(This Document is the Property of the Government of the Republic of Zambia
The National Planning and Budgeting Policy
Responsive, open, accountable and results-oriented budget and development planning processes that enhance the development and service delivery impact of public finance
Ministry of Finance P.O. Box 50062 LUSAKA
15th April 2013
Table of Contents
Foreword................................................................................................................................................. 3 Acknowledgement .................................................................................................................................. 4 Working Definitions ................................................................................................................................ 5 Acronyms ................................................................................................................................................ 7 1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction .................................................................................................................................... 8 Situation Analysis ............................................................................................................................ 8 The Vision ...................................................................................................................................... 11 Rationale ....................................................................................................................................... 11 Guiding Principles: ........................................................................................................................ 12 Objectives...................................................................................................................................... 12 Measures....................................................................................................................................... 12 Integrated National Planning and Budgeting Process .................................................................. 14 Implementation Framework for the National Budget and Development Planning Policy ........... 17
Foreword Zambia is committed to planned socio-economic development of the country as reflected by the determination of the Government to improve the Socio-economic conditions of the citizens. The National Development Planning and Budgeting Policy is the first ever policy aimed at strengthening the coordinated approach in undertaking national development planning processes. It further enhances the implementation of the long and medium term plans as it establishes a link between the plans and the Medium Term Expenditure Frameworks (MTEF) and subsequently the annuals budgets. It equally reaffirms Government commitment to uphold the provisions of the Constitution of the Republic of Zambia. It is a comprehensive Policy for inclusive development agenda. It builds on the growing strength of the economy and also addresses weaknesses and challenges faced in the implementation of previous National Development Plans. The Policy is therefore, aimed at re-positioning Government in a cost effective and most efficient manner with regard to attaining the Vision 2030. The Policy has incorporated national and regional initiatives and has taken into account the various progress reports on the implementation of National Development Plans and the FNDP Mid Term Evaluation Report. Further, the Policy has repositioned the country on its quest to attain international initiatives such as the Millennium Development Goals. The National Planning and Budgeting Policy is as a result of participative process by all stakeholders in the country and provides a development strategy aimed at pursuing initiatives that systematically addresses development and reduces poverty based on the principle of equity in the distribution of resources. The Policy presents a logical organization of activities towards the achievement of the vision 2030. It is an effective planning and budgeting instrument for the country as it sets out clear guidelines to be undertaken to harmonize National Development Plans, Medium Expenditure Framework and the Annual Budgets at District, Provincial, Sectoral and National Levels. The Policy provides the bases for effective planning and allocation of resources to the development agenda of the country. The important aspect which Government has fully taken into account in the preparation of the Policy is the integration of Planning and budgeting into a single coordinated process by enshrining the Planning and budgeting process in the Republican Constitution. The main objective of the Policy is to provide for the co-ordination of national planning and budgeting functions and processes participation of stakeholders in the planning and budgeting process for transparency, accountability and ownership of national development plans and provides for the effective institution arrangement in the development, implementation and monitoring and evaluation of development plans and budgets. In conclusion, the implementation of the National Development Planning and Budgeting Policy will depend on the commitment of all stakeholders, I, therefore, urge each and every one of us to put in every effort to the successful implementation of the policy.
