Medium Term Budgetary Framework

Punjab Public Resources Management Program (PRMP) is organizing the Medium Term Budgetary Frame Work (MTBF) Forum on 22^nd and 23^rd October at Pearl Continental Hotel Lahore.

2. The Government of Punjab is committed to preparing its annual budgets in the MTBF format. This commitment has been made by the Chief Minister Punjab in the Punjab Vision 2020 as well as at the Punjab Development Forum. MTBF accordingly is an important policy reform initiative and has been reflected prominently in the policy matrix of the PRMP.

3. Under the TA Grant of PRMP [TA 4015] provided by the Asian Development Bank [ADB], M/s A. F. Ferguson and Company have been engaged as consultants to assist in preparing the budget in the MTBF format. M/s A.F. Ferguson and Company have provided a detailed analysis report on MTBF and are in the process of generating final recommendations for preparation of the budget in MTBF mode. Simultaneously the Finance Department has prepared the first draft of MTBF and a new budget call circular has also been approved for circulation.

4. The MTBF Forum is meant to discuss and share information about the MTBF with the various stakeholders. It is aimed at initiating the MTBF dialogue and would also serve as one of the many interactions that the Finance and P & D departments as well as the consultants would have with the various key departments of the government in the coming months, leading to the preparation of the MTBF.

Government of the Punjab has committed itself to adopting a Medium Term Budgetary Framework [MTBF] for its financial management and resource planning systems. The work on this exercise has been initiated in the Finance Department, and with the assistance of the Asian Development Bank, the services of M/s A.F. Ferguson & Co. have been engaged to provide the needed technical support to the government in developing the MTBF. Punjab Public Resource Management Program [PRMP] is coordinating this endeavor.

2. Any MTBF exercise has to begin with the vision statement of the government, which has to be followed by a budget call circular that requires the departments to formulate budgets based on sector policies and plans. This entails a large exercise of collecting data and developing performance targets etc.

3. It is believed that progression from the existing incremental systems to a strategically oriented medium term budgetary framework can only be brought about gradually and certainly not without a major effort at training and capacity building of the departments. To create awareness about the significance and usefulness of adopting a medium term budgetary framework, a workshop on MTBF is planned to be held on 22-23 October 2004 at the Pearl Continental Hotel Lahore. It is meant to be an event to reiterate political commitment for MTBF as well as to market the exercise and sensitize and train a variety of officers on the subject.

Introduction

In December 2003, A. F. Ferguson & Co. was engaged by the Asian Development Bank (ADB) to provide technical assistance to the Government of Pakistan under TA 4015-Enhancing Capacity for Resource Management and Poverty Reduction in Punjab-Component 2. This technical assistance is aimed at promoting effective use of public resources in Punjab for poverty reduction, human development and economic growth.

Rationale For Mtbf

The objective of Government of the Punjab is to reduce poverty in Punjab, as highlighted in the Chief Minister’s Vision Statement, Punjab Economic Report and the Punjab-Poverty Reduction Strategy Paper (P-PRSP). In order to achieve this objective, the Provincial Government is committed to enhance pro-poor spending in the future, with particular focus on the social sectors. As development and poverty reduction cannot be achieved in a short span of time, the Provincial Government has formulated a Medium Term Budgetary Framework (MTBF), to plan its resources accordingly over the medium term.

Clearly, there is a very substantial gap between the goals and objectives of Government of Punjab and the actual budget practices. Annual incremental budgeting has been unable to deliver the desired results, and, a new strategic direction is required to enable the organization to achieve its goals.

A Medium Term Budgetary Framework (MBTF) exercise is proposed to address this gap. The MTBF will provide a medium term (three year) planning perspective. It will be top-down and bottom –up. Top down because a fiscal restructuring will be formulated under component B of this TOR (Revenue and Tax Administration Reform) to determine an appropriate resource mobilization strategy, and based on this strategy, revenue projections will be fed into the MTBF, and fiscal predictability will be enhanced. Bottom-up because the costs of implementing policies will be gathered up from the delivery units and measured against the relevant performance measures. Thus, sectoral programs will be implemented not only in line with resource realities but also according to a plan with measurable outputs and outcomes in accordance with performance budgeting objectives of FD.

