The medium-term budgetary framework (MTBF) reform project in Pakistan has successfully strengthened budgeting across the entire Federal Government.
In 2012, an independent review by DFID concluded that the reforms had successfully modernised the budgeting system and that important additional achievements had been made, particularly in relation to budget transparency, that were not envisaged in the original project design.
The MTBF reforms were implemented with our technical assistance between 2006 and 2012. The reforms include two major components:
- a strategic ‘top-down’ component which involves the preparation of a medium term fiscal framework;
- a budget strategy paper;
- expenditure ceilings, and the necessary technical underpinnings; and
- the introduction of programmes and a ‘bottom-up’ system of budgeting in line ministries on the basis of outputs and outcomes.
The MTBF has strengthened policy guidance over budgetary allocations and has changed the way that line ministries consider, use and present information related to budgets, outputs and outcomes.
This provides the basis for the move towards greater accountability for results and achievement of national economic development and poverty reduction goals.
Until recently, Pakistan’s budgetary system was incremental. The budget was based on the previous year’s budget without careful attention to the priorities of Government or the achievement of service delivery outcomes.
The shortcomings of this traditional system of budgeting included:
- lack of a clear link to the policies and strategies of government and the actual budget preparation process, driven in part by lack of a significant role for line ministries in the budget process;
- the extensive use of cuts in proposed budgets late in the preparation process, which meant that approved budgets bore little relation to budget proposals prepared by the ministry; and
- inadequate predictability in the budgetary process, which meant that ministries were unable to undertake proper medium term planning for delivery of their services.
Budget reforms were recognised by the Government as a key element for supporting poverty reduction. DFID began working with the Government in 2001 to support the move towards an MTBF in which budgeting processes are structured around clear, medium-term strategies for achieving measurable outcomes.
We were brought in to manage the implementation of the MTBF from 2006, developing the reforms piloted during initial exploratory phases. The project focused on three key elements: improving fiscal discipline at the top levels of government, aligning expenditure with national priorities and supporting budgetary planning based on outputs and outcomes.
We led a team of specialist advisers, based in the Federal Ministry of Finance, providing technical assistance and capacity building support for the roll-out of the MTBF.
The team developed a work plan based around the design and piloting of budget reforms and extensive stakeholder consultation involving discussions with key staff in central government institutions, federal line ministries and agencies.
The following key features of our approach contributed to the successful introduction of the MTBF reforms:
- The emergence of a team of reformers at the top of the Ministry of Finance: A key task of the external advisory team was to engage with and support the priorities of this internal reform team.
- The delivery of technically useful materials to the Finance Ministry: An important role was the delivery of evidently useful products quickly when required.
- The increasingly prominent position taken by more senior local consultants on the MTBF team, particularly as reforms were rolled out from 2009 onwards: This played an important role in changing the perception of the MTBF from an external project to a domestically-driven reform process.
- A key feature of our support was the contribution of a small team of top advisors in the field of budget reforms: This team was able to gain the attention of senior policymakers and enable a proper discussion of reform concepts at the top of Government.
For the Government of Pakistan, the MTBF delivered:
- More realistic budgets: The tools and processes now exist to enable the Ministry of Finance to analyse fiscal scenarios and articulate fiscal policy objectives consistently and transparently
- Better quality fiscal and macroeconomic information reaching Cabinet: The budget strategy process provides a mechanism for improved analysis of budgetary options and better engagement by Cabinet
- A consistent and integrated budget process: Prior to the MTBF, recurrent and development budgets were prepared separately. Recurrent and development budgets are now prepared and considered jointly for each ministry on the basis of outputs and outcomes.
- The basis to move towards greater accountability for results: The establishment of OBB has changed the way that line ministries consider, use and present information related to budgets, outputs and outcomes.
- Improved budget transparency and accessibility: The ‘Green Book’, in which MTBF information is presented, is tabled before Parliament with the annual budget documents and is widely commented on in the media.
As a result:
- Political involvement in preparation of the budget improved, with the introduction of the MTBF: The clarity and comprehensiveness of political guidance on annual budget submissions scored ‘A’ in the 2012 PEFA PFM assessment, compared to a ‘C’ in 2009.
- Pakistan’s score in the Open Budget Survey improved significantly: As a result, Pakistan’s ranking in the Open Budget Index improved from 56th to 29th - out of a total of 98 countries covered in the 2012 survey.