Alexander Bwalya Chikwanda, MP Minister of Finance
Acknowledgement The Ministry of Finance would like to acknowledge with gratitude all organizations, institutions and individuals that contributed to the development of this policy. Special thanks to the Sector Advisory Groups, Provincial Development Coordinating Committees, District Development Coordinating Committees, the Civil Society, Non-Governmental Organizations and Faith Based Organization to mention but a few. The effective participation of these organizations and their valuable contributions made it possible for the development of this policy which is aimed at providing the much needed guidance in the preparation, implementation and monitoring and evaluation of national development plans and the Medium Term Expenditure Frameworks and subsequently the annual budgets. SECRETARY TO THE TREASURY
Working Definitions “Annual Budget” - the estimates of public revenue, public expenditure and public borrowing for a financial year as enacted by Parliament in an Appropriation Act or as altered by Parliament through a Supplementary Appropriation Act. “Appropriations-in-Aid” - monies received by a department of Government and collected under the provisions of any law which authorizes that department to retain and expend part, or the whole, of these monies for defraying the expenses of the department. The “Budget (Estimates) Committee” - a committee of the National Assembly tasked with oversight responsibility over the Executive’s processes for allocating public resources through the annual budget. “Charge” - in relation to public expenditure, is expenditure that is so designated in the Constitution, and is authorized by the Legislature for an unrestricted duration by charging it on the Revenues of the Republic and does not require further annual appropriation by the National Assembly in an Appropriation Act. “Contingency fund” - the fund established by section 24 of the Public Finance Act No. 15 of 2004. “Contingent liability” - a financial liability that may have to be met from public revenues, but this imposition is contingent upon a particular event either occurring or not occurring. “Controlling Officer” - an officer designated as such in accordance with section 7 of the Public Finance Act No. 15 of 2004. “Cooperating partner” - a country or international organization that renders material, human or financial assistance to Zambia’s development programme. “District Budget and Development Plan Committee” -a committee, to be established at district level in place of the current District Development Coordinating Committee, to coordinate the formulation, implementation, monitoring and evaluation of the district’s annual budgets and its development plans. “Deconcentration” - the transfer of functions and resources to sub-national units of the same administrative system while authority over decision making and the use of such resources remains with the centre. “Delegation” - the assignment of authority and responsibility to sub-national levels of government to execute specific functions as the agent for a Central Government entity which, as principal, remains accountable for the execution of the delegated function. “Devolution” - the transfer to sub-national levels of government of functions and resources together with the power and authority to determine how these functions are to be executed and the resources utilized. “Extra-Budgetary Fund” - a fund where public monies are deposited and used in accordance with an enabling statute and which may not be reflected, or only partially reflected, in the Annual Budget. “Financial Year” - the period of twelve months ending on the 31st December.
“Functional classification” - the classification of the expenditure plans of the General Government Sector according to the broad purposes of these expenditures. “General Government Sector” - the Central Government, including Provincial administrations, grant aided institutions and the district and sub-district offices of Central Line Ministries together with District Councils but excludes public corporations . “Medium Term Budget Plan” - a three year General Government Sector financial plan that is linked to development programmes, projects and targets in the National Development Plan, or annual updates thereof, and is formulated with the Medium Term Expenditure Framework (MTEF) as a central element. “Medium Term Expenditure Framework” - a three year projection of the resources of the General Government Sector and their allocation across heads and functions to finance the operational and development expenditures of the General Government Sector as specified in the National Development Plan, or its annual update. “Non-state Actor” - any individual or entity that is not part of the public sector. “Provincial Budget and Development Plan Coordinating Committee” - a committee, to be established at provincial level, to coordinate the formulation, implementation, monitoring and evaluation of the province’s annual budgets and its development plans. “Public sector” - the General Government Sector and public corporations. “Revenue assignment” - the division of control over public revenue sources between Central, Provincial and Local Governments. “Sector Advisory Group” - a group established to facilitate the structured participation of nonstate actors in the formulation, implementation, monitoring and evaluation of budgets and development plans at the level of Government where they operate. “Subsidiarity” - the principle that public taxing, spending and regulatory functions should be exercised by the lowest level of government that can execute them effectively. “Supplementary Budget” - a further budget for a particular financial year, submitted to the National assembly prior to the end of that financial year, requesting the National Assembly to approve additional expenditures over and above what was first appropriated by Parliament for the financial year in question. “Supply expenditure” -public expenditure that is authorized annually by the Legislature and provided for in appropriation legislation in response to demands presented by the Executive in the form of estimates. Authority for incurring supply expenditure lapses at the end of the financial year. “Tax Expenditure” - a tax privilege conferred on a non-state actor or a public sector entity that reduces government revenues and has a similar impact to that of providing a direct subsidy to the beneficiary. “Virement” - the movement of public funds during the financial year within an amount already appropriated by Parliament for that financial year.
