallocations and strategic budgeting. While a partial MTBF is better than no MTBF, improved coordination with the ADP-process is a must to achieve the strategic objectives of the reform.

52%

50%
40%
30%

26%

26%
20%
10%
10%

15%
8%

5%

0%
2007

2009

2011

2013

Budget deviation from latest MTBF
Project
Figure 3: Quality of forward estimates against annual budgets (FY2007-2013)

Finally, the political economy of the civil service system poses challenges for the retention of specialized skills. Budget and planning staff risk being lost to three-yearly rotations of civil servants.
Though Finance Division has managed to retain its highly qualified and seasoned officials, in all other ministries little effort has been put on retaining budgeting and planning skills.
The challenge of a coordination gap and institutional differences between the Ministry of Finance and the
Planning Commission is not unique to Bangladesh and exists in most countries that have a separate planning entity. However, awareness and ownership issues at the line ministry level are perhaps less common and indicate a need for the Finance
Division‟s proactive and high level interaction with line ministries.

Sourc e: national budget docum ents

Structural and institutional challenges A number of institutional and structural challenges hamper the further development of the MTBF. The
MTBF is still largely an instrument of the Finance
Division of Ministry of Finance. There is a need to generate better conceptual understanding, interest, demand, and ultimately ownership of the MTBF process in line ministries, not least at secretary level.
Embedding the MTBF in line ministries is a difficult and time-consuming exercise which has been compared to “pushing on a piece of string”.
However, without ownership and engagement from line ministries, the objectives of the MTBF will remain unachievable.
The lack of coordination between the non development and development budgets is also increasingly frustrating the achievement of the objectives of the MTBF. The Annual Development
Programme (ADP) which constitutes 29 percent of

Looking aheadiii
A three-legged strategy could be proposed to ensure that the MTBF is properly embedded in line ministries and gradually leads to the necessary institutional changes in the budget process. Firstly, conceptual work to establish a roadmap for a rolling budget mechanism which fully integrates the annual budget process and the MTBF should be expedited.
While full integration cannot be expected within the remaining time of the DMTBF project, it is essential to plan for the next reform steps to give line ministries a clear sense of reform direction and conceptual understanding as well as rule out any perceptions of the MTBF as a separate non-essential
“paper exercise”. The roadmap should comprise both upstream aspects such as policy processes in the cabinet and formulation of medium term budget constraints and downstream aspects such as internal controls and incentives for a more smooth budget execution in line ministries.

Secondly, ownership and engagement of line ministries should be facilitated through a variety of mechanisms. The secretaries should be targeted through high-level workshops with an open discussion of MTBF implementation and concerns.
Support to use the MTSBP (Medium Term Strategy and Budget Plan) should be expanded to cover 2-3 large line ministries in the coming FY. These same line ministries should simultaneously function as overall pilots for improved internal controls and a gradual relaxation of centralized controls.
Thirdly, a fresh attempt should be made to bridge the coordination gap between Finance Division and
Planning Commission. This would include involving the PC in a more meaningful way in the determination of line ministry budget ceilings, for example through preparation of a joint Budget
Strategy Paper and joint budget circulars and by exploring the possibility of moving the timing of the second budget call circulars and the development budget call circular forward to provide more time for line ministries to prepare their submissions.
Coordination may also be improved through utilization of the upcoming integrated budget and accounting system (iBAS) and continuous dialogue across the two ministries through budget reform working groups.

i

MTEFs: Lessons from Country Case Studies,
PRMPS, November 2011 ii MTEFs: Lessons from Country Case Studies,
PRMPS and PEFA 2010, Bangladesh iii MTBF Review of Bangladesh, 2012

You May Also Find These Documents Helpful

  • Good Essays

    Cool Cool

    • 701 Words
    • 3 Pages

    Honors 1-18-12 Relative Solubility of Transition Elements Introduction: In this lab we evaluate the solubility of compounds of iron, copper, zinc, and mercury in both water and acid. Coming into the lab we know that iron, copper, and zinc are all found in the the same row of the periodic table, while zinc and mercury are found in the same column. The transition metals are found in groups 3 to 12 and periods 4 to 6. Rows are known as periods and columns are known as groups. They share characteristics…

