United Republic of Tanzania

1. United Republic of Tanzania STRENGTHENING THE POLICY AND BUDGET LINK THROUGH STRATEGIC BUDGET ALLOCATION SYSTEM (SBAS) IN TANZANIA

2. THE FOLLOWING AREAS WILL BE COVERED: • Introduction • Salient Features of SP, MTEF and PER Process • Implementation of NSGRP through the Budget • Development and Application of SBAS • Achievements and Challenges • Conclusion & then Brief Demonstration of SBAS

3. 1. Introduction: • Various reform initiatives has been taken by the Government of Tanzania in improving resource management and service delivery to the public and society as a whole. • Such reforms include Strategic Planning (SP), Medium Term Expenditure Framework (MTEF) and Public Expenditure Review (PER). • Tanzania also continued to implement Poverty Reduction Strategy [PRS) from 2000/2001 up to 2002/03 and a widely covered National Strategy for Growth and Reduction of Poverty (NSGRP) commonly known as MKUKUTA from 2005/06.

4. Significant efforts are being made, through these reforms inaddressing the issue of ensuring consistency in policies and budgetary provisions and strengthening the budget process. • The biggest challenge that emerged during implementation of NSGRP, was how to coordinate and provide adequate funding between complex cross - sectoral policy initiatives and budget activities. • To that end, a Strategic Budget Allocation System [SBAS] was introduced to facilitate the resource allocation process.

5. 2. Salient Features of SP, MTEF and PER Process (i) Strategic Planning (SP) • Strategic Planning is a process that charts an institution’s broad direction forward for achieving their broad mandates in the medium term. • SPs encompass Institution’s mission and vision statements; objectives, strategies, targets and performance indicators. • SPs take in consideration National strategy/policy frameworks i.e. Tanzania Development Vision 2025 and NSGRP; and sector policies and strategies.

6. (ii) MTEF • MTEF is a prioritised three-year performance budget to implement the Strategic Plan; • Based on available resources, it establishes the cost of implementing activities that will achieve the targets and meet set objectives; • MTEF takes the objectives and targets developed in the SP and prepare activities and budgets.

7. (iii) PER Process • PER process is intended to enhance efficiency in public expenditure management. • The process involves evaluation of performance against approved budget frame and output targets. • Inputs from PER in terms of proposed policy issues and priorities are incorporated into the sector plans and budgets through the Plan and Budget Guidelines (PBG), which inform into the preparation of the annual Budget and MTEF.

8. 3. Implementation of NSGRP through the Budget Background to the NSGRP • Adoption of the PRSP in 2000 provided a new momentum for fighting poverty and guidance on strategic resource allocation. • Under the PRSP initiative, the Government committed itself to accord priority status in resource allocation to PRS priority sectors, which were agriculture, basic education, primary health, water, rural roads, judiciary and HIV & AIDS. • Thus, during PRS I, expenditure policy intentions were assessed on the basis of progress made in rising the funding/budgets of these sectors. • The next PRS II (National Strategy for Growth and Reduction of Poverty – NSGRP) was adopted and implemented starting 2005/06. • NSGRP is informed by the aspirations of the Tanzania Vision 2025 and Millennium Development Goals (MDGs).

9. NSGRP is addressing the need to become more outcome-oriented by adopting three clusters of interventions: i) Growth and income poverty reduction; ii) Improvement of quality of life and social well being; iii) Governance and accountability. • The clusters are the highest level and beneath it are goals and cluster strategies, which cut across sectors. • Relevant actors, including MDAs, Regions and LGAs are linked to cluster strategies. • In order to ensure that what has been articulated in the NSGRP are implemented, deliberate actions are taken in integrating them in the Institutional Strategic Plans (SP) and Budgets.

