Development partners in Tanzania’s Planning and

Budgeting systemDPG Orientation :Aid management

September 12, 2006

Allister Moon

Tanzania’s planning and budgeting system

• Planning and budget cycle

• MKUKUTA linkage

• PER process

• PRBS interface with planning and budgeting

• Sector reviews, cluster/sector PERs

Planning and budget cycle

• Macro framework preparation, PER Macro group

• MDA submissions, SBAS• Budget Guidelines, BG

Committee• IMTC, Cabinet• PER/PEFAR consultations• Annual budget, MTEF• Parliament

July-September

Sept/OctNov-DecJanuaryMayJuneJuly -August

MKUKUTA- budget linkage

• MKUKUTA : domestically driven policy content and development of implementation instruments

• implementation through MTEF/annual budgets

• Priority sectors > clusters

• SBAS

• MKUKUTA monitoring system

Strategic Budget Allocation System

“ The Tanzanian authorities have gone furthest in any country to develop a hard and structured link between a PRSP and the Budget through the SBAS” - conclusions in a recent multi country study on PRSP/budget linkage

SBAS continued

• SBAS micro – MDAs prepare submissions based on MKUKUTA/Strategic Plan

• SBAS macro – MoF/Budget Guidelines Committee use to to review submissions and link to macroframework

• Challenges – wage bill planning, performance focus, link to MKUKUTA monitoring

• Local Government – PLANREP to be linked 2007/8

Key:Input/information

Approval/decisions

Public Expenditure Review Process

Parliament Cabinet

MKUKUTA Monitoring System

Inter Ministerial Technical Committee

Budget Guidelines Committee(output: Budget Guidelines)

Technical Committee(MKUKUTA Secretariat)

PER Working Group Monitoring

Advisory Committee

Surveys & Routine Data

TWG

Communications TWG

PER Macro Group

Cluster 1 WG Growth

Research & Analysis TWG

Cluster 2 WG:Well being

Sectors(output: Sector Reviews)

Cluster 3 WG:Governance

Cluster 4 WG:

Financial Acct

MKUKUTA Secretariat MPEE

MDAsM&E and MIS units(Policy & Planning

Depts)PM-RALG

LGAs M&E unit

Budget and MKUKUTA monitoring

Public Expenditure Reviews : a short history

– Pre-1998: Bank product by Washington missions => Focus on restoring fiscal equilibrium (introduction of cash budget system).

– 1998 to 2000: Introduction of Participatory annual PERs & MTEF; =>Focus on consolidating fiscal prudence; improving budget predictability & Accountability

– 2001-2004: Participatory annual PERs to support implementation of PRSP => Focus on protecting social sector expenditures.

– 2005 to date: “One Process One Assessment” = Integrated PEFAR review of PE + PFM + PP. => Focus on aligning the budget to support the growth focus of MKUKUTA.

Key features of PER process

• Govt-led & Participatory process (PS-MoF; Secretariat; Broad membership of Macro & Sector PER WGs; Regular meetings); Jointly agreed work program that dovetails with the budget cycle

• Joint External Evaluation: WB, IMF/East AFRITAC, DFID, KfW, EU, Finland, Ireland, Canada, NGOs – Haki Elimu, Water Aid, NPF, REPOA + consultancy support (local & international)

• Annual Stakeholders Consultative meeting => Provide feedback to stakeholders + Get feedback on draft budget frame/cross-sector allocations.

PRBS: interface with budget

• Redesign of PRBS : simplification of PAF, alignment with MKUKUTA, use of national systems, underlying processes, key role of sector reviews

• Timing of annual review in the cycle – in time to assess prior year outturn, early indication of next year financing

• PEFAR as annual fiduciary assessment

Sector reviews : three functions

• integral components of the national planning and budgeting system, feedback on sector performance ,broad dialogue on sector policy and expenditure plans, input for annual budget

• instrument for strengthening domestic accountability, contributing to a broad public awareness of sector issues that can strengthen the role of formal institutions of accountability, especially Parliament

• Less centrally, but very importantly for aid strategy, the base for performance monitoring and policy dialogue for DPs, supportive/catalytic for broad accountability to all stakeholders.

