Apr 16, 2020

Learning How to Do the Costing of Structural Reforms Properly

Mr. Valion Cenalia, General Budgetary Department Programming Specialist at the Ministry of Finance in Albania, shares his reflections about his attendance at the learning event where the aim was to exchange ideas on how to increase cooperation between experts from ministries of finance and line ministries in order to improve design, costing and budgeting of structural reforms as an element of the Economic Reform Programs. The event was delivered as part of the EU funded multi-country project “Strengthening Line Ministries’ Capacities to Assess Fiscal Implications of Structural Reforms” (FISR).

The most significant and important FISR activity I participated in was the “Enabling Finance Officials as Trainers and Learning Facilitators” workshop, held in March 2019 in Bohinjska Bistrica, Slovenia. This workshop was attended by about 30 participants from all countries of Southeast Europe. In addition to providing professional training, the workshop offered a very dynamic environment, taking experience from different people from different fields and sharing skills and knowledge.

The most important activity in this workshop was Designing and Implementing Structural Reforms – a link between the line ministries and the ministries of finance in the process of costing and budgeting of structural reforms. Spending a large part of my work on costing of structural reforms, I got new and profound knowledge of how to do the costing of structural reforms properly.

Structural reforms and their fiscal implications are an extremely complex subject. OECD’s assistance helps us significantly strengthen the methodological framework for the structural reform chapter of Economic Reform Programs (ERPs). European Commission’s Guidance for ERP now offers much clearer guidance about the definition of structural reforms, about structural reform areas and priority structural reform measures. With the assistance of the OECD, my country was provided with methodological tools for assessing obstacles to growth, for articulating and prioritizing reform policy measures as well as for monitoring their implementation.

The main features of this “new” approach, articulated in the ERP Costing Guidance, were the following:

  • Focus on costs of structural reform measures only. In contrast to the “old" system, based on a rather vague concept of fiscal implications of structural reforms that de facto addresses both sides of public finances (their costs as well as revenues), the ERP Costing Guidance focuses clearly on the costing side of structural reform measures. The revenue side of public finances is therefore not addressed under this Guidance or, more precisely, it is addressed only sporadically.
  • Focus on additional costs of structural reform measures only. In contrast to the “old” system, where it was not clear which costs of structural reform measures are expected to be calculated, the ERP Costing Guidance focuses exclusively on “additional costs” of structural reform measures, i.e. on the costs that are additional to the circumstances where this measure would not be introduced. The ERP Costing Guidance is therefore not aimed at calculating the total costs of structural reform measures but only at those costs that are additional to the status quo scenario and measured vis-à-vis the base year.

Participation in this workshop helped me understand the new approach introduced during this period for costing of structural reforms, and how these reforms will gain value after costing them according to this approach. This workshop helped me a lot to be really prepared for its implementation in my country. After the workshop, I prepared a presentation for my supervisors. I explained the new approach to the costing of structural reforms and the methodologies on how this should be accomplished. They agreed and supported the new idea of the approach, making it possible to start implementing it immediately after the workshop. This demonstrates my contribution to the workplace and the dissemination of information we receive at relevant trainings and workshops, which is very valuable.