Acronyms ABB – Activity Based Budgeting APR – Annual Progress Review COFOG – Classification of the Functions of Government DDCC – District Development Coordinating Committee FNDP – Fifth National Development Plan HIPC – Highly Indebted Poor Country HDI – Human Development Index MMD – Movement for Multi-Party Democracy MPSA – Ministries, Provinces and other Spending Agencies MTEF – Medium Term Expenditure Framework NCDP – National Commission for Development Planning NDCC – National Development Coordinating Committee NDP – National Development Plan NERP – National Economic Recovery Programme PDCC – Provincial Development Coordinating Committee PF – Patriotic Front PRSP – Poverty Reduction Strategy Paper PSRP – Public Service Reform Programme SAG – Sector Advisory Group SNDP – Sixth National Development Plan UNIP – United National Independence Party
1. Introduction This National Planning and Budgeting Policy is designed to guide the processes used to plan, implement, monitor and evaluate National Development Plans and Annual Budgets. Current Annual Budget/Medium Term Expenditure Framework (MTEF) preparation, implementation, monitoring and evaluation processes - and those for the formulation, implementation, monitoring and evaluation of National Development Plans - are not underpinned by a clear statement of policy. This has led to a number of shortcomings, including, inter alia,weak linkage between budgeting and development planning procedures; ambiguous and variable processes used in practice for preparing MTEFs, budgets and development plans; and no legally binding institutional structures in place to undertake budgeting and development planning procedures in a manner that ensures informed participation by relevant stakeholders and effective oversight by the National Assembly. Arising from these shortcomings, the socioeconomic development and public service delivery impact of public finance has been less than optimal. As a consequence, in 2009 Parliament enacted an amendment to the Constitution by the inclusion of a new Article - Article 118A - that requires that “Parliament shall enact budgeting and planning legislation which shall provide for matters that relate to the annual Budget and to medium and long-term development plans”. This policy document provides a clear statement of the principles, procedures, structures, timelines and responsibilities that are to be used in formulating, implementing, monitoring and evaluating annual budgets and National Development Plans so that the current shortcomings are addressed. It is thereby envisaged that the development and service delivery impact of public finance can be enhanced so that, alongside the goal of sustaining robust economic growth, Government can attain the wider development objectives of the nation, including: reducing poverty (especially in the rural areas); economic empowerment through employment creation and entrepreneurship development (especially for the burgeoning numbers of the youth); and reversing rising levels of inequality in the nation to ensure social justice.
The structure of the policy document is as follows: Section 1 covers the Introduction, Section 2, covers the situation analysis of the current planning and budgeting process. Section 3 presents the Vision. Section 4 provides the Rationale for the policy. Section 5 provides the guiding principles. Section 6 outlines the key policy objectives. Section 7 outlines the proposed new measures and systems of planning and budgeting. Section 8 outlines the implementation framework which includes; the institutional arrangements, legal, resource mobilization and financing and monitoring and evaluation framework. 2. Situation Analysis From Independence in October 1964 up to the early 1990s, Zambia produced a series of National Development Plans (NDPs) to guide national development efforts. However, a common criticism of these early development plans, especially after the collapse in international copper prices in the mid-1970s, was that they were not sufficiently based on realistic projections of the macroeconomic and fiscal circumstances that were likely to prevail during implementation. Further, their implementation processes themselves were (a) not adequately integrated into the annual budget process such that the actual allocation of public resources through the annual budget did not reflect the development programmes and priorities they contained and (b) plans were not flexible enough to adapt to changed circumstances during implementation and became increasingly outdated and irrelevant. As a
consequence, their development objectives were, at best, only partially achieved. In addition, from the 1970s, national development planning was undertaken in the context of a one party state with the Government adopting a socialist economic orientation. As a consequence, the processes and procedures for the formulation and implementation of development plans were overly centralized and lacked participation by citizens and sub-national governments. Thus, development programmes were not very responsive to the development and service delivery needs, as perceived by the communities and people who ostensibly were their main beneficiaries. The one party state ended in November 1991 with the re-introduction of multi-party politics with the new Government swiftly proceeding to liberalize the economy. As part of this economic liberalization process, development planning was allowed to lapse and, in the mid1990s, the National Commission for Development Planning (NCDP) - the institution that was mandated to spearhead national development planning and that was institutionally separate from the Ministry of Finance - was abolished. This led to the development of stand-alone sector investment programmes (e.g. Road Sector Investment Programme, Basic Education SubSector Investment Programme and the Agriculture Sector Investment Programme) which were not anchored around common national objectives and strategies. Alongside these planning developments, and