Chapter Three: Methodology and

Stages of Planning
Chapter contents:
9Basic Data in Planning
9Methodology of planning
9Stages of Economic planning
9The process of Plan Formulation and
Adoption
9Plan Implementation
9Plan monitoring and evaluation
Abraham S. 1
 Ch.3 (cont…)
3.1. Basic Data in Planning
Data: are numbers(figures) or words (facts) capable of
yielding information about people, things, events,
concepts, organizations, countries, etc.

In respect to planning, data are required for three main

purposes:
9 To identify the existing development needs and
problems
9 To identify and evaluate alternative policies and
courses of action
9 To provide feedback about the impact of these
courses of actions during or after their
implementation. by Abraham S. 2
 Ch.3 (cont…)
Types of data required for planning are of 3 types:

a) Data which provide information about

distribution of a group of values & spatial
distributions as well.
b) Data concerning relationships between the
different factors which are linked plans.
c) Development indicators: that is development
data which indicate the degree or the level of
development attained in respect to different
variables in particular time and area or among
a particular group of people.

by Abraham S. 3
 Ch.3 (cont…)
3.2. Methodology of planning:
• The planner is gone through the following steps
in economic planning:
(a)Collecting information: The most important
aspect of economic planning is the collection of
economic data.
9 The data are not only comprised economic data,
but they also cover the demographical,
geographical, and political data.
9 The planner also considers non-quantitative
data for economic planning.
9 The planner or the team of planners must have
an enough knowledge regarding the fields like
sociology, religion, politics and ethics in
addition to economics. by Abraham S. 4
 ch.3 (cont…)
b). Deciding nature and duration of the plan:
Once the planning authority gets the
knowledge in respect of the economy on the
basis of necessary statistics, the next step is to
determine the nature and size of the plan.
9 The planner has to decide between the
planning on micro-basis and planning on
macro-basis, functional or structural,
centralized or decentralized, etc.
9 Again it is to be decided that whether the
planning will be on short-term basis, medium
term, or long term. In most of the countries,
the medium term plans are advocated.
by Abraham S. 5
 Ch.3 (cont…)
(c) Setting the objectives: After the nature and the
duration of plan, the next issue is of setting the
objectives.
9 It is an important task before the planner to
decide regarding the social and economic
objectives which will have to be attained in the
specified period of the plan.
9 Most of the objectives or goals of the plan are
concerned with the attainment of higher growth
rate of GNP, reduction of unemployment, removal
of regional disparities, removal of illiteracy,
development of agriculture and industrial sectors,
etc.
9 After identifying such objectives, planner arranges
these objectives in order of their importance to
the society and the economy as a whole.
9 objectives should be as few as possible.
by Abraham S. 6
 Ch.3 (cont…)
the next step is to quantify the objectives into
targets. Targets act as guide–posts for the
preparation of effective policy instruments.
9 Targets are important to determine the required
amounts of raw material, manpower, funds, and
other resources for the execution of the projects
provided in the plan.
9 The development of plan may lay down not only
targets but also forecasts and projections. A
target must be accompanied by policies and
instruments. With out policies and instruments,
the target become simply a forecast.
To recap,
Targets – achieving the fixed value or level.
Forecast _ contain probability or likelihood to occur.

by Abraham S. 7
 Ch. 3 (Cont…)
d) Determination of growth rate: It is about to
determine the growth rate during the plan period.
i.e., at what rate the economy will grow during this
period.
9 The economists agree that the growth rate of the
economy should be one which could at least maintain
the per capita income of the country. This would be
possible if the growth rate of the economy or growth
rate of GNP and growth rate of the population are
equal.
9 Though this growth rate is the least recommended, the
planner will opt for that growth rate which is greater
than the population rate.

by Abraham S. 8
 Ch.3 (cont…)
™ For example, if Ethiopia wants to maintain its
existing per capita income while population is
growing at the rate of 3% p.a., then the required
GNP growth rate should not be less than 3%.
If we want to grow GNP by 3%, NI should grow by
6%. If the capital output ratio (COR) is 1:3, then
we will have to invest 18% of GNP.
ƒ While determining the growth rate, the planner
must keep in view the growth rate of other
neighboring or developing countries like
Botswana, Mauritius, India, China, Indonesia, etc.

