2
                                                        2
                               
                 Transition Context
                 Transition Context
    Severe economic decline 
      Severe economic decline 
         
           In 2000 GDP represented 35% of 1990 
           In 2000 GDP represented 35% of 1990 
           value
           value
         
           Public spending fell by 9% GDP during 
           Public spending fell by 9% GDP during 
           1996-2000
           1996-2000
         
           Total public debt exceeded 90% of GDP by 
           Total public debt exceeded 90% of GDP by 
           2000
           2000
    Strong economic recovery since 2000
      Strong economic recovery since 2000
         
           Budget deficit:  -0.1% of GDP (2001), 
           Budget deficit:  -0.1% of GDP (2001), 
           -1.8% of GDP (2002), +0.5% of GDP (2003)
           -1.8% of GDP (2002), +0.5% of GDP (2003)
                                                        3
                                                        3
                               
            Reform of the Budget System
            Reform of the Budget System
     1996 Budget Law
        1996 Budget Law
        – consolidated previous reforms
           consolidated previous reforms
        – formalised budget planning arrangements
           formalised budget planning arrangements
             budget Concept
              budget Concept
             budget planning cycle
              budget planning cycle
             new budgetary classification
              new budgetary classification
     But  slow  progress  with  budget  planning 
        But  slow  progress  with  budget  planning 
        reforms
        reforms
        – economic crisis and instability - short-term outlook
           economic crisis and instability - short-term outlook
        – weak macro-fiscal framework
           weak macro-fiscal framework
        – weak linkage between policies and budgets
           weak linkage between policies and budgets
        – unrealistic ministry budgeting
           unrealistic ministry budgeting
                                                                      4
                                                                      4
                                       
                  2001 - Decision to introduce more 
                     strategic approach to budget 
                                planning –
                        Introduction of MTEF
                   2 stage budget planning cycle: 
                     MTEF to be prepared prior to 
                         budget preparation.  
                         Design of MTEF based on 
                         international good practice
                         (assisted by WB and other 
                                  donors)  
                                                                       5
                                                                       5
                                       
                  MTEF Objectives
                   MTEF Objectives
    Realistic macro-fiscal framework for 
      Realistic macro-fiscal framework for 
      budgeting
      budgeting
    Greater predictability for budget planning
      Greater predictability for budget planning
    Policy-led resource allocation process
      Policy-led resource allocation process
    Multi-year perspective for budget planning
      Multi-year perspective for budget planning
    Greater transparency and wider participation
      Greater transparency and wider participation
                                                        6
                                                        6