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Government Resource Estimation and Allocation Tool - GREAT

Government Resource Estimation and Allocation Tool - GREAT. Presentation – June 2015. What is GREAT. GREAT (Government Resource Estimation and Allocation Tool) has been coined to describe the package of documents and templates that will support a State to produce a document containing:

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Government Resource Estimation and Allocation Tool - GREAT

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  1. Government Resource Estimation and Allocation Tool - GREAT Presentation – June 2015

  2. What is GREAT • GREAT (Government Resource Estimation and Allocation Tool) has been coined to describe the package of documents and templates that will support a State to produce a document containing: • Economic and Fiscal Update (EFU); • Fiscal Strategy Paper (FSP); and • Budget Policy Statement (BPS).

  3. What is in the GREAT Package Funded to a • Popular Guide • Detailed EFU-FSP-BPS Guidelines • Example EFU-FSP-BPS Document • MS Excel Template (for graphs and forecasts) • MS Word Templates (main document and Executive Summary) • Economic Commentary (as at June 2015)

  4. Purpose of GREAT Presentation • Five Key Questions which we aim to answer: • What is an EFU-FSP-BPS? • Why produce it? • When should a state produce the EFU-FSP-BPS? • Who is responsible for producing it? • How is it produced – what are the key steps?

  5. What is the EFU-FSP-BPS • Key part of Top Down Budgeting • First major output of the budget preparation process, containing three main sections • Economic and Fiscal Update (EFU) – backwards looking: • Provides Context • Recent economic performance (global, national, state) and fiscal (state) performance • Fiscal Strategy Paper (FSP) – forwards looking, including: • Macroeconomic Assumptions underpinning Revenue Estimates (Medium Term Macroeconomic Framework) • Estimation and Justification – forwards looking estimates for major Revenue and Expenditure aggregates (Medium Term Fiscal Framework) • Fiscal Targets, Constraints and Risk Assessment • Budget Policy Statement (BPS) – forwards looking, including: • Sector Ceilings • Budget Policy Thrust (Medium Term Budget Framework) • Should define linkage to Annual Budget Call Circular (BCC)

  6. MTEF Process

  7. Why Produce an EFU-FSP-BPS • There are numerous reasons for producing the EFU-FSP-BPS document: • Discipline to start budget process earlier • Pressure to produce final accounts for previous years • Ensures that all relevant data is collated and presented clearly • Provides a reference point for civil society when reviewing the final approved budget • Required under Fiscal Responsibility Legislation

  8. Why Produce an EFU-FSP-BPS 2 • Assists ExCo and SHoA to appreciate the latest Fiscal and Economic trends • Helps enforce a multi-year perspective to the budget • Clearly lays out the assumptions and the calculations used to derive the aggregate budget breakdown • Provides Sectors with an early indication (prior to the budget call circular) of the three year envelopes – to update MTSS’s

  9. When to prepare the EFU-FSP-BPS • As noted previously, preparing the EFU-FSP-BPS should be the first task of the budget preparation process • Requires state final accounts and macroeconomic performance from previous budget year to be complete (not necessarily audited) • Ideally, should be prepared in by end of April / early May, but at least prior to the issuance of the call circular

  10. Who Prepares the EFU-FSP • Responsibility should be assigned to the Planning / Budget Ministry primarily • Will require data from key departments of Ministry of Finance: • Treasury Department • Debt Management • Internal Revenue • Statistics • Should be presented and approved by ExCo and SHoA (appropriate Appropriations Committee)

  11. How 1 – Data • Requires Data – to be collated in an excel spread sheet: • Prior Year (5-7 years) Budget and Actual Data for main revenue and expenditure items • Expenditure by Sector • Global, National and where possible state Macroeconomic Performance (Real GDP Growth and Inflation) and Projections • Nigerian Mineral Sector Performance

  12. How 2 - Estimations • Calculations • Statistical/Time series based Forecasting of Aggregate Revenue and Expenditure Items • Moving Averages • Elasticity Based Forecasting • Ratio Based Analysis for Debt Sustainability, Expenditure Composition • 3-Year Sectoral Allocations

  13. How 3 - Narrative • Brief Background on the State PFM Systems, Laws, Processes • Commentary on Key Economic and Fiscal Trends • Medium Term Fiscal Targets/Constraints (including Debt) • Basis for Aggregate Revenue and Expenditure Estimates • Fiscal Risks • Basis for Sectoral Allocations and Budget Policy Thrust

  14. How 4 – Rolling Forward • The first time development of the EFU-FSP-BPS requires significant effort • Subsequent years will be easier: • Rolling forward dataset by one year (not a whole new data-set) • Some narrative text needs only to be reviewed and validated • Some of the fiscal analysis will still stand

  15. Interrelation with Annual Budget • Must be a clear linkage between Aggregate Revenue Estimation in FSP and Budget Call Circular (BCC) • Alterations explained • Must be a clear linkage between sector envelopes in BPS and any envelopes in the BCC • What is included • How is it divided (Sector to MDA)

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