Note: COR shows how much of capital is required for

how much of output. Or broadly, it tells how much
of investment is required to produce a certain level
of consumption goods. by Abraham S. 9
 Ch.3 (cont…)
e) Financial resources of the plan: The economic
planner is aimed at utilizing the resources of the
country in such a way that the pre-determined
objectives are attained.
9 The real resources of a country consist of manpower,
natural resources, technological advancement,
infrastructure, good governance, entrepreneurial skills,
etc.
9 The planner also has to consider the various optional
external resources (foreign aid and assistance, foreign
grants, foreign direct investment, and foreign
borrowings from various IFIs and rich countries) in case
the internal resources are short to fulfill the planning
requirements.

by Abraham S. 10
 Ch.3(cont…)

f) Sectoral allocation or determination of priorities:

since the resources at the disposal of a country are
always short of the requirements, a plan is aimed at
utilizing them in such a way that the maximum social
benefit could be attained.
9 Accordingly, the planner has to decide which project
be taken-up and which project be postponed. He has
to prepare a schedule on the basis of relative
importance of projects. Then a choice has to be made
regarding allocation of resources amongst d/t uses.
9 The planner has to decide between industrial or
agricultural sector dev’t, private or public sector,
labour-intensive or capital-intensive technology, etc.
To settle the issue of ‘choice of priorities’ amongst
different alternatives, the planners have given the
concept of ‘investment criteria’.
by Abraham S. 11
 Ch.3(cont…)
g) Formulation of economic policies: In some
economies, the role of planners in planning
methodology is not just confined to preparation of
schemes and projects, they also have to devise
economic policies which could provide a favorable
atmosphere for the operation of the plan.
9 Accordingly, economic policies play an important role
in economic planning, they provide fuel to the engine
of economic development.
The types of economic policies include: budgetary
policy, Tax policy, Credit policy, Foreign trade and
foreign exchange policy, Tariff policy, Price policy,
Wage policy, Manpower policy, Immigration policy,
Privatization and deregulation policy, etc.

by Abraham S. 12
 Ch.3(cont…)
h) Plan execution: The last step is plan execution. For
effective implementation of plan, following
conditions are the pre-requisites:
9 the government should be stable, honest,
sincere and constructive
9 the administrative system must be efficient
& free of corruption
9 maintenance of law and order situation,
9 equal participation of private and public
sectors in economic development,
9 readily availability and computerized
maintenance of government records,
financial statements and cost statements,
9 vigilant and constructive opposition, etc.
by Abraham S. 13
 3.3 Stages of Economic planning

™ There are four well-defined stages through which a

plan has to pass for its successful workings.
• Formulation: Can be done by ministry of planning or
planning commission .In Ethiopia, national plan is
prepared by MOFED.
• Adoption: in Ethiopia, it is the function of either the
parliament or prime minister.
• Execution: is the responsibly of various government
departments.
• Supervision: calls for independent body of experts.

by Abraham S. 14
 3.4. The process of Plan Formulation and Adoption
A comprehensive system for development planning and
budgeting which involves a continuous cyclical process
is based on the following points:
a) Appraisal of the current state of affairs.
b) Assessment of future directions for progress
c) Preliminary for formulation of objectives and
estimation of variable funds
d) Consideration of alternative courses of actions
e) Specification of objectives and sub-objectives
f) Identification of alternative programs, projects, policies
and strategies
g) Derivation of evaluation criteria
h) Appreciation of evaluation criteria
i) Determination of actions plans and budget
by Abraham S. 15
 The main steps in the process of planning are:
Establish
Decision original
to adopt framework
a plan for
planning

Monitoring Specify
and plan
evaluation goals

Collect
and
Impleme
analysis
ntation
data

Identify
Select an
preferred alternativ
action Appraise e course
alternativ of actions
e courses 16
by Abraham S.
of action
 Cont’d

• A well prepared plan document is characterized as:

i) be comprehensive- include all or nearly all aspects of the

economy (sector). Wider scope.
ii) Include a review of past economic performance
iii) Specify economic objectives in to targets
- identify aims/goals into fixed value (level)
iv) Translate objectives into targets
v) Translate the strategy into policies
vi) Set out programmes of capital spending
vii) Provide a range of forecasts about economic
performance
viii) Focus on the medium –term but may incorporate both
the short–term and long- term plan.

by Abraham S. 17
 3.5. Plan Implementation
• Implementation involves mobilizing and
organizing resources and activities.
• Implementation can be hampered by:
9 lack of coordination
9 natural disasters
9 shortage of foreign exchange earnings
9 Sudden political changes
9 etc.

by Abraham S. 18
 3.6. Plan monitoring and evaluation
™Monitoring: involves collecting information about
what actually happen during the implementation
process in order to find out how the inputs have
being used , how activities have being processed ,
how deadlines have being met and generally whether
or not things are working out .
• It is real mechanism for correcting deviations that
may have arisen between what was intended to be
and what has been actually done.
™ Evaluation means an appraisal of plan and process
which is undertaken either at periodic intervals,
during the implementation stage or after the
implementation (ex-post evaluation).

by Abraham S. 19
 Cont’d

• Various groups of factors may be interested in

evaluation exercise such as donor or lending agencies
in addition to government.
™ The major areas of focus of evaluation are:
a) A review of performances
b) Impact analysis
c) Appropriateness assessment: how the program
components equate with the leads and priorities of
households in the target population.
d) An institutional evaluation: including “grass-roots”
as well as higher level institution in the provision of
services
-further it ensures the sustainability of organization
and its rules.
by Abraham S. 20