10. PRS 1 • Covers three years timeframe. • Focused on a few priority sectors • Adopted a sector approach • Limited participation of stakeholders during formulation. • NSGRP/MKUKUTA • Covers a five year timeframe. • Calls on all the contribution of all sectors and actors. • Adopts an outcome approach. • Focused on growth, governance and accountability. • Aligned to National Development Vision 2025 AND MDGs. • Mainstreams cross cutting issues. • Emphasizes on inter- sectoral linkages and cross sector collaboration. • Developed under broader participation of stakeholders in the formulation. Differences between PRS 1 and NSGRP/MKUKUTA

11. Linkage between NSGRP and Budgets • The explicit linkage between the NSGRP cluster strategies and the budget are currently undertaken in a process of budget formulation at two levels. • Level 1 is Budget formulation at Plan and Budget Guidelines Stage. This involves the inputting and processing of budget requests using a Microsoft Access software tool called SBAS. Resource ceilings are ultimately allocated to Institutions up to the level of targets. • Level 2 deals with inputting data in the Integrated Financial Management System (IFMS) for preparation of Annual Budget Estimates and MTEFs. This stage involves going further to allocate resources down to activity and input levels.

12. 4. Development and Application of SBAS • In order to implement the NSGRP and meet its requirements, a Microsoft Access software tool called Strategic Budget Allocation System (SBAS) was developed to manage the complexity of the budget data on cross-cutting strategies. • SBAS is a software tool to facilitate resource allocation including preparation of budget ceilings by the Plan and Budget Guidelines Committee (PBGC). • SBAS has two versions namely SBAS Micro and SBAS Macro. • The Micro version is used by MDAs to fill out their budget requests electronically; and • The Macro version is used by the PBGC to analyse the requests and allocate resources according to the size of the resource envelope.

13. Inputting and Processing Budget Requests Using SBAS (i) SBAS Micro as an Interface for Budget Planning: • SBAS Micro was designed to be used by MDAs and Regions for inputting budget requests to the PBGC. • The system was first designed to capture requests at the target level and inputs both NSGRP and non-NSGRP targets. • MDAs and regions can see which NSGRP cluster strategies are relevant to them in the system.

14. Non-NSGRP targets come from existing Strategic Plans and MTEFs and are internal to the MDA and Region. • MDAs can analyse and compare NSGRP and Non - NSGRP budget requests at this formulation stage. • The updated software has facilities for costing of targets and activities financed through recurrent other charges (OC), local development and foreign development funds. • SBAS Micro has also a facility for enabling the user Institution to prioritize the targets and link them to the NSGRP cluster strategies.

15. In year 2005/06, SBAS Micro assisted in developing an interface for budget planning between MDAs and the Ministry of Finance (MoF) by enabling MDAs to fill in their MTEF budget requests and submit the same to MoF. • Requests inputted in the SBAS Micro were imported to the MoF at target level with textual explanations on: • Major policy commitments and the rationale for such requests; • Notable shifts or trends in policy with expected expenditure implications; • Summary of critical issues identified in PER studies or in any other studies with budget implications.

16. (ii) SBAS Macro as an Allocation Tool: • SBAS Macro was designed to aggregate the MDA requests and to strategically facilitate the setting of ceilings according to available resources. • Requests at target level are submitted to the PBGC for consolidation, analysis and resource allocation using Macro version. • The system provides different scenarios for distributing resources to both NSGRP and non-NSGRP targets. • In year 2005/06 PBG resource ceilings were issued at vote and target levels, with a clear picture of how much was set for use in financing NSGRP cluster strategies.

17. (iii) Improvements made to the SBAS: • During budget allocation for year 2005/06 – 2007/08, MDAs through SBAS, prepared their MTEF requests by replacing their existing “SMART” targets with pre-set NSGRP cluster strategies • The NSGRP cluster strategies were in some cases too broad and general to effectively serve as SMART MTEF targets. • Thus, in year 2006/07 – 2008/09, It was decided that cluster strategies should not be used to replace SMART MTEF targets. • The targets were then derived by Institutions during their strategic planning processes and associated with a cluster strategy in the updated SBAS2 Micro.

