Performance-Based Budgeting and Medium-Term …

1 Performance-Based Budgeting and medium -TermExpenditure Frameworks in emerging EuropeEdited byLeszek K sek and David Webber2009 Performance-Based Budgeting and medium -TermExpenditure Frameworks in emerging EuropeEdited byLeszek K sek and David Webber2009 Performance-Based Budgeting and medium -TermExpenditure Frameworks in emerging EuropeEdited byLeszek K sek and David Webber2009 Performance-Based Budgeting and medium -TermExpenditure Frameworks in emerging EuropeEdited byLeszek K sek and David Webber2009 Current Issues in Fiscal Reform in Central europe & the Baltic States 2008 Performance-Based Budgeting and Medium-Term expenditure Frameworks in emerging EuropeEdited by Leszek K sek and David Webber2009 Table of.

2 :.AcHievements,..9I. Introduction .. 9II. Recent Achievements in Budget Reform .. 10 III. Critical Success Factors .. 12IV. Lessons from the Region .. 16V. The Challenges Ahead .. 231. Fundamentals of PFM Reform and Sequencing .. 262. Systemic Approach to performance Budgeting .. 273. Developing a Toolkit for Improved performance .. 334. Medium-Term expenditure Frameworks (MTEF) .. 385. Conclusions .. General political and administrative structure governing budget preparation.. 432. Key pieces of legislation relating to the budget and country-specific circumstances influencing the budget system .. 473. Recent international assessments of quality and transparency of budget systems .. Recent public finance reform initiatives and major institutional achievements.

3 532. Motivation, champions for reform, and involvement of budget departments .. 573. Institutional changes, involvement of budget authorities and managing opposition .. 60 The opinions expressed in this report do not necessarily represent the views of The World Bank or its member governments. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their : 978-83-88911-17-0 The World Bank, Poland,Warsaw OfficeEdition I, Warsaw 2009 PublisherThe World Bank53 Emilii Plater Str., 00-113 Warsawtel. (48 22) 520 80 00fax. (48 22) 520 80 01email: byHERA Drukarnia Offsetowa Brzozy-Brzeziny Str., 05-220 Zielonkatel.

4 (48 22) 811 22 23fax. (48 22) 771 90 01 Cover designed by Agnieszka Mo .. Adopting Medium-Term expenditure Frameworks (MTEFs) Coverage of the MTEFs compared to the annual budget and its legal basis ..109 General Assessment (Summary) ..1091. Core Features of Current Budget System ..1102. General Progress on Budget Reform ..1133. Adopting Medium-Term expenditure Frameworks ..1164. Performance-Based Budgeting ..1215. Budget Presentation and Classification ..1256. Public Management performance Culture ..127croAtiAGeneral Assessment (Summary) ..1291. Core Features of Current Budget System ..1302. General Progress on Budget Reform ..1373. Adopting Medium-Term expenditure Frameworks ..1414. Performance-Based Budgeting .

5 1445. Budget Presentation and Classification ..1516. Public Management performance Culture ..153lAtviAGeneral Assessment (Summary) ..1571. Core Features of the Current Budget System ..1582. General Progress on Budget Reform ..1593. Adopting Medium-Term expenditure Frameworks ..1604. Performance-Based Budgeting ..1635. Budget Presentation and Classification and Public Management performance Culture ..166polAndGeneral Assessment (Summary) ..1691. Core features of the current budget system ..1702. General progress on budget reform ..1733. Adopting Medium-Term expenditure Frameworks ..1754. Performance-Based Budgeting ..1775. Budget Presentation and Classification ..1826. Public Management performance Culture.

6 185slovAkiAGeneral Assessment (Summary) ..1871. Core Features of Current Budget System ..1882. General Progress on Budget Reform ..1903. Adopting Medium-Term expenditure Frameworks ..1934. Performance-Based Budgeting ..1975. Budget Presentation and Classification ..2026. Public Management performance Culture ..204turkeyGeneral Assessment (Summary) ..2071. Core Features of the Current Budget System ..2092. General Progress on Budget Reform ..2103. Adopting Medium-Term expenditure Frameworks ..2134. Performance-Based Budgeting ..2155. Budget Presentation and Classification and Public Management performance Culture ..216 Annex 1. Program structure in Transport Slovakia 2008 ..206 Annex 2. Program structure in Transport Turkey 2008.

7 217 Annex 3. Main macroeconomic and fiscal indicators in emerging europe ..219 Annex 4. Questionnaire for World Bank Country Economists ..2337 ABBREVIATIONS AND ACRONYMSBISBL COM COFOGEBF EDPFLSU FMISGFSLGU IMFITC KPIM&E MOFNGO MTEFMTONISOECDOMB PARTPBB PDBPEFAPEIRPEM PFM PFMCLPFDMLPFMRPIB PPP PRB PRSPROSCSAO SPOTSAWBB udgetary Information SystemBudget LawCouncil of Ministers, (the Cabinet)Classification of the Functions of GovernmentExtra Budgetary FundExcessive Debt ProceduresFirst Level Spending UnitFinancial Management Information SystemGovernment Financial StatisticsLocal and Regional Self-Government UnitInternational Monetary FundInformation Technology and CommunicationsKey performance IndicatorMonitoring and Evaluation Ministry of FinanceNon-Government organizationMedium-Term expenditure FrameworkMedium-Term (Fiscal)

8 ObjectiveNational Investment SystemOrganization for Economic Cooperation and DevelopmentOffice of Management and BudgetProgram Assessment Rating ToolPerformance- based Budgeting (often called performance Budgeting ) performance -Determined BudgetingPublic expenditure and Financial Accountability (assessment)Public expenditure and Institutional Review Public expenditure ManagementPublic Financial ManagementPublic Financial Management and Control Law Public Finance and Debt Management LawPublic Finance Management Reform (project) performance -Informed BudgetingPublic-Private PartnershipPerformance-Reported Poverty Reduction Strategy Paper(IMF) Report on Standards and CodesState (or Supreme) Audit OfficeState Planning OfficeTreasury Single AccountWorld BankAcknowledgementsThis report was edited by Leszek K sek and David Webber, and writ-ten by a World Bank team.

9 The authors of respective chapters are: Mediha Agar (Turkey), Paulina Ho da (Latvia), Stella Ilieva (Bulgaria), Leszek K sek (regional overview, task team leader), Ewa Korczyc (Poland), Sanja Madzarevic-Sujster and Matija Laco (Croatia), Jan Marusinec (Slovakia), Mario Sangines (currently with the IADB - Global Lessons), and Dav-id Webber (principal author of the questionnaire). The report benefited from valuable comments from the peer reviewers: James Brumby, Roland Clarke, and Bill Dorotinsky who also provided excellent suggestions for the finalization of the are most grateful to national counterparts from the Ministries of Finance in Bulgaria, Croatia, Latvia, Poland, Slovakia, and Turkey, for their responses to a questionnaire and valuable comments to the earlier draft of the Summary: ACHIEVEMENTS, LESSONS & CHALLENGES AHEADI.

10 Introduction1In recent years, governments in many regions have adopted a wide range of reforms to make fiscal policies more consistent and effective over the Medium-Term and emphasize the impact of policies and spending. Two reforms performance Budgeting and Medium-Term expenditure frameworks have been central elements in improving the management of public finances. Medium-Term expenditure frameworks (MTEF) have been developed and refined by many countries to help build fiscal policy credibility and predictability via a more strategic, multi-year, budget plan-ning perspective. At the same time, Performance-Based Budgeting (PBB) concepts and methods have been especially important in many countries in bringing an increased focus on the results sought and achieved from government spending ( getting better value for money).