in the absence of a central institution to coordinate national development, Cabinet Office issued Cabinet Office Circular No. 1 of 1995 which administratively established District, Provincial and National Development Coordinating Committees to facilitate coordinated development at national and sub-national levels. However, these structures were not established by law and the National Development Coordinating Committee has never met. In 2003, Government initiated a “first generation” of budget reforms when formulating the 2004 Budget. This entailed moving from incremental “line item budgeting”- where the focus was on the inputs to be bought by Ministries, Provinces and other Spending Agencies (MPSAs) - to Activity Based Budgeting (ABB) - where the focus shifted to what programmes and activities were to be supported by the spending plans of MPSAs. Further, the annual budget formation process began to be undertaken in a more strategic, medium-term context by producing a “Green Paper” prior to Budget Day containing a rolling three year Medium Term Expenditure Framework (MTEF). However, the implementation of these “first generation” of budget reforms has not been entirely successful. In particular, the specification of many programmes and their constituent activities by MPSAs in their expenditure estimates has not been very rigorous or strategic, and the outputs and outcomes to be achieved through these programmes has been ambiguous; not clearly linked to those in National Development Plans and not reported in budget documentation. Indeed, a criticism often heard is that incremental “line item” budgeting has been replaced with incremental Activity Based Budgeting with no significant mindset change to support a more results/performance orientation. Further, the MTEF has proved to be a poor predictor of eventual actual resource allocations in the two “outer” years of each MTEF, with work on each successive MTEF starting afresh with new base numbers which are significantly different from those published in earlier MTEFs without adequate public explanation for these wide divergences. This has undermined a major objective of the MTEF - to provide reliable forward estimates of resource allocations to MPSAs for them to be able to make realistic medium term public expenditure plans. Further, absent from these “first generation” of budget reforms were fiscal decentralization measures to facilitate the implementation of the National Decentralization Policy which was launched in 2004 and envisaged the devolution of a wide range of public services to local authorities. This shortcoming has meant that decisions concerning the allocation and use of
public finances has remained highly centralized which, in large measure, explains the geographic inequality in access to public services, with areas outside the national (and to a lesser extent provincial) capitals suffering as a result. In addition, the fiscal capacity of local authorities has been undermined over many years through the erosion of their revenue base. At the same time that the “first generation” budget reforms were being introduced, national development planning began to re-emerge in the form of the articulation of a long term Vision for the Nation in the form of the Vision 2030 (a long term aspirational document with the objective of making Zambia a prosperous middle income country by 2030) and a Poverty Reduction Strategy Paper (PRSP). The PRSP led to the preparation of a Transitional National Development Plan in 2004 and then the launch of the Fifth National Development Plan (FNDP) for the period 2006-10. During the preparation of the FNDP, Sector Advisory Groups (SAGs) were established to facilitate the channeling of advice from non-state actors into its formulation and, later, in monitoring its implementation. However, there has been a growing lack of understanding as to the functional responsibilities of these groups, with some non-state actors seeing their role as approving rather than advising. Further, some confusion has arisen due to the increasing proliferation of SAGs which has inevitably caused an overlapping of the areas of their coverage. In addition, the effectiveness of SAGs has been compromised by the perception that they are often donordriven. As a result, many SAGs now rarely meet and where they so they do so on an ad hoc basis. Despite an attempt being made during the formulation of the FNDP, to develop district development plans, they were not effectively implemented due to the lack of fiscal decentralization to facilitate this. The current NDP - the Sixth National Development Plan (SNDP) covering the period 2011-15 was launched in early 2011, less than nine months before the September 2011 General Elections which saw a change in the political party in power. This posed a challenge with regard to incorporating the new Government’s aspiration for spearheading national development. In spite of various attempts by Government to harmonize planning and budget processes, poor linkages still exist between the two. The national budgets are supposed to be informed by the National Development Plans. However, due to lack of a mechanism for effective alignment of the national budgets to the National Development Plans, programmes are sometimes financed outside national development plans without any laid down guidelines and procedures for selection and inclusion into the budget. Further, weaknesses exist in the clear identification, selection and appraisal system for National Development Plan programmes and projects. Further, despite the re-emergence of national development planning around the time that the “first generation” of budget reforms was being initiated a decade ago, its links to the annual budget and MTEF formulation processes remained ambiguous. This ambiguity was not helped by the various budgeting and development planning processes using different programme nomenclatures and classifications and following different timelines that are not harmonized and integrated with each other.