18. MDAs and Regional Budget Committees were responsible for assessing the relevance of the association between MTEF targets and NSGRP cluster strategies prior to submission of their requests. • Budget requests within SBAS2 Micro were inputted at the level of an activity rather than MTEF target. • Regions also used SBAS for inputting budget requests to the PBGC. • On the other hand, LGAs linked their budgets with NSGRP using a Planning and Reporting Database (PlanRep). • Final output from PlanRep is ultimately downloaded to IFMS for annual expenditure management purposes.

19. Interfacing Budget Information from SBAS to IFMS • As explained above, PBG is Level 1 and the Annual and MTEF Budget is Level 2 of budget formulation process. • Final output from the SBAS Macro in terms of vote and target ceilings are interfaced into the Enhanced MTEF Model in the IFMS. • The Enhanced MTEF Model is a computerised system enabling MDAs and Regions to plan, upload and define targets and activities.

20. Target-level ceilings are disaggregated to activities and inputs for the Annual Budget and detailed MTEF preparation. • The model is, therefore, a tool designed to input performance based MTEF budgets into the IFMS. • IFMS has many facilities including those for production of performance reports used for budget monitoring and control.

21. 5. Achievements and Challenges: Achievements: • An outcome-oriented budget: The outcome-oriented NSGRP is molding the budget to finance outcomes rather than sectors; • Consistency between policy and budget: SMART MTEF targets are associated directly with NSGRP Cluster strategies. These targets are then mapped down to the Government Finance Statistics (GFS) input levels;

22. Linking Targets to Cluster Strategies

23. Standardized inputs to PBG: MDAs and regions use a standardized template to fill out their MTEFs which are electronically imported into the Macro version of the Strategic Budget Allocation System for easy analysis; • Stakeholders’ scrutiny of the budget: Public institutions, Development Partners and others can easily see the consistency between strategic allocations at target level in the PBG and final allocations made to activities directly linked with NSGRP in the annual budget; • Accuracy and consistent reports of estimates: SBAS Macro version can produce output reports which analyze various categories of the budget i.e. targets directly linked with NSGRP, as well as others broken down to activities and distribution by institutions etc. • Harmonization of recent reform initiatives: A planning and budgeting manual has been developed and was used as a working document by MDAs, Regions and LGAs in the 2006/07 planning and budgeting process.

24. Timing of the Planning and Budgeting Processes

25. Challenges: • For cross cutting NSGRP cluster strategies, whereby multiple MDAs affect joint outcomes, allocation to targets and activities with such joint outcomes requires close collaboration and streamlining • The software that is intended for tracking NSGRP related and other expenditures has to be fully developed and operationalised. • Establish a linkage between the PlanRep tool used by LGAs and SBAS used by MDAs and Regions in order to integrate the National Budget.

26. 6. CONCLUSION • NSGRP is the national organizing framework which accords high priority to growth and reduction of poverty in Tanzania’s development agenda. • The strategic planning process, which involves formulation of interventions/strategies and targets is informed by NSGRP. • MTEF on the other hand, operationalises the SP by identifying and costing the activities under each target.

27. Since the budget has to encompass all the fiscal operations of Government and has to address all major policy decisions in the background of hard budget constraint and competing demands, senior management in every MDA, Region and LGA have been involved in the whole planning and budgeting process. • The process begins at preparation of SPs and goes further to the reviewing performance and indicating resource requirements using SBAS Micro. • During this stage, sector policies and institutional priorities are defined; and • Resources needed to implement them are established.

28. SBAS Macro has been used as tool for facilitating resource allocation at target level and linking targets to NSGRP cluster strategies. • Significant efforts have been made to explicitly link policy and budget in the MDAs, Regions and LGAs. • However, in order to attain the desired NSGRP goals, strengthening inter-sectoral linkages and collaboration between institutions is still highly required.

29. THE END THANK YOU FOR YOUR ATTENTION