Challenging the Budget Creating Incentives for Results

1. Challenging the BudgetCreating Incentives for Results Rwanda’s Experience Elias Baingana - Budget Director

2. Structure of the presentation • Performance based budgeting in Rwanda • Objectives • Key steps since 2000 • Legal requirements • Drivers of change • Key instruments • Existing reporting mechanisms • Budget cycle • Role of MINECOFIN • Main challenges • Next steps

3. Performance budgeting in Rwanda

4. Objectives of introducing performance budgeting in Rwanda • Enhancing the focus on results • Feedback loop into policy making • More efficient policy making and prioritization • Enhancing the quality of the budget • Strengthening the link between planning (targets, priorities) and budgeting • More efficient budget allocations • Linking the analysis of budget execution with actual performance • Enhancing transparency

5. Key steps in introducing performance budgeting in Rwanda • Introduction of the MTEF in 2000 • outputs and activities included in the budget • Introduction of annual action plans for each ministry since 2000 • Monitored annually • 1st PRSP in 2001, EDPRS in 2007 • Set of key indicators for each sector • PRSP policy matrix • Monitored annually • Introduction of performance contracts with districts in 2006

6. Legal requirements • New Organic Budget Law – art 72: “Chief Budget Managers are responsible for preparing the respective annual reports of their respective institutions and shall explain their budget execution relative to objectives to be achieved and estimates, and especially emphasizing on the reasons why budget achievements differ from those planned.”

7. Main drivers of change • High level political commitment • Request from Parliament, Development Partners and Civil Society • EDPRS process focused on results • Donors increasing focus on results • WB (PRSG policy matrix) • EC (variable tranche) • Need to move from input conditionality to results focus

8. Key instruments for performance budgeting in Rwanda

9. Existing performance reporting mechanisms • Budget execution report produced quarterly, biannual, annual • Financial budget execution • Per Ministry, District, programme, sub-programme, economic classification • Currently does not include an analysis of non financial performance (outputs, activities) • EDPRS annual report • Should include data on budget execution • Analysis of results achieved over the past year and setting broad targets for the following year • Annual action plans • Contain mainly activities / outputs • PERs: plans to carry them annually for key sectors

10. Setting indicative ceilings Budget requests Budget consultations Final ceilings Budget presentation April May-June July August October Space allowed for challenging the budget in the budget calendar MoF Ministries MoF Cabinet Parliament

11. 1. Setting indicative ceilings • Ceilings should be based on • The macro-economic framework • Broad priorities defined at national level • Analysis of past year performance in terms of • Budget execution • Execution of the annual action plan (activities/outputs) • Outcomes and key performance indicators • This analysis should ideally draw from • PRS annual progress report • Itself based on joint sector reviews and district reviews

12. 2. Budget requests • Mid april: guidelines sent to line ministries to prepare their budget requests (Strategic Issues Papers), along with indicative ceilings • Overall objectives & priorities • Analysis of past year performance • Link between budget proposal and sector strategy • Proposed 3-year MTEF at programme and sub-programme level • Key outputs and objectives for following year

13. 3/4. Budget consultations and final ceilings • Led by Ministry of Finance • Should be based on an analysis of the requests received from line ministries: • Compared with ceilings • Compared with performance over the past year • Compared with broad priorities at national level • Lead to agreement on final ceilings in Cabinet

14. 5. Budget presentation to Parliament • Explanatory note to the budget should outline the macro-framework and justify the proposed budget • The budget is presented along with the previous year’s budget execution report • Currently the format of the budget presented to Parliament does not include any non financial performance measurement

15. Minecofin’s challenging role • Ensure respect of indicative / final ceilings • Monitor respect of donor conditionalities (WB, IMF, others) • Respect of broad priorities identified in LTIF/EDPRS • Analysis of past year performance compared to objectives • Budget execution • Outputs • outcomes

16. Main challenges

17. Main challenges • Implementing the budget cycle as foreseen • Data quality • Definition of indicators and targets • Alignment • Budget presentation • Repartition of roles within MINECOFIN

18. 1. Budget cycle • Timing: availability of data on time • Ceilings: need to shift from incremental to performance & priority based ceilings • Budget requests: need to improve quality and avoid overlapping requests on line ministries • More analysis of past performance • Better reporting on past performance • Link between financial and non financial performance

19. 2. Data quality • Creation of the national statistics institute • Key role of line ministries in collection of routine data and performance analysis • Need for more quality control & cross checking • Need for more analysis • Need for more coordination between NIS and line ministries, and between donors supporting the NIS • data available should be used in order to stimulate improvement in quality and in analysis

20. 3. Definition of indicators and targets • Training and guidelines provided to line ministries • SMART indicators • Need for a set of key performance indicators for each ministry • Targets should be realistic but ambitious • Link with the MDG targets – to be made in EDPRS • Targets should be coherent with the budget • Indicators and targets should be coherent across all reporting mechanisms

21. 4. Alignment • Between different reporting instruments • annual action plans, • Sector strategies • Outputs/activities in the budget, • EDPRS and policy matrix, • performance contracts in districts • Between different ministries – coherence • Between donors and Government • Conditionalities and indicators used by donors should be drawn from national performance monitoring instruments

22. 5. Budget presentation • Key for better involvement of stakeholders (parliament, donors, NGOs, etc) and for more transparency • 2008: • Should include for each ministry the outputs linked to the budget • Alignment with the annual action plans and the EDPRS policy matrix • Should include data on past year budget execution and on future years

23. 6. Repartition of roles within MINECOFIN • Need for sector focal points • Following consistently sector activities (sector strategies, annual sector reviews, key priorities and issues, discussions with donors) • Making the link between planning and budgeting • Supporting sectors in preparing their budget • Providing input in budget consultations, budget cuts, finalization of budget ceilings • Need for clarification of roles between the budget and planning departments

24. Next steps

25. 2008 budget preparation • Broad agreement on budget calendar in order to: • Ensure information needed is available on time • Avoid overburdening and competing requests on line ministries • Consultations on new budget format • Address issue of alignment between different reporting mechanisms • Address issue of repartition of roles within MINECOFIN • Start discussions with INS, donors, and ministries concerned to strengthen the quality of statistics and improve coordination in this sector (SWAP ?)