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Presentation, Katja Lautar, joint SIGMA ReSPA PIFC regional conference, Skopje, 19 September 2019

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Presentation on ensuring alignment between policy planning and financial planning: experience from Slovenia, Katja Lautar, SIGMA expert, joint SIGMA-ReSPA PIFC regional conference for EU candidate countries and potential candidates, Skopje, 19 September 2019.

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Presentation, Katja Lautar, joint SIGMA ReSPA PIFC regional conference, Skopje, 19 September 2019

  1. 1. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU © OECD AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU 5th Regional Conference on Public Internal Financial Control Ensuring Alignment between Policy Planning and Financial Planning: Experience from Slovenia Katja Lautar Head of Office for fiscal and economic policy Ministry of Finance of Slovenia Skopje 19 September 2019
  2. 2. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU © OECD AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Content: Strategic planning Budget / MTBF RIA Discussing the Slovenian (gradual) experience in establishing processes and systems to ensure alignment between strategic planning, individual policy making and financial/budget planning.
  3. 3. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU • Area: 20,273 sq. km • Capital: Ljubljana • Population of 2 million • EU member state - May 2004 • Euro area - January 2007 • Schengen Space - December 2007 • OECD member (May 2010) About Slovenia: Key Statistics and Indicators 2019 Source: UMAR and *SORS, realease Source: SORS, *ESA methodology Source: AJPES, SORS 3 Real growth (%) 2016 2017 2018* 2019f 2020f Gross domestic product 3.1 4.9 4.5 3.4 3.1 Exports 6.4 10.7 7.2 5.1 5.3 Imports 6.6 10.3 7.7 6.0 5.8 Private consumption 3.9 1.9 2.2 2.9 2.4 Gross fixed capital formation -3.7 10.7 10.6 7.7 7.0 Government consumption 2.7 0.5 2.6 2.2 1.9 Annual growth (%) 2016 2017 2018 2019f 2020f Employment according to the SNA 1,8 2,9 3,0 2,0 1,0 Unemployment rate (ILO in %) 8,0 6,6 5,1 4,3 3,9 Wage per employee (real, gross) 2,0 1,3 1,6 3,3 3,5 Productivity ( GDP per employee) 1,3 1,9 1,5 1,4 2,1 Unit labour costs (nominal)* 1,8 1,3 2,5 3,7 3,4 Inflation (end of year) 0,5 1,7 1,4 2,2 2,2 % of GDP 2016 2017 2018 2019f 2020f General government balance* -1.9 0.0 0.7 0.9 1.0 General government debt* 78.7 74.1 70.1 65.4 61.3 Dec_2016 Dec_2017 Dec_2018 Jan _2019 May_2019 Total employment 824.485 856.201 887.170 881.245 896.129 Public sector employees (total) 235.841 236.676 240.035 239.365 241.567 % of public sector in total employment 28,6 27,6 27,1 27,2 27,0
  4. 4. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Slovenia's Development Strategy 2030 Vision, 5 strategic orientations, 12 goals WHAT about development priorities, investment priorities, institutional setup and structural changes? Programme of Development Priorities and Policies National Reform Programme Stability Programme = Fiscal strategy within 4y MTBF State budget, Municipal budgets, Health Insurance fund, Pension and Disability fund → GG or S.13 Operational programmes Development Report (IMAD) Macroeconomic forecast (IMAD) Country specific recommendations - CSR Stability and Growth Pact EU 2020 Slovenian strategic planning in The EU framework (PF aspect)
  5. 5. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Slovenia's development planning model
  6. 6. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Main components of the policy-making and strategic planning systems (institutions) The Government shall propose to the NA the adoption of laws, the national budget, national programmes and other general legal acts determining the core and long-term political guidelines for each of the areas within the competence of the state. Gov. shall direct the state administration through the ministeries (13 LM +2 without portfolio: one is GODEUCP). Decree on development planning and budget preparation Alignment of strategic planning with budget preparation: GODEUCP & MoF RULES OF PROCEDURE of the Government of the Republic of Slovenia Gov. Office for Legislation General Secretariat 6
  7. 7. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Slovenia case: Who does what ? • Government annual plan: laws, regulations, strategies from LM (monthly report), MPA role (no quality control) • Ministry of Finance: Budget Directorate + Fiscal unit Office: fiscal forecast, budget preparation, structural balance (fiscal rule), proposal of economic policy and structural measures, drafting legal documents, drafting of strategic documents (NRP, SP, memorandum for state budget) • IMAD: macroeconomic forecasts, impact of measures, potential GDP, ex post assessment of fiscal policy, drafting macro chapter in PS, NRP and memorandum • Fiscal Council: Ex ante & ex post assessment of fiscal policy • Line ministries: sectorial measures and legal proposals BUT also strategies, pre-conditionalities for EU funds (+200) • GODECP no clear role now days for development : SDS + SDG…
  8. 8. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Year 3Year 0 Year 1 Total expenditure Debt servicing + other legal expenditure Limitation of resources (to be distributed between the sectors /ministries/strategies/ programmes) Financing the existing programmes Total discretionary expenditure Efficiency savings Basic allocation Additional funds for financing new programmes Conceptual framework of the medium- term planning – room for manouver for (new) programmes, measures? Summarised from the IMF
  9. 9. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Connecting strategies and budgeting (↓↑ approach) Measures, structural policies and its impacts, financial effects Strategic phase : SDS, PDPP, programmes Decision phase: MTBF State budget production phase (1/2 of GG) Legislative phase (parliament approval) Implementation & execution in year t RIA - function Evaluation, PBB Full aligement