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Another major challenge in the budgeting process is the lack of comprehensive coverage of the General Government Sector in both the MTEF and the budget. In the current arrangement, the budgeting system does not include information from quasi-government institutions such as the budgets of local councils and other grant aided institutions that are only reflected to the extent of the grant received from the Treasury. Other income (if any) and their expenditures are not reflected in the “Yellow Book”. Further, certain statutory funds (e.g. the Land Development Fund) are not comprehensively covered in the “Yellow Book”. Finally, the credibility of the annual budget itself has been undermined for many years by wide in-year variations between appropriated amounts and actual expenditures incurred by Ministries, Provinces and other Spending Agencies (MPSAs).These significant variances are belatedly regularized by submitting large supplementary budgets to the National Assembly at the end of the financial year, in the last week of the National Assembly session. As a result there is inadequate National Assembly oversight over these supplementary expenditures. Indeed, the technical capacity of members of the National Assembly to form an independent view of the Executive’s initial and supplementary budget proposals and borrowing plans is limited such that their ability to “challenge” these proposals and plans - and thus provide effective oversight over the Executive - is undermined. These challenges in development planning and budget processes over the last decade has not led to satisfactory progress in addressing the significant development challenges facing the nation, especially the persistently high rural poverty rates, youth unemployment and the delivery of efficient municipal services to local communities. A worrying trend is that, despite rapid and sustained economic growth over the last decade, income and wealth inequality between Zambians has risen and not all Zambians are benefiting from this positive growth record. To address these problems in the nation’s budgeting and development planning processes, Parliament enacted an amendment to the Constitution in 20091, in which a new Article - Article 118A - was inserted that requires that: “Parliament shall enact budgeting and planning legislation which shall provide for matters that relate to the annual Budget and to medium and long-term development plans”. 3. The Vision A coordinated and integrated national development planning and budgeting system that is responsive, transparent, accountable and result oriented. 4. Rationale The Constitutional requirement to enact budget and planning legislation has provided an opportunity to critically review the current national planning and budgeting formulation, execution and monitoring and evaluation processes, timelines and responsibilities - and the links between the two. This review - and the identification of the shortcomings as set out in the Situation Analysis above - has underpinned the development of this National Planning and Budgeting Policy. The Policy is intended to strengthen accountability, oversight and participation mechanisms in national planning and budgeting, so enhancing the responsiveness, openness and resultsorientation of these processes. Through the implementation of this policy, a “second
Act No. 20 of 2009
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generation” of national planning and budgeting reforms will be initiated that will entail the re-engineering of budgeting and national planning processes through which public finances are better allocated and used so that they can more effectively facilitate the delivery of the economic empowerment, socio-economic development and service delivery needs of families and communities across Zambia. 5. Guiding Principles: The fundamental principles that will guide the national planning and budgeting processes include the following: a) Transparency and accountability, make stakeholders’ roles clear and provide timely financial and non-financial information regarding plans and budgets; b) Authoritativeness, specify the decision making authority of each arm of the State at each stage, and between each level of the planning and budgeting process; c) Periodicity, define timelines and milestones for planning and budgeting processes; d) Specificity, define the plan targets and ensure that all budgets are in line with the National Development Plans. e) Credibility, ensure that the approved plans and budgets are fully implemented; f) Subsidiarity, devolve functions, including fiscal responsibilities to the lowest possible level of government; g) Sustainability, ensure that national development does not compromise the wellbeing of future generations. h) Equity, ensure equitable distribution of resources for development. i) Comprehensiveness, ensure that national planning and budgeting systems cover all public resources. j) Responsiveness, ensure that national plans and budgets are responsive to the felt needs and desires of the citizenry. k) Results Based Management, emphasis on results as opposed to inputs in planning and budgeting process. 6. Objectives The objectives of the National Budget and Development Planning Policy, and the “second generation” of budget and development planning reforms they will give rise to: I. II. III. IV. V. VI. VII. Integrate national planning and annual budgeting processes with a greater results orientation. Strengthen synergies in the various planning processes. Facilitate more participative/decentralized development planning and budgeting processes. Align the national development planning cycle with the electoral cycle. Strengthen the National Assembly’s oversight over the allocation and use of public finances. Enhance Budget Credibility. Facilitate greater evidence-based decision making in development planning and budgeting.