    • 701 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Cool

    • 438 Words
    • 2 Pages

    reason for it was to solve some problems a printer was having with papers in the summer (“Title” 1). Air conditioners and refrigerators worked the same way. Instead of cooling just the small, insulated space inside of a refrigerator, an air conditioner cools a room, whole house, and/or entire business. Air conditioners use chemicals that easily convert gas to a liquid and back again. Extreme heat has a clear negative impact on the intellect and on physical activity and the use of air conditioning…

    • 438 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    cool

    • 1062 Words
    • 3 Pages

    Many people would find shocking because George killed his best friend Lennie. I think it was selfless the thought that life without Lennie would be easy might have crossed Georges mind but I think he kills Lennie mainly because he dont want Lennie to suffer from Curley. First reason why George killed Lennie is George wants to prevent Lennie from suffering a long and painful death“Shoot im in the guts” Curley wants to make sure that Lennie suffers a long and painful death for killing his wife…

    • 1062 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    cool

    • 482 Words
    • 2 Pages

    In this chapter, about photosynthesis, we vaguely learned about organisms that lived deep down in the ocean and they get their energy from earth. They make their own food, which makes them autotrophs, though they do this without the help of light (light independent process). Being fascinated about this process I did some research and tried to find out more about how they were discovered and what kind of environment they lived in; so I found a ted talk on this topic. In this Ted talk, Mike deGruy…

    • 482 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    cool

    • 375 Words
    • 2 Pages

    Construct a Presentation Form General Purpose: To Inform Specific Purpose: At the end of my presentation, my audience will how apple started and where it is now. Introduction I. Attention Getter: To show how many people all over the world have a apple product. (Map) II. Audience Relation: Ask my classmates how many of you own an apple…...(pause) product and what they are. III. Central Idea: Today I will show to you how apple Inc has develop or in other words apples history along…

    • 375 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Cool

    • 1177 Words
    • 4 Pages

    6.) So, what is the carbon footprint of a cheeseburger in the US? 200 million metric tones, more than all the SUV’s in the United States 7.) How might an increase of 2C affect the planet? Rapid changes in the biosphere, especially marine life of the oceans, dying off of coral reefs, flooding of island states, melting of Greenland’s glaciers, etc. 8.) What significant ocean system could break down that could magnify the warming effect? Carbon sink provided by tiny sea creatures that…

    • 1177 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Cool

    • 1441 Words
    • 6 Pages

    Zimmerman, Lund, and Tanner (2004) said, “The accumulated experience [of media exposure] contributes to the cultivation of a child’s values, beliefs, dreams, and expectations, which shape the adult identity a child will carry and modify through his or her life.” With this in mind, it is reasonable to assume that media has a grave effect on how we construct our own behaviors. I found it very interesting that the programs that many kids of my generation grew up watching contained many examples negative gender…

    • 1441 Words
    • 6 Pages
    Better Essays
  • Better Essays

    Cool

    • 980 Words
    • 4 Pages

    KRISSH Words that Describe a Good Friendship Have you ever thought of what friendship really means? It is really hard to put into words. Friendships are mutually beneficial, meaning each of you get something out of the relationship. Friends are there when you need them, whether to comfort, support, congratulate, or just listen. Here is a list of words that describe a good friendship: affable, affectionate, amiable, amicable, attentive, available, believable, brave, caring, cheerful, considerate…

    • 980 Words
    • 4 Pages
    Better Essays
  • Good Essays

    Cool

    • 392 Words
    • 2 Pages

    against their fate. The poem suggests that (to use an old cliché) we should leave this world the way we came in – kicking and screaming, holding on to life for all we're worth. Furthermore, Dudely Randall’s “To the Mercy Killers” tells the reader that the life and death of human are determined by the God not by someone. The speaker says that life is too precious for him or her even though he or she has a very bad disease. Therefore, the speaker…

    • 392 Words
    • 2 Pages
    Good Essays
  • Good Essays

    The Cool

    • 573 Words
    • 2 Pages

    Memorandum To: Thomas A. Hemphill From: (Your Name) Date: Spell Out! Subject: Name of Case ___________________________________________________________________ 1. Tata Nano is neither an incremental innovation nor component or architectural innovation. This is because of brainstorming session to create functionality with different material better in order to achieve cost effectiveness objective. This is a complete rethinking process for fewer parts. Nano development is competence enhancing…

    • 573 Words
    • 2 Pages
    Good Essays