Public Finance Management Reform The Georgian Experience 2008 ICGFM Winter Conference December, 2008

Introductions Speakers Papuna Petriashvili, Deputy Minister Budget Department Georgian Ministry of Finance Liana Skhirtladze MTEF Advisor Georgian Minister of Finance Moderator Tim Grewe, Resident Advisor US Department of Treasury Office of Technical Assistance

Speakers

Papuna Petriashvili, Deputy Minister

Budget Department

Georgian Ministry of Finance

Liana Skhirtladze

MTEF Advisor

Georgian Minister of Finance

Moderator

Tim Grewe, Resident Advisor

US Department of Treasury

Office of Technical Assistance

Presentation Overview History of Public Financial Reforms (PFR) Objectives of PFR Primary Elements Public Financial Management Vision Strategy Medium Term Expenditure Framework

History of Public Financial Reforms (PFR)

Objectives of PFR

Primary Elements

Public Financial Management Vision Strategy

Medium Term Expenditure Framework

Reasons PFMR Initiated in Georgia Develop Government Strategic Directions, make priorities more sophisticated Make a reasonable forecast on the bases of good macroeconomic parameters Develop united e-Treasury system Tax reform Improve revenue planning Local budget system reform Develop Integrated Information System

Develop Government Strategic Directions, make priorities more sophisticated

Make a reasonable forecast on the bases of good macroeconomic parameters

Develop united e-Treasury system

Tax reform

Improve revenue planning

Local budget system reform

Develop Integrated Information System

Reasons PFMR Initiated in Georgia Anticorruption activities to improve State Finance Management and increase transparency Conformance to International Standards Donor coordination and using the international financial assistance money more effectively and efficiently Implement Neighbor policy and NATO entry conditions (international liabilities) Improve public finances and services

Anticorruption activities to improve State Finance Management and increase transparency

Conformance to International Standards

Donor coordination and using the international financial assistance money more effectively and efficiently

Implement Neighbor policy and NATO entry conditions (international liabilities)

Improve public finances and services

PFM System Goals Maintain fiscal discipline, macro-economic stability and budget predictability. Promote a strategic approach in allocating resources to priorities. Ensure the effective and efficient use of resources. Accountability in the use of public resources.

Maintain fiscal discipline, macro-economic stability and budget predictability.

Promote a strategic approach in allocating resources to priorities.

Ensure the effective and efficient use of resources.

Accountability in the use of public resources.

PFRM Components National Priorities Government Strategy Basic Data & Direction Medium Term Expenditure Framework Annual Budget Sector Strategies

Budget Planning Reform Establish program budgeting system. Improve budgeting and reporting for PLE’s. Improve capital budgeting Extend reforms on local government level Improved public involvement and information

Establish program budgeting system.

Improve budgeting and reporting for PLE’s.

Improve capital budgeting

Extend reforms on local government level

Improved public involvement and information

Resource Management Reforms Continued Treasury Reforms E-treasury functional Design prepared E-treasury System technical specification prepared Financial Module and Software Licenses Procured Financial Module customized Security system designed and implemented Pilot phase launched

Continued Treasury Reforms

E-treasury functional Design prepared

E-treasury System technical specification prepared

Financial Module and Software Licenses Procured

Financial Module customized

Security system designed and implemented

Pilot phase launched

Resource Management Reforms Consolidating and further improving revenue management : Complete on-going reforms including simplification of customs and tax codes. Strengthen tax and customs administration. Improve management of tax arrears Implement risk based system for audit identification Improve oversight of MOF budget execution Improve capital asset management

Consolidating and further improving revenue management :

Complete on-going reforms including simplification of customs and tax codes.

Strengthen tax and customs administration.

Improve management of tax arrears

Implement risk based system for audit identification

Improve oversight of MOF budget execution

Improve capital asset management

Macroeconomic Indicators

Strategic Budgeting Reform Actions Budget reform goals Improve budget and reflect comments of Independent Public Expenditure Financial Accounting (PEFA) Assessment Simplify the budget process Increase linkage between budget documents Strengthen management and improve expenditure policy Improve budget process coordination Increase transparency and availability to the public

Budget reform goals

Improve budget and reflect comments of Independent Public Expenditure Financial Accounting (PEFA) Assessment

Simplify the budget process

Increase linkage between budget documents

Strengthen management and improve expenditure policy

Improve budget process coordination

Increase transparency and availability to the public

Strategic Budgeting Reform Actions Improve legislation base Integrarte MTEF into Budget process and institutionalize it Introduce medium term thinking and medium term action plan on the state and local level Link state policy, planning and budget processes in the medium term Reallocate resources to meet government priorities Basic Data and Direction Document (BDD) State Budget Forms State Budget Format

Improve legislation base

Integrarte MTEF into Budget process and institutionalize it

Introduce medium term thinking and medium term action plan on the state and local level

Link state policy, planning and budget processes in the medium term

Reallocate resources to meet government priorities

Basic Data and Direction Document (BDD)

State Budget Forms

State Budget Format

MTEF approach in annual budgeting Forecast Budget Budget Forecast Forecast Budget T T +1 T +2 T+1 T +2 T +3 T +4 T +5 MTEF and Annual Budget MTEF should be closely linked to the technical and institutional processes of the budget preparation

Budget Process Reforms Adoption of the regulation by the Govenment of Georgia Complete involvement of spending agencies on all levels Medium term action plan – a bases for developing the BDD document Fully integrate MTEF into budget process and format. Improve linkages to BDD and sector priorities Comprehensive goals Performance indicators GFS 2001 at all levels Revised budget legislation Improved intergovernmental finance systems (Formula)

Adoption of the regulation by the Govenment of Georgia

Complete involvement of spending agencies on all levels

Medium term action plan – a bases for developing the BDD document

Fully integrate MTEF into budget process and format.

Improve linkages to BDD and sector priorities

Comprehensive goals

Performance indicators

GFS 2001 at all levels

Revised budget legislation

Improved intergovernmental finance systems (Formula)

Budget Planning Reforms Improved and simplified budget systems: Circular Execution Strengthen capacity of Parliament to review budget proposals. Improve capital investment project planning and budgeting.

Improved and simplified budget systems:

Circular

Execution

Strengthen capacity of Parliament to review budget proposals.

Improve capital investment project planning and budgeting.

Lessons Learned PFRM is an ongoing, multi-year process Multi-year systems provide stability Political transition Economic swings Conflicts Quality of systems improve over time Political and Executive support required for success Danger of “over-committing” to reforms

PFRM is an ongoing, multi-year process

Multi-year systems provide stability

Political transition

Economic swings

Conflicts

Quality of systems improve over time

Political and Executive support required for success

Danger of “over-committing” to reforms

What’s Next for PFRM Update plan based upon : Post conflict needs PEFA Report Focus for next three year: PFMIS Implementation Improved budget system law Improved annual budget law Implement MTF in local governments Program budgeting system Capital budgeting systems

Update plan based upon :

Post conflict needs

PEFA Report

Focus for next three year:

PFMIS Implementation

Improved budget system law

Improved annual budget law

Implement MTF in local governments

Program budgeting system

Capital budgeting systems

Questions and Comments