VIII. 7. Measures These objectives of the National Budget and Development Planning Policy will be achieved by adopting the following strategies and will be implemented by the ministry responsible for:
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Integrate national planning and budgeting processes with a greater results orientation • Harmonize the programme classification used in development planning with that used in the annual budget/MTEF process. • Strengthen inter and intra institutional arrangements for linking planning and budgeting at all levels • Ensure that the timelines for the formulation of Plans, reviews and reports are integrated with and inform the formulation of budgets;
Facilitate more participative/decentralized development planning and budgeting processes. • Clearly and periodically specify the functions of each level of Government so as to unambiguously inform each level which functions it is required to plan and budget for; • Local councils with devolved functions are assigned appropriate revenue bases upon which to raise local revenues to cover a visible and significant portion of the cost of delivering devolved public functions so as to strengthen “downward” accountability to local residents and communities. • Local councils have the authority to approve their own budgets for functions devolved to them in the context of a strengthened accountability framework and clear policy guidelines and the requirement to provide basic minimum service delivery standards while operating within a well-defined hard budget constraint. • Legally establish budget and development planning coordinating structures at district, provincial and national levels to replace the existing administratively formed Development Coordinating Committees at the district, provincial and national levels and extend the scope of these structures to incorporate coordination of all the formulation, implementation, monitoring and evaluation of development plans, MTEFs and budgets at their appropriate level; • Strengthen existing structures for state and non-state actor participation in the planning and budgeting process with these structures aligned with the programme classification used in plans and budgets to avoid overlaps;
Align the national development planning cycle with the electoral cycle. • Develop each national plan after general elections to inform the first budget cycle to be implemented by the new political administration;
Empower the National Assembly with information to strengthen their oversight role in the planning, implementation, monitoring and evaluation and budgeting process • To require the Executive to table before National Assembly finance and non-financial information on a timely basis; • Review the institutional framework that governs the scrutiny of the executive’s budget proposals;
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Enhance Budget Credibility. • Ensure the plan informs the budgeting process • Ensure Supplementary expenditure is only incurred in line with Constitutional provisions.
Enhance the effective use of information/statistics in planning and budgeting decision making • Expand the scope of Activity Based Budgeting (ABB) to Output Based Budgeting (OBB), and progressively change the format of the yellow book in line with the changing aspirations of society. •Expand the accountability of Controlling Officers to include the achievement of plan/programme outputs to be produced through the introduction of performance contracts. • Strengthen capacity to undertake ex-ante appraisal of capital projects before they’re included in the plans and they are allocated in the annual budget and require that such appraisals guide the allocation of public resources earmarked for infrastructure development. • Integrate results from planning and budget reviews and evaluation processes into the preparation of Medium Term Expenditure Framework and annual budget and subsequent development plans at all levels of Government.
The above measures will be coordinated and supervised by the ministry responsible for finance in close collaboration with cabinet office. 8. Integrated National Planning and Budgeting Process National Planning Process In the run up to general elections every five years, each Province and District will update its economic and social assessment in readiness for the next development planning cycle 2. After elections, Provinces and Districts will be informed of the functions they will be responsible for during the new administration’s term of office, together with indicative ceilings, policy guidelines and minimum service delivery standards for these functions. In the first quarter of each year each district will submit its draft District Development Plan, to the its Province and each Province will submit its draft Provincial Development Plan to the Ministry of Finance, incorporating the draft district development plans submitted to it. During the same period, Ministerial Permanent Secretaries, after consulting relevant stakeholders, will submit to the Ministry of Finance, a draft Development Plan for functions that remain their responsibility. In the second quarter, a draft National Development Plan, in the form of a green paper, will be tabled before the National Assembly. This will be a five year policy and strategy document, with costed sector action plans that incorporate the plans of districts and provinces for functions that are devolved /deconcentrated to them and drafted in the context of the resource ceilings, policy frameworks and service standards provided by Central Government. The programmes to be used in subsequent Medium Term Expenditure Frameworks and Annual
These updated assessments may also be used by district councils to reassess/renew their spatial plans/IDPs.