Achievements

According to the work plan agreed in Inception report dated march 15, 2004 under the TA 4015-Enhancing Capacity for Resource Management and Poverty Reduction in Punjab-Component 2.Following accomplishments have so far been achieved

Inception Report -March 2004

ü Preliminary Analysis of issues in MTBF

Detailed Analysis Report - July 2004

ü Budget formulation business process flows

ü Budget implementation and evaluation process flows

ü Analysis of existing budget formats and changes required

ü Analysis of budget data collection formats

ü Analysis of revenue projection processes

ü Issues and Problems in the above areas and identification of gap

ü Format for MTBF 2004-05

Purpose Of This Forum

As MTBF cannot be implemented without the participation of all stakeholders so any efforts of implementation would be futile unless there is effective participation of all stakeholders generally and all line departments specifically. This forum has been arranged to acquaint the relevant stakeholders about the concept, need, objectives and methodology of MTBF. A new Budget Call Circular is going to be issued by the Punjab Government, which will be a base for the preparation of MTBF. In this forum we will discuss this new Budget Call Circular so that it can be well understood by all stakeholders. A proposed Budget Call Circular is attached as annexure (1).

ANNEXURE (1)

Budget Call Circular

As you are aware Government of the Punjab is moving towards a Medium Term Budgetary Framework (MTBF). In order to provide a strategic focus to the budgetary process, the Chief Minister has issued a vision 2020 document. In line with this direction certain forms have been added to the Budget Call Circular to ensure the budgets are in accordance with sectoral priorities.

A brief description and purpose of the additional forms is being provided for guidance purposes.

Additional Forms

1. Sectoral mission, goals and strategic issues

This form contains the following fields.

A) Sector mission statement

This should be a brief statement which expresses the reason for the existence of the department in terms of the public service that it is providing i.e the ultimate benefit which the citizen will receive if the service is effective.

B) Three year goals

These are the sectoral goals in each major area over three year term period. The goals should be quantifiable as far as possible. The existing level may be an estimation where correct figures are not available. Three types of performance indicators may be used.

Input indicators will measure the degree to which services are being provided at the lowest possible cost. These indicators will be expressed in ‘’cost per unit of output’’ such as cost per inspection, cost per student in school per year.

Output workload will represent outputs of the program such as the number of clients served, the number of inspections completed, etc.

Outcome indicators will measure the results, outcomes, impact, or quality of services the program provides to its customers. Outcome measure will be stated like: increase in percentage of adult literacy, decrease in rate of crime, etc.

C) Strategic Issues

This should be a list of the problems and issues that are hindering the department from achieving its goals.

2. Departmental Organizational Structure

This should include an organizational chart of the department clearly identifying division/service areas.

3. Division/ Service area objective, initiative and targets

The form includes the following fields

A) Division/ Service area mission statement

This will be the mission statement for the particular division on similar lines to the overall sectoral mission statement. In most case this will be a subset of the overall mission statement.

B) Division / Service Area Strategic Issues.

The problems and issues relating to this particular division / service area may be listed here.

C) Proforma for the Annual Development Programme (MTBF Mode)

The status and category of the developmental schemes are covered through this form.

1. Sectoral mission, goals and strategic issues

A. Mission Statement

*B. Three year goals*
*Goals*	Existing level	*2005-06*	*2006-07*	*2007-08*

C. Strategic issues

2. Organizational structure of the Department

3. Division/ Service area objective, initiative and targets

A. Division/ Service area mission statement

B. Division / Service Area Strategic Issues

Chair: Muhammad Basharat Raja, Minister for Law and Parliamentray Affairs and LG & RD

Chair: Dr. Salman Shah, Advisor to the Prime Minister on Finance and Revenue.

Existing level