Target audience

The workshop has been designed for mid to senior level officials who actively deal with budget formulation, strategic planning and budget decision-making.

Course description

Many budget decisions have impacts that extend well beyond the current budget year or that even arise mostly in later years. To make rational budgetary decisions, decision-makers must focus on the medium- and long-term implications. Most importantly, new spending initiatives kick in only after the budget year in which they are taken. Similarly, important saving measures usually take longer than a year to take effect. It is increasingly becoming standard practice for countries to introduce medium-term budget frameworks to extend the time horizon of their budget management processes. While specific mechanisms and terminology vary, the most successful approaches to development of medium-term budgeting incorporate a medium-term budget framework (MTBF) which includes revenue forecasts and expenditure ceilings for subunits of general government and individual ministries and agencies; as well as baseline estimates for expenditures, which indicate the future costs of current policy.

The potential benefits of effective medium-term budgeting are well documented. A well-designed and well-managed framework for medium-term budgeting should contribute to improved fiscal discipline and control, allocative efficiency and cost-effectiveness of service delivery, through increased clarity of policy objectives, greater predictability in budget allocation, increased comprehensiveness of budget information and enhanced accountability and transparency in the use of resources.

In practice, however, many attempts to introduce medium-term budgeting have failed to realize the aforementioned potential benefits. Frequently, introduction of the medium-term budget process has resulted in a process of ritualistic resource-consuming effort of little practical value, often divorced from the annual budget preparation process. In addition, budget agencies frequently do not regard aggregate expenditure targets or ceilings as binding during budget negotiations. This reduces the capacity of the top-down character and removes the incentive of budget institutions to prioritize their expenditures and thereby improve the efficiency of resource allocation. As a result, spending proposals effectively become wish lists with little focus on achievement of government priorities within the designated resource constraint. Inefficient coordination with national or sectoral strategies, including public investment programs, is another common problem, as is the proliferation of uncosted policy initiatives that are produced without consideration of the fiscal realities associated with their implementation. Another challenge that is frequently overlooked in unsuccessful attempts to implement medium-term budgeting is the failure to ensure that basic annual budgeting capacity is robust enough to allow for its introduction.

The course will be given by practitioners and professionals with extensive national and international experience, and consequently the emphasis will be on discussions and examples based on country practices; with theoretical discussions kept to a minimum. It will focus on the lessons learned in both advanced and less advanced economies and the challenges that need to be taken into account when designing medium-term budget frameworks.

Topics covered

The following topics will be discussed during this three day workshop:
Introduction to medium-term budgeting: theoretical background, key concepts and definitions
Medium-term budgeting reforms: international experiences
The role of fiscal rules
A practical model for South East Europe to build a medium-term budget framework from a top down perspective
Challenges and bottlenecks for medium-term budgeting
Medium-term budgeting in practice

Benefits to the individual

The objective of the course is to help participants to better understand objectives and features of multi-year budgeting, to identify the challenges and bottlenecks in these reforms and to share experiences with colleagues in other South East European countries about how to overcome these challenges.

After attending this workshop, participants will be able to:
Explain different dimensions of medium-term budgeting;
Understand the relationship between the annual budget and the medium-term budget framework; and how the two are linked;
Describe the implementation challenges and the factors that are necessary to make medium-term budgeting work in practice;
Explain the role of fiscal rules in the budget process

Contributions from participants

The workshop will be highly participatory. Participants are encouraged to be active in discussions and exercises throughout the three days. Participants will work in groups to discuss country specifics in medium-term budgeting reforms and will take part in simulations of medium-term budget preparation and negotiation exercise.

Faculty

Mr. Dirk-Jan Kraan, Public Financial Management Advisor for South East Europe of the IMF
Dirk Kraan is a Dutch citizen. He holds MA degrees in Law (1970) and Economics (1976) from Erasmus University in Rotterdam and a PhD degree in Economics from the same university (1989). He worked in several positions in the Directorate General of the Budget of the Dutch Ministry of Finance from 1980 to 2002, lately as head of the Division of Policy Review of the Inspectorate of Finance (Expenditure Division). He joined the Organisation for Economic Co-operation and Development (OECD) in 2002 as a senior economist in the Budgeting and Public Expenditures Division of the Directorate of Public Governance and Territorial Development. At the OECD he was among other things responsible for the Eastern European program of the Budgeting and Expenditure Division and for the OECD Value for Money Study on the organization of central government. He recently joined the International Monetary Fund (IMF) to work as a Regional Public Financial Management Advisor for South East Europe based at the CEF in Ljubljana, Slovenia.

Mr. Peter Van Den Berg, Budget Director, Ministry of Finance, the Netherlands
Peter van den Berg holds an MA degree in Econometrics. He is Director of Budget Affairs and Deputy Director-General of the Budget in the Dutch Ministry of Finance. Previously he held the position of Director of the Inspectorate of Finance (Expenditure Division) in the same ministry. Prior to that, he served as a Deputy Director of the Bureau for Economic Policy Analysis (Central Planning Bureau) of the Dutch government.

Mr. Karl Bergstrand, Ministry of Finance, Sweden
Karl Bergstrand is a Special Advisor in the Budget Department at the Swedish Ministry of Finance since last year. He is currently working on issues involving strengthening of the medium-term budgetary framework and how the government presents the budgetary effect of its policies in the annual Budget Bill. Before joining the Ministry of Finance he was head of the unit forecasting central government finances at The Swedish National Financial Management Authority. He has also worked as a non-political civil servant in the Swedish parliament advising the different political parties on forming their fiscal policy.

Mr. André Lundvall, Ministry of Finance, Sweden
André Lundvall serves as desk officer in the Budget Department at the Swedish Ministry of Finance. Currently he is working with short and medium-term revenue and expenditure forecasts for the central government budget. Furthermore he is involved in revenue forecasting steaming from dividends from state-owned companies. Mr. Lundvall has formerly worked at the structural division at the Ministry of Finance on issues related to investments and productivity.

Medium-Term Budgeting