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Budgets will be fully aligned to the programme classification in the National Development Plan. Each National Development Plan will show how it contributes to the Vision goals; build on the achievements made/lessons learnt from previous Development Plans; be based on a realistic macro-economic and fiscal frameworks; mainstream cross-cutting issues; ensure equitable allocation of resources and have clear output targets and outcome/impact objectives. Major capital projects and recurrent programmes will undergo appraisals and/or evaluations before inclusion in the Plan. The Plan will be then be finalized and launched by the President. The final Plan will be submitted to the National Assembly as part of the documentation used to support the first budget fully prepared by the new administration. Once the National Development Plan is launched, draft Provincial and District Development Plans will be finalized as appropriate and, thereafter, each Ministry, Province and District Council will prepare a five year institutional strategic plan showing how it will contribute to the achievement of the development targets as set out in the appropriate development plan. These institutional strategic plans will then form the basis of the Medium Term Expenditure Framework (MTEF) and annual budget estimates of each Ministry, Provincial Administration and Council. Annual/Mid-term Reviews of National Plans and Budgets In the second quarter, an annual review of the National Development Plan - and the annual budget drawn from it - will be prepared and tabled before the National Assembly. Each review will specify any adjustments that may be necessary to projects and programmes and any change in inter and intra-sectoral priorities in the Plan as a result of economic, policy or other developments that were previously unforeseen. In the fourth year of implementing the Plan a detailed mid-term review of the Plan over the first three years of its implementation will be prepared and tabled, together with any adjustments that may be necessary in order to meet the overall development targets of the Plan by the end of the following year. MTEF/Annual Budget Formulation The annual (or mid-term) review will be used to prepare the draft Medium Term Financial Framework (MTEF) to be submitted to the National Assembly as a “Green Paper” at the beginning of the third quarter of each year3. As part of the preparation of the Green Paper each Ministry and Province will submit a Budget Framework Paper to the Finance Ministry, detailing its revenue and expenditure proposals for the forthcoming three years, made in the context of the analysis provided to the National Assembly in the Annual or Mid Term Review of the National Development Plan. By the end of the first quarter, any non-state actor may make expenditure or revenue proposals to the Ministry of Finance. In addition to the MTEF - which will show the three year forward allocations of public finance to MPSAs - the Green Paper, submitted to the National Assembly by beginning of the third quarter, will contain a review and projections of the main socio-economic parameters. Details of all new and on-going major capital projects and major recurrent programmes will be provided and how these relate to the priorities as set out in the National Development Plan. The assignment of tax and non-tax revenue sources between Central Government and District Councils will be clearly stated together with the allocation of grants to District Councils, by
When general elections are held and a Green Paper cannot be laid before the National Assembly in July (as it will be dissolved), it will be laid before the National Assembly within 30 days of the swearing in of the new President.
