Medium-Term Medium-Term Expenditure Framework Expenditure Framework

(MTEF)(MTEF)

Ministry of FinanceMinistry of Finance

Royal Government of BhutanRoyal Government of Bhutan

(Budhiman Rai)(Budhiman Rai)

Structure of the PresentationStructure of the Presentation

1. Legal Framework2. Development Philosophy3. Macroeconomic Framework4. Medium Term Horizon5. MTEF Approach6. Fiscal Sustainability & Transparency7. National goals, objectives and Annual Budget8. PFM Reforms9. Issues and Challenges10. Measures 11. Lessons learned

Legal FrameworkLegal Framework

1. Constitution of the Kingdom of Bhutan, 2008

2. Public Finance Act, 2007

3. Financial Rules and Regulations, 2001

Development PhilosophyDevelopment Philosophy

Development Philosophy/GNH Pillarso Sustainable and Equitable Socio‐Economic

Developmento Preservation and Promotion of Cultureo Conservation of Environmento Promotion of Good Governance

Governmento 10 Ministries, 20 Dzongkhags, 29 Autonomous

Bodies and 205 Geogs

Macroeconomic Fiscal FrameworkMacroeconomic Fiscal Framework

Macroeconomic Framework

Coordination Committee (MFCC)

Chaired by Finance Secretary

Macroeconomic management

Facilitate regular preparation of reliable and

systematically compiled macroeconomic and fiscal

projections

- contd.- contd.

Macroeconomic Framework

Coordination Technical Committee

(MFCTC)

Technical Working members from the relevant

agencies

Resource Projection

Provides critical technical and analytical

inputs that enable the policy making body and

members of the MFCC to formulate important

macroeconomic decisions.

Medium Term HorizonMedium Term Horizon

Financial year- July to June

Medium term- 5 years Actual - Past 2 financial years Revised aggregates Projections- 2 financial years

Budget Policy and Fiscal Framework Statement

Actual - Past financial year Revised aggregates Budget Projections for 2 financial years

MTEF ApproachMTEF Approach

Multi-year revenue projectionsMFCTC > MFCC = Resource envelope

Bottom-up cost estimationNational and Sectoral PlansFormulate sector programs and set priorities

Matching the cost with available resources

Maintain fiscal balance below 5% of GDP

Fiscal Sustainability Fiscal Sustainability &&

TransparencyTransparency

Recurrent expenditures shall be met from the internal resources : PFA 7(a), Constitution Article 14 (6)

Meeting the requirements for sustainability of the fiscal balance shall not be achieved at the expense of development projects

National Goals and Objectives National Goals and Objectives &&

Annual BudgetAnnual Budget

- National key objectives Enhance food and nutrition security, Improve Rural Livelihood, Accelerate and sustain RNR sector growth, and Promote sustainable management and utilization of natural

resources

- Resource based budgeting Resource envelope Sectoral ceiling- Recurrent & Capital

- BPFFS- Medium term budget

PFM ReformsPFM Reforms

a. Multi-Year Rolling Budget: Financial Manual 1988 > Financial Rules and Regulations 2001

b. Incremental to Resource based budgetingc. Sectoral Ceiling

• Local Governments- Resource Allocation Framework (GNHC)

• Other budgetary bodies- FYP

d. Fiscal Decentralization e. No supplementary appropriations (PFA) f. Integrated Online Systems- PLaMS, MYRB,

PEMS

Issues and ChallengesIssues and Challenges

a. Difficulty in gathering actual national aggregates for projection of inputs into Macroeconomic Framework/discrepancies

b. Need for standard system for Macroeconomic Framework

c. Sectoral ceiling > Living within funding constraints

d. Revenue growth less than increase in expenditure

e. Decline in Donor support

f. Increase in costs- Geographical factor, procurement procedure

MeasuresMeasures

a. Develop system for Macroeconomic Framework

b. Expenditure prioritization/Rationalizing expenditure

c. Constitutional and Fiscal Sustainability requirement

d. Mobilize resources through concessional window and domestic financing

e. Financial and output monitoring

f. Harmonization of Financial Rules and Regulations

g. Environment Friendly Construction/Improved technologies

Lesson LearnedLesson Learned

a. Legal requirement

b. Political commitment

c. Improved Macroeconomic Management

d. Align and prioritize sector programs and activities

e. Accountability for program delivery/output

f. Real-Time and Integrated Computerized Systems

g. Improved expenditure control and reporting

h. Multi-Year Budgets

TASHI DELEKTASHI DELEK

(THANK YOU)(THANK YOU)