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Sudan Assessing Pro-Poor Efforts through the Budget

Sudan Assessing Pro-Poor Efforts through the Budget . Sudan Consortium March 9, 2006. Motivation. Making investments in pro-poor development is central to averting the risk of future conflict and realising the shared goal of poverty eradication

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Sudan Assessing Pro-Poor Efforts through the Budget

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  1. SudanAssessing Pro-Poor Efforts through the Budget Sudan Consortium March 9, 2006

  2. Motivation • Making investments in pro-poor development is central to averting the risk of future conflict and realising the shared goal of poverty eradication • Strong commitments to pro-poor budgets made in the JAM • Key indicators of progress on pro-poor spending • Changes in levels and efforts • Progress on fiscal decentralization

  3. International Experience • Pro-poor spending: • no easy and unique way to define and track, but tools exist to analyze the relationship between public expenditures and poverty • incremental approach often useful – start with available data and some basic analysis, then improve data, address analytical gaps and refine • Identifying pro-poor budget items does not lessen the need for: • comprehensive analysis of budget expenditures • emphasis on program delivery – how effectively are the monies being spent • focus on budget execution relative to plans

  4. A Working Definition for Sudan • JAM definition: “half of state transfers along with some education and health expenditures and a small but rising percentage of capital spending” (p. 53) • Revised working definition (for GNU) based on international PRSP/HIPC experience and detailed budget review: • Locally financed central development spending on pro-poor projects* • Central social subsidies • One-half current transfers to Northern states • Locally financed regional development spending on all projects • Total transfers to the Three Areas • Central pro-poor projects = all education, health, drinking water and sanitation, part of agriculture, most of basic infrastructure, and micro-productive opportunities • Equals 36 percent of national development spending in 2005 and 2006 *Similar to MOFNE PRSP Unit definition, except national current spending excluded from staff estimates

  5. Definition Applied to2006 GNU Budget

  6. Increased Domestic Efforts: GNU GNU Pro-Poor Spending, JAM Estimates vs. Actual/Projected (US$ millions and % of GDP)

  7. Pro-Poor Efforts: GOSS • Budget allocations are strongly pro-poor – up to 75 percent of spending (55 percent of budget) can be regarded as such • BUT challenges nonetheless: • Establishing sound public financial management systems  key recommendations reflected in GOSS presentation • Managing revenue volatility over time given virtually total dependence on oil  savings strategy is key • Ensuring security needs are met while avoiding excessive resources being directed to SPLA…  technical advice being provided under PER

  8. GOSS Sectoral Allocations: Expenditure Share

  9. Pro-Poor Spending, 2005 - 06 Pro-Poor Spending, JAM Estimates vs. Outturns and Projections, GNU and GOSS NOTE: Functional GOSS figures for 2005 not yet available.

  10. How does Sudan Compare? Cross- Country Comparisons ofEstimated 2005 Pro-Poor Spending 2006 budgeted Note: The definition of poverty-reducing expenditure varies across countries. Source: Sample of African countries that have reached HIPC decision point, preliminary figures taken from IMF and World Bank, August 2005, " HIPC Initiative - Status of Implementation" (Appendix Table 2A).

  11. Fiscal Decentralization • Fiscal decentralization is one of Sudan’s key priorities, and challenging at technical as well as institutional level • Larger share of resources planned for transfer to sub-national governments • BUT challenges to be addressed: • Improve equity of resource distribution to Northern states • Ensure predictability of flows to sub-national : • In 2005, expenditure performance only 86 percent compared to aggregate of 93 percent • Improve sub-national budgeting and reporting • Monitor and publish results as well as spending

  12. Total Transfers toSubnational Governments Note: Share to North includes non-NSSF funds (e.g., public institutions moved to Northern states). Source: MOFNE budget.

  13. 2005 NSSF Transfers to Northern States: Distribution by State Source: Bannaga (2006) and Bank staff estimates.

  14. 2005 NSSF Transfers to Northern States: Per Capita by State Source: Bannaga (2006) and Bank staff estimates.

  15. Direction of Transfers to Sub-national Levels • Need to address lack of redistribution associated with current system • Distribution of per capita amounts ranges from $10 for South Darfur to $50 for Northern State • Total transfers reflect derivation of VAT revenue • Predominance of Khartoum and Gezira • Critical role of FFAMC: • Allocation formulae – transparency and predictability • Monitoring of flows

  16. Next steps • Review working definition and applications of pro-poor spending in the budget process, in coordination with ongoing development of Poverty Eradication Strategy • Operationalise the Fiscal and Financial Monitoring Commissions (GNU and Southern) • Improve planning, allocation, and monitoring of decentralized spending (e.g., PER state case studies) • Build capacity, including focus on public financial management

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