Sector reviews : challenges

• Long way to go in realising these goals across key sectors

• Few sectors have established track record on annual review process (eg health)

• Sector review task force : currently working on tighter definition of ‘satisfactory review’ and how PRBS use of reviews

• Need to recognise that extensive use of sector reviews is an experiment in hybrid instituions, specific to high aid context

JAST – joint analysis, joint programming

• Part 1 JAST text – MoU to be signed October• Part 2 Joint analysis• Part 3 Joint programming• Part 4 Agency specific supplement Parts 2+3 = Joint Program Document, final draft

by end SeptemberPart 4 – timetable as required by individual

agencies, should be minimum additional required to meet agency program doc requirements, with minimal additional consultation/ transaction costs

Part 3 outline

• Intro, context, lessons learnt• Managing external finance• Issues for developing aid strategy: MTEF

projections, scaling up, consistency with MKUKUTA,JAST

• Response to MKUKUTA cluster strategies• M&E/Results matrix• Risk analysis• Other JAST issues

Managing external finance

Institutional challenges of high levels of aid• Vision of DP role as catalyst for strengthening

domestic accountability• Key role of sector reviews in realising this

vision,balancing national planning and budget role, domestic accountability and monitoring/dialogue for DPs

• Recognising the responsibilities of high aid dependence, DPs as integrated particpants in budget process

Key changes in DP input to planning/budget cycle

PRESENT

Got passive recipient of individual agency projections

One off DP input

Exclusively bilateral

FUTURE

GoT actively assesses projections,leads dialogue

Iterative, interactive

DPG role in coordination quality review, facilitating adjustment

Work in progress

• Consistency with JAS: key indications one year ahead – number of projects increasing 25%, average project size falls by 20%, slight fall in % budget support

• Summaries of aid programs by cluster: Cluster priorities, MKUKUTA alignment, financing strategy, development of dialogue/sector reviews

• Summaries of aid programs by cluster: Cluster priorities, MKUKUTA alignment, financing strategy, development of dialogue/sector reviews

Figure ?: Total External Financing (actual+projections)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0%

of

GD

P

Actual Donor Support MTEF Projection 07 MTEF Projection 06

MTEF Projection 05 MTEF Projection 04 MTEF Projection 03

Figure ?: DPs MTEF Projections

Commitment (18 agencies)

Pipeline/indicative (3 agencies)

Unallocated (4 agencies)

0

500

1000

1500

2000

2500

2006/07 2007/08 2008/09 2009/10

Mill

ion

USD

Commitment (18 agencies) Pipeline/indicative (3 agencies) Unallocated (4 agencies)

Average Forecast Error (in percent)

0 10 20 30 40 50 60 70 80 90

DPs Budget Support

DPs Other Support

DPs Total Support

Domestic Revenue

Percent

Year 3 Year 2 Year 1

Improving DP projections : some options

• Individual agencies prepare comprehensive MTEF projections annually (commitments, pipeline + unallocated)

• DPG takes more collective responsibility for quality of projections (ex ante), and realisation (ex post)

• Reserve funds set aside to assure stable medium term flows(DP or GoT)

• Recommendation : pursue all three approaches, option 1 to be included in next GoT MTEF call, PER macro group to work on detailed proposals on 2 and 3

Work program for DP working groups

• Review sector MTEF projections – identify gaps, encourage WG members to improve coverage (commitment/pipeline)

• Review Joint program doc: – Proposed drafting revisions for cluster text, covering:

sector priorities, developments in external financing, status of sector review/policy dialogue institutions

– Results matrix : review indicators (col 1), review DP inputs and summarise (col 3), insert summary of strategies/intermediate results (col 2)

– comments on other sections

Finalising the joint program doc

• First draft with GoT, comments expected mid Sept, including views on any broader consultation process required

• Similar for civil society

• Still aiming for final draft end Sept/next DPG

• DP views on facilitating HQ engagement/ comment/agreement on final draft ?

Orientation challenges

• DP Government institutions: an increasingly complicated map, changing rapidly

• Important to get a sense of dynamics : where have we come from, what’s the collective vision of future institutions

• No textbook solutions : resource transfers at this level have been rare historically, no models of how this works over the long term, consistent with national ownership and domestic accountability

• Best to view Tanzania institutions not as a model but rather a complex experiment in how to make sustained aid levels consistent with national ownership, with aid as a catalyst for building institutions of domestic accountability