Aligning Sector Policies with the Medium-Term Budget Framework

1. Aligning Sector Policies with the Medium-Term Budget Framework Victor Zafra Almaty, Kazakhstan May, 2011

2. Introduction • This presentation: • reviews what is meant by “policy” and its derivation from alternatives; • describes different levels of policy statements; • stresses the important role of detailed program policy that can be reviewed and • related to the medium-term budget framework and a strategic plan through • program budgets; • sets out examples of program budgets – design based on organization, • meaningful sector policy descriptions, alternative program targets under a • ministry plan and an MTBF ; and • presents an “issue” paper that demonstrates how policy issues may be analyzed • and presented for resolution. Aligning Sector Policies with the Medium-Term Budget Framework

3. What Do We Mean by “Policy?” Aligning Sector Policies with the Medium-Term Budget Framework Webster’s Dictionary defines policy: “1 a: prudence or wisdom in the management of affairs b: management or procedure based primarily on material interest” “2 a: a definite course or method of action selected from among alternatives and in light of given conditions to guide and determine present and future decisions b: a high-level overall plan embracing the general goals and acceptable procedures especially of a governmental body”

4. Where Can Policy Be Found? • Policy can be found in many locations: • ---- the key policy document is the annual national budget -- resources are committed • to public purposes. • ---- other important statements of policy;: • the national strategic plan; • individual ministries’ strategic plans and policy statements; and • various other budget documents, e.g., a transmittal message that • accompanies the submission of the budget to the legislature. • ---- most importantly, individual budget programs themselves • at the most specific level, performance indicators • ---- compatibility, consistency, and specificity Aligning Sector Policies with the Medium-Term Budget Framework

5. Some Observations about Policy Statements National policy can often be too general, e.g., “to promote the well-being of the citizenry” or “to permit every citizen to realize his or her full potential through assuring equal opportunity.” ----- important statements of national purpose. ----- limited use in designing a program budget and activities. Other danger of national policy: being unnecessarily specific and restrictive. ----- describing the precise mechanism (s) that will be used to implement a policy discourages the development of alternative ways of achieving national goals. Program budgets and alternative ways of achieving government purposes. Aligning Sector Policies with the Medium-Term Budget Framework

6. Some Observations about Policy Statements • sector or program policies can be at a high level of generalization: • --“Assure universal access to quality health care at affordable costs to patients” • --“Assure equal access to a high quality basic education for all our citizens.” • detailed descriptions of policies in individual program budgets provide the greatest utility: • --- funding levels in the medium term expenditure framework reflect the costs of • continuing specific policies adopted in the budget; and • --- estimates in the following year’s medium term budget framework capture funding for a • specified sets of policies, programs, and activities. Aligning Sector Policies with the Medium-Term Budget Framework

7. Some Observations about Policy Aligning Sector Policies with the Medium-Term Budget Framework • inherent disconnect between broad government policy objectives and • budget program design and management – level of specificity • program activities • bridging the “disconnect” • --- program budget narratives • --- program performance indicators (the “devil in the details”)

8. Medium-Term Budget Framework and Policy Aligning Sector Policies with the Medium-Term Budget Framework • ideally – as set out in a Government of Pakistan approach -- a medium- • term budget framework has two components designed to enhance the • alignment of sector (ministry) policies over the medium-term: • --- a strategic (‘top down’) component that sets the overall budgetary • framework over the medium term with ceilings for each ministry at the • start of the annual budget process; and • --- a line ministry (‘bottom up’) component that reforms the budget • preparation process within line ministries and helps build the capacity for • line ministries to prepare and manage their budgets in a strategic way. • importance of the “bottom up” component. • policy and the medium-term budget framework alignment. • the utility of program budgets as policy documents.

9. Specific Program Policies and the Medium-Term Budget Framework Aligning Sector Policies with the Medium-Term Budget Framework • relationship of MTBF, MTFF, and MTEF • effective management and decision-making tool • two mechanisms that can enhance the utility of MTBF: • --- specific program policies • --- analytical process that develops a responsible range of alternatives and • related costs.