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type of grant, showing the basis upon which these allocations have been made across District Councils. Revenue proposed in the Green Paper to be raised through domestic or external borrowing will not exceed the total expenditure provided for investment4.The Green Paper will contain information about the total indebtedness of the State (including information about the performance of past loans and how they relate to Development Plan targets and objectives); contingent liabilities, tax expenditures, the performance of Extra Budgetary Funds, the utilization of the Contingency Fund. Progressively, the Green Paper will contain information on the net financial position of the parastatal sector, local Governments, and Grant Aided Institutions. Further, the total financial obligation arising as a result of court judgments and arbitral awards successfully brought against the State by non-state actors will be reported. Approval of the Budget After the Minister responsible for Finance has presented the Budget, the estimates of revenue and expenditure and their respective Ministerial Policy Statements, will be sent to the Budget (Estimates) Committee. In addition, each Sessional Committee will receive that part of the estimates of revenue and expenditure and the respective Ministerial Policy Statements that fall within its jurisdiction. Each Sessional Committee will scrutinize the estimates submitted to it and send recommendations for any amendments to the Budget (Estimates) Committee in the last quarter of the year. The Budget (Estimates) Committee will then review these reports and send recommendations on the full estimates of revenue and expenditure to the Speaker. After receiving the report from the Budget (Estimates) Committee, the National Assembly will debate the complete estimates of revenue and expenditure and may amend them. However, when making such amendments, the National Assembly must compensate any increase in the allocation to a particular Head by either a reduction in the allocation given to another Head or by a fully costed proposal to raise additional revenue, or by a combination of these two measures. Further, the National Assembly may not increase the level of public borrowing to finance the proposed expenditure, although it may specify where reductions in expenditures can be made (or where additional revenues can be generated) if the House proposes a reduction in public borrowing. Further, when amending the proposed budget estimates for a particular Head, the National Assembly may, after receiving advice from the Controlling Officer responsible for that Head on the practical implications of doing so, including the implications for achieving NDP output targets, reallocate resources within a Head from one programme to another or from one project to another on a quid pro quo basis. The National Assembly shall approve the estimates of revenue, financing and expenditure for the forthcoming financial year, with the expenditure estimates approved by Head and Department. In an election year, when the estimates of revenue and expenditure for the following financial year are presented to the National Assembly as stipulated by the Constitution, the National Assembly will carry out the steps outlined above by the end of the first quarter of the financial year to which it relates. By the end of each year, following the approval of the Budget and the enactment of an Appropriation Act, a White Paper will be tabled before the National Assembly, setting out the final Medium Term Expenditure and Budget Plan for the next three years.
Public borrowing will also be also restricted by observing the rule that total public sector indebtedness does not exceed 30 percent of Gross National Product, unless prior approval of the National Assembly is obtained.
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9. Implementation Framework for the National Budget and Development Planning Policy The institutional arrangements, legal framework, resource mobilization and monitoring and evaluation modalities for implementing this National Budget and Development Planning Policy are set out below: [A] Institutional Arrangements The ministry responsible for finance will implement the National Planning and Budgeting policy and will facilitate the putting in place of enabling legislation for smooth implementation of the policy. This will be achieved in part by legal recognition of coordinating and advisory committees at the various levels of government to facilitate the structured participation of nonstate actors in the development planning and budgeting processes. The institutional framework that governs the legislature’s scrutiny of the executive’s budget proposals will be reviewed to enhance the oversight function of the National Assembly and allow it to more effectively undertake independent fiscal policy and budget analysis. The development of this National Planning and Budgeting policy is based on a more decentralized governance architecture as envisaged under the National Decentralization Policy. [B] Legal Framework The policy will be implemented through the enactment of Budget and Development Planning legislation in accordance with Article 118A of the Constitution. As the implementation of these “second generation” budget and development planning reforms will require significant process re-engineering, the establishment of new institutions and coordinating structures and capacity development at various levels of Government, the commencement of the legislation after its enactment will be phased. Consequential amendments to the Public Finance Act of 2004, the Local Government Act (as amended) and other relevant legislation will be undertaken to ensure that there are no statutory inconsistencies. [C] Resource Mobilization and Financing Government will mobilize resources through the annual budget to progressively effect the process re-engineering, institutional establishment and capacity development activities that will be required to be undertaken to effect the National Budget and Development Planning Policy in time for the formulation for the subsequent Development Plans, MTEFs and budgets. [D] Monitoring and Evaluation Cabinet Office will monitor the achievement of the overall Policy, while the Ministry responsible for Finance will monitor the Implementation of the Policy. The Monitoring and Evaluation system which includes the Government Wide (G-Wide) Monitoring and Evaluation Framework approach articulated in the National Plan, emphasizes management using development results (or Results Based Management). The G-Wide M&E approach articulates the structures, tools, strategies and indicators that are required to effectively monitor and evaluate national programmes and projects in order to improve public management and accountability and facilitate internal learning.
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