GBS ANNUAL REVIEW, GBS ANNUAL REVIEW, 20092009

Key Issue # 4:Key Issue # 4:

Budget ExecutionBudget Execution

November 24, 2009November 24, 20091

OutlineOutline

IntroductionIntroduction Achievements Achievements Key ChallengesKey Challenges Measures to address challenges Measures to address challenges

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IntroductionIntroduction Budget execution is measured as Budget execution is measured as

percentage of release and spending in percentage of release and spending in relation to the original approved estimatesrelation to the original approved estimates

The gap between original budget and The gap between original budget and release is called release gaprelease is called release gap

The gap between release and spending is The gap between release and spending is called spending/absorption capacity gapcalled spending/absorption capacity gap

Most often spending/absorption gap is Most often spending/absorption gap is reinforced by release gap, when releases reinforced by release gap, when releases are late.are late.

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Achievements in budget Achievements in budget executionexecution Execution of recurrent budget has Execution of recurrent budget has

performed well over recent yearsperformed well over recent years About 90% of budgeted recurrent funds are About 90% of budgeted recurrent funds are

released and spent every year.released and spent every year. The release of both PE and OC is on The release of both PE and OC is on

monthly basis. And, some of institutions monthly basis. And, some of institutions receive their OC funds on quarterly basisreceive their OC funds on quarterly basis

Establishment of functioning cash Establishment of functioning cash management unit at the Treasurymanagement unit at the Treasury

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Achievements in budget execution Achievements in budget execution cont..cont.. Release and spending of local development Release and spending of local development

funds in road sector is more than 90% funds in road sector is more than 90% Use of IFMS has also accelerated budget Use of IFMS has also accelerated budget

execution, through spending agencies execution, through spending agencies accessing exchequer release as soon as accessing exchequer release as soon as they are posted in ACCGEN’s office in they are posted in ACCGEN’s office in DSM, and effect spendingDSM, and effect spending

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Challenges Challenges Despite the achievements in budget execution Despite the achievements in budget execution

some challenges remains, especially in some challenges remains, especially in development budget. This proves to be a major development budget. This proves to be a major hurdle limiting the ability of the public hurdle limiting the ability of the public expenditure to deliver public service and obtain expenditure to deliver public service and obtain required results/outcomesrequired results/outcomes

In 2007/08 only about In 2007/08 only about 45 percent45 percent of the of the MDAs’ budget development funds were MDAs’ budget development funds were spent.spent.

Preliminary outturn data for 2008/09 Preliminary outturn data for 2008/09 indicates that about indicates that about 52 percent 52 percent of budgeted of budgeted

development funds were spent. development funds were spent. 6

Challenges cont..Challenges cont.. The size of the execution problem also differs The size of the execution problem also differs

according to the according to the nature of spendinature of spending ng and and source of source of financing.financing. Development budget tends to experience Development budget tends to experience higher execution gaps than recurrent budget. higher execution gaps than recurrent budget.

The source of funding matters in development The source of funding matters in development budget execution. budget execution.

Execution of the locally funded component of the Execution of the locally funded component of the development budget performs better than the development budget performs better than the foreign funded component.foreign funded component.

Regardless of the source of funding, sectors with Regardless of the source of funding, sectors with higher share of capital investment spending in their higher share of capital investment spending in their development budgets experience major execution development budgets experience major execution problems than the sectors with higher current problems than the sectors with higher current spending componentspending component 7

Challenges cont..Challenges cont..

Inadequaces in cash flow and Inadequaces in cash flow and procurement plans; and late submission of procurement plans; and late submission of cash flow plans to MoFEA by spending cash flow plans to MoFEA by spending agenciesagencies

Limited capacity to plan and physically Limited capacity to plan and physically execute large capital investment projects execute large capital investment projects

Weak link between sector strategy and Weak link between sector strategy and sector MTEF, especially for large sector MTEF, especially for large investment projects which take longer to investment projects which take longer to implementimplement

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Challenges Cont..Challenges Cont..

Under-reporting of direct to project funds Under-reporting of direct to project funds and difficulties in timely capturing this and difficulties in timely capturing this information through Dummy Exchequer information through Dummy Exchequer recordsrecords

Delays in release of basket funds Delays in release of basket funds compounded by overly demanding compounded by overly demanding reporting requirementreporting requirement

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Measures to address challengesMeasures to address challenges

Strengthening capacity in the preparation of Strengthening capacity in the preparation of cash flow and procurement planscash flow and procurement plans

Strengthening the established cash Strengthening the established cash management unit at the Treasury.management unit at the Treasury.

Strengthening capacity in the preparation Strengthening capacity in the preparation and implementation of public investment and implementation of public investment projects, including capacity to undertake Cost-projects, including capacity to undertake Cost-Benefit-Analysis (CBA).Benefit-Analysis (CBA).

Continue strengthening the MTEF, including Continue strengthening the MTEF, including public investment planning in order to public investment planning in order to enhance its credibility and hence enhance its credibility and hence predictability of resourcespredictability of resources

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Measures to address challengesMeasures to address challenges....

Continue encouraging DPs to channel all Continue encouraging DPs to channel all the approved project funds through the the approved project funds through the exchequer system, as PFM systems exchequer system, as PFM systems continue to improvecontinue to improve

Strengthening of procurement and internal Strengthening of procurement and internal audit units in all spending agencies.audit units in all spending agencies.

Continued improvement of Dummy Continued improvement of Dummy exchequer recording, to ensure that all exchequer recording, to ensure that all relevant information is captured on monthly relevant information is captured on monthly basis rather than annuallybasis rather than annually

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Asanteni SanaAsanteni Sana

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