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M T BF Methodology

M T BF Methodology. Jean-Pierre Dumas Advisor on Multi-Annual Budgeting PFMR , Ministry of Finance December 18, 2003. Sequencing the MTBF The top-down approach The bottom up approach Main characteristics of a MTBF Points for discussion Budget execution is as important as the MTBF.

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M T BF Methodology

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  1. MTBF Methodology Jean-Pierre Dumas Advisor on Multi-Annual Budgeting PFMR , Ministry of Finance December 18, 2003

  2. Sequencing the MTBF The top-down approach The bottom up approach Main characteristics of a MTBF Points for discussion Budget execution is as important as the MTBF Contents 2

  3. Different steps of the MTBF (top down) STEP 2 STEP 1 STEP 4 STEP 5 Preliminary ceilings at the macro and chapter level Macro economic framework, budget projection Hearing: program selection within an agency. Arbitrage from PM at interagency level. Sectoral ceilings Integration of the MTBF in the budget Budget circular STEP 3 Sector diagnostic Priorisation of activities and expenditures at Chapter level Review of objectives, outputs, activities & performance indicatorts Activities costing, capital & recurrent, Govt & donors 3

  4. Objective: Set up a macro fiscal ceiling At the CG (State) level For SS Funds & other Funds Break down the macro fiscal ceiling by chapters How to break down by chapters? Projections by years Any projection should start with actual year Actual year should be consistent with projections Projections must be on accrual basis Consistency with the macro ceiling Iterative process Macro Fiscal Framework (MFF) 1 4

  5. How to calculate the macro ceiling? Project revenue for CG & other part of the GG Project expenditure based on economic classification (first step) Make a clear distinction between non discretionary (debt service, arrears to be paid) and discretionary expenditure It is not the role of the MF to set up sub ceilings within a chapter Programs should be designed first, inputs second Macro Fiscal Framework (MFF) 2 5

  6. The bottom up approach The chapters prepare their programs within their ceilings Program costing according to economic classification Hearing 6

  7. The MTBF is an iterative process it is not important if the data projected are approximate What is important is to be consistent with the hard budget constraint What is important is to have one budget flowing from the MTBF and not two parallel budget processes What is also important is the different steps & the hearing process (not clear today) Main characteristics of a MTBF 7

  8. Shall the MTBF be limited to the state budget or other budgets? Shall the programs follow the chapters or the reverse? Is accrual accounting necessary for performance budgeting? Consistency between program & economic classification The reserve “Rezerva na prioitne projeekt”, for what purpose? The consolidation issue Refine the budget process, who, when at what stage? Inclusion of contestability and hearings Budget Rules law and other legislation Points for discussion 8

  9. Compare budget Law with budget outturn How to improve knowledge on budget expenditure (actual)? How to control sectoral fiscal ceilings How to you control actual expenditure against appropriation? Discretionary intervention of the Ministers during the budget execution Budget execution is as important as budget formulation 9

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