10. Program Budgets and Policy -- Components of a Program Budget ----- a statement of the program’s goal and/or objective. ----- a program narrative section in which the program proposals can be outlined at a high level of specificity and justified in terms of stated national goals and sector strategic plans; ----- the principal activities conducted by the program and the amount of funds devoted to each activity; ---- performance indicators – identified by the managers of the individual activities – that capture targets and results; and ---- economic classification (to permit financial audits) and employment (to complete the picture of resources devoted to the program). ---- simplicity and comprehensiveness -- key objectives in program budgets Aligning Sector Policies with the Medium-Term Budget Framework

11. Program Budgets and Policy – Designing a Program Budget Aligning Sector Policies with the Medium-Term Budget Framework • programs already exist • program budgets -- just another way to present budget information: • --- specific activities that permit consideration of different ways • to address problems); and • --- program narratives to connect broad statements of policy and • performance indicators. • --- detailed program policies set out. • align organizations and programs -- management accountability

12. Program Budgets and Policy – Designing a Program Budget Director General for Organization Chart Aligning Sector Policies with the Medium-Term Budget Framework

13. Program Budgets and Policy Aligning Sector Policies with the Medium-Term Budget Framework

14. Program Budgets and Policy Aligning Sector Policies with the Medium-Term Budget Framework

15. Budget Programs and Policy Aligning Sector Policies with the Medium-Term Budget Framework

16. Program Budgets and Policy Aligning Sector Policies with the Medium-Term Budget Framework

17. Program Budgets and Policy – Setting Out Specific Policy in a Program Narrative Aligning Sector Policies with the Medium-Term Budget Framework This is an ideal area in which to set out detailed program policy and a summary justification of the policy and any changes

18. Program Budgets and Policy – Setting Out Specific Policy in a Program Narrative Aligning Sector Policies with the Medium-Term Budget Framework

19. Program Budgets and Policy – Explicit and Detailed Policy Aligning Sector Policies with the Medium-Term Budget Framework • detailed and relevant policy in the context of results oriented budgeting. • policies, resources, activities, and program targets and results are presented • together. • the income and expenditure related to the pension reforms would be reflected in the • indicative years of the medium term expenditure framework and also serve as the • starting point in developing the medium-term budget framework ceilings for the • pension program in the following year: • -- updated for changes in inflation, etc.; and • -- assuming, of course, that the legislature adopts the budget.

20. Program Budgets and Policy – Setting Out Alternative Policies Aligning Sector Policies with the Medium-Term Budget Framework • program budgets formats and alternative performance • indicators for MTBF decision-making • detailed performance indicators • priorities revealed

21. Program Budgets and Policy – Setting Out Alternative Policies Aligning Sector Policies with the Medium-Term Budget Framework

22. Program Budgets and Policy – Setting Out Alternative Policies Aligning Sector Policies with the Medium-Term Budget Framework

23. Family Cost of Living Allowances – Policy and Practice Alignment Aligning Sector Policies with the Medium-Term Budget Framework

24. Family Cost of Living Allowances – Policy and Practice Alignment Aligning Sector Policies with the Medium-Term Budget Framework

25. Family Cost of Living Allowances – Policy and Practice Alignment Aligning Sector Policies with the Medium-Term Budget Framework

26. Family Cost of Living Allowances – Policy and Practice Alignment Aligning Sector Policies with the Medium-Term Budget Framework

27. Family Cost of Living Allowances – Policy and Practice Alignment Aligning Sector Policies with the Medium-Term Budget Framework

28. Summary • By way of summary, this presentation has: • set out a dictionary definition “policy” that stresses that it is derived from • consideration of alternatives; • described different levels of policy statements; • reviewed the nature of the medium-term budget framework and its purposes; • stressed the important role of detailed program policy that can be reviewed and • related to the medium-term budget framework and a strategic plan through • program budgets; • set out examples of how program budgets can provide meaningful sector • policy descriptions; and • shared an “issue” paper that demonstrates how policy issues may be analyzed • and presented for resolution. The issue paper format is an analytical tool for • budget analysis and decision-making. As a general rule, policy should • result from a consideration of alternatives (options). Aligning Sector Policies with the Medium-Term Budget Framework

29. Aligning Sector Policies with the Medium-Term Budget Framework • Thank you!