  10. 10. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Medium-term programme framework & strategic planning alignment trough assessment Macroeconomic estimates Fiscal estimates/envelope Expenditure limits on the policy level PBB & programme classification are useful tool Sectoral requirements ↑ „wish“ or reality Technical/finance aspect - MoF Policy-related aspect- LM + GODEUCP (role?) Quality estimates Forecasts vs. targets, impact of measures/investments Income, debt, expenditure (1), impact evaluations, multipliers policy based Fiscal policy, debt management, public expenditure policy over growth component? Room for new „costs“, new impacts TW target from strategy/programme Key amendments to policies – structural changes – new/better indicators Expenditure trend, spending reviews, assessment of policies Assessment and evaluation of policies and programmes, investment planning Sectoral strategies, investment policy – obligatory to asses „money point of view“ + all new ideas/prescribed targets BUT.. A structured, regulated process: a combination from the policy-related aspect and from the technical aspect
  11. 11. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Instructions for the Implementation of the Rules of Procedure of the Government of the RS • Currently, the General Secretariat checks RIAs and regulatory management tools + necessary only MoF opinion 11 LAW ASSESSMENT OF THE SITUATION AND REASONS GOALS, PRINCIPLES AND MAIN SOLUTIONS ASSESSMENT OF FINANCIAL CONSEQUENCES INDICATION THAT FUNDS FOR THE IMPLEMENTATION DESCRIPTION OF ARRANGEMENTS IN OTHER LEGAL SYSTEMS ASSESSMENT OF CONSEQUENCES
  12. 12. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Assessment of impacts and consequences: environment, including spatial and protection aspects for the economy administrative: procedures + obligations for development and planning documents important circumstances relating … public participation social consequences 12
  13. 13. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Article 8b: Elements of a proposal for a law: Rules of Procedure of the National Assembly, an assessment of consequences in individual fields: 13 • consequences for the environment, including spatial and protection aspects • consequences for the economy, particularly SMEs, and for the competitiveness • administrative consequences only, no supervison • financial implications on the national budget and other public funds Budget Develop ment planning SecGen/ MoF approval Social
  14. 14. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU First phase budget preparation: determination of the Overall Budget Ceiling and Government Programs = SP &MTBF Second phase budget preparation: detailed preparation of line ministries subprograms, projects and activities MACROECONOMIC FORECAST 1st Government budget session CEILINGS LINE MINISTRIES Proposals according to priorities FINAL NEGOTIATIONS Budget sent to Parliament 2nd Government budget session Budget adopted by the Government Expenditure NOT only B.9 (±) target Estimation of revenues Public expenditure ceilings (5 classifications) + PRIORITIES Slovenia case: Budget preparation process DBP (whole GG) sent the to EC
  15. 15. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU DECREE on development planning documents and procedures for the preparation of the national budgetRegulates: 1. the method of preparation of development documents, 2. the drafting of policies and setting national development priorities 3. the procedures and documents for the preparation of the national budget and its amendments, the amending budget, and other documents related to these acts. • Applies also to the preparation of government positions on development planning documents at the level of the European Union and international organizations, and other obligations at international level. • Relevant regulations have to require that budget components are consistent with national policies and priorities set in other strategic planning documents • Defining hierarchy of documents and clear responsibilities
  16. 16. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU How can/should we link PF & DevPlan? • Commitment from institutions, Gov. oversight & ownership • Mapping all strategic and sectorial objectives and outcomes (also possible pre-conditionalities for cohesion policy) • Linking them to fiscal expenditure: setting ceilings on policy levels • PBB was focus as link between PF and DevPlan • Reinforce budgetary framework and set priorities (clear) Key „on-going processes“: „Easier said than done“  Programme budgeting and strategic planning (to be mesured, fulfillment of goals/objectives, SMART enough?)  Structural measures: labour market, pensions, health …  Strengthen the capacity for strategy implementation and for measuring the achievement of results (RIA, PBB…fiscal/financial aspects)  Modernizing the budget system to better support budget decision makers (IT) Re-think aspects in SI:
  17. 17. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU How important are RIAs in ensuring alignment of strategic planning & budget preparations?  Governments tend to spend more than they create/collect taxes  Poor analysis of impacts (including fiscal) can risk policy implementation (unfunded policies)  RIAs help inform individual decision making about individual policies and helps budget preparation and planning. This reduced the risk of unfunded policies.  They link medium-term planning and development  It obliges decision-makers in economic policy, less room for political maneuvering.  Transparency and "ease" of fiscal planning with clear priorities and objectives.
  18. 18. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Key issues and topics • Need to have an adequate regulatory and methodological framework that acknowledges the need for full alignment of different planning documents of Government. • Regulation/law vs polical commitment. Why is not working? • Clarity of the status and role/hierarchy of different planning documents (budget, sectoral strategies, work plans etc.) • Clarity in roles and responsibility of various government players • A functioning RIA system which should help improve the quality of individual policies and inform budget preparation (fiscal impact assessment) • Programming budgeting and sectoral strategies 18
  19. 19. AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU AjointinitiativeoftheOECDandtheEuropeanUnion, principallyfinancedbytheEU Thank you for attention! katja.lautar@mf-rs.si Change has a considerable psychological impact on the human mind. To the fearful it is threatening because it means that things may get worse. To the hopeful it is encouraging because things may get better. To the confident it is inspiring because the challenge exists to make things better. King Whitney Jr.

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