1. G O V E R N M E N T – D E V E L O P M E N T P A R T N E R S R O U N D T A B L E
S A N A ’ A , D E C E M B E R 1 8 T H 2 0 1 3
J E A N - M A R C L E P A I N
E U P F M S P E C I A L I S T
J L E P A I N @ Y A H O O . F R
W W W . S L I D E S H A R E . N E T / J E A N M A R C L E P A I N /
Action Plan for Public Finance
Management Reforms

2. Part 1
Objectives and Content of the Action Plan

3. Why the Action Plan is strategically Important
 The political stability of the country requires new economic
policies which cannot be implemented without efficient
PFM mechanisms.
 Restoration of macroeconomic stability requires sound
fiscal policy that cannot be put in place without
strengthening revenue collection and an adequate
expenditure planning.
 Resolution of the liquidity crisis cannot be achieved only
through external budget assistance. It requires important
structural PFM reforms and improvement in budget
execution procedures.

4. Methodology
This Action Plan is made of the compilation of several
plans:
 MOF sector plans + Revenue Authority, Custom
Authority and Finance Institute
 COCA Action Plan
 High Tender Board Action Plan
 Harmonization Plan (joint plan MOF-MOPIC)
 MOLA Fiscal Decentralisation Plan
 Matrix of existing projects financed by development
partners

5. Key Objectives of the Action Plan
 Accelerate implementation of the Transitional
Programme for Stabilisation and Development
 Restore fiscal sustainability and budget credibility
 Prepare for fiscal decentralisation
 Strengthen controls and enhance accountability

6. Characteristics of the Action Plan
 Two year interim strategy (2014-2015)
 Focus on ‘quick-wins’ and efficiency issues
 New planning phase starting in 2015 to deal with
more structural issues such as revision of the legal
framework after PFM assessment (PER , PEFA or
other);
 Attention given to reform sequencing

7. Structure of the Action Plan
A. Restoring fiscal sustainability and strengthening the budget
formulation process
B. Strengthening revenue mobilization and revenue management
C. Enhancing Control and Accountability
D. Developing capacity and expanding role of the Finance
Institute
E. Strengthening risk management, public debt management and
development of the financial sector
F. Implementing fiscal decentralisation
G. Institutional reforms and medium term planning

8. Part 2
Fiscal Policy and Budget Credibility

9. Key Components of the Action Plan
 Integration of fiscal policy with budget formulation
 Budget integration
 Revenue mobilisation strategy and revenue management
 Roadmap for fiscal decentralisation
 Revised chart of accounts, budget classification in line
with budget integration and development of new
accounting rules
 Enhancement of internal and external controls (COCA)
 Preparation for structural reforms

10. (1) Integration of Fiscal Policy in Budget Formulation
-Baseline-
 Medium Term Macro-economic Framework (MTMF) and
Medium Term Fiscal Framework (MTFF) are prepared since
2008 but are not integrated in budget formulation.
 No unity of fiscal policy: use of different aggregates and
indicators across different agencies resulting in a lack of
consensus on fiscal policy.
 Lack of clarity of role between MOF and MOPIC
 No consensus on revenue forecasting due to the use of different
methodology in different agencies
 No binding fiscal policy declarations
 No Medium Term Budget Framework (MTBF) or fiscal envelopes

11. Integration of Fiscal Policy in Budget Formulation
-Actions to be taken-
 Harmonization of aggregates and indicators across all
agencies
 Clarification of role between MOF and MOPIC
 Revision of legal and regulatory framework to integrate
MTFF in budget formulation
 Strengthening capacity in MOF Planning Department
 Development of new methodologies for revenue forecasting
and fiscal analysis

12. Reaching Fiscal Sustainability
 Potential decline in oil revenues (need a consensus)
 Assessing revenue mobilisation potential
 Dealing with tax holidays
 Phasing out energy subsidies
 Rationalizing state-owned enterprise management
 Facing new fiscal challenges (fiscal decentralisation, poverty
reduction strategy, employment development, etc.)
→ Defining medium term path toward fiscal
sustainability based on a Medium Term Fiscal
Sustainability Study

13. (2) Budget Integration
1. Operational budget
2. Investment Budget
3. Subsidy Budget
4. Economic Unit Budget
5. Other off-budget fiscal activities

14. Integration Between Operational and Investment
Budgets
Harmonisation Plan:
 Aligning Public Investment Plans (PIP) on the Transitional
Programme for Stabilisation and Development;
 Defining a realistic fiscal envelope for investment based on the
MTFF;
 Aligning budget on PIP;
 Introducing Public Investment Management (PIM) methodology to
monitor the complete investment life cycle;
 Improve investment projects’ documentation;
 Define strict criteria for investment projects’ budget financing;
 Remove from budget non-performing projects;
 Integrate systematically maintenance cost in operational budget
through specific commitments.

15. Integration of subsidies in the General Budget
 Subsidies should be treated as a budget-line item,
not as a sub-budget;
 Volume of subsidies should be determined through
the MTFF in direct relation to fiscal capacity;
 A plan should be developed to phase out gradually
energy subsidies while deploying a social safety net.

16. Integration of the Economic Unit Budget
-Baseline-
 Economic Unit Budget nearly as big as the General
Budget;
 Definition of “economic unit” is vague. It includes
potential direct budget users such as hospitals, and
non-budget users such as state-owned-enterprises,
as well as other parastatal entities.
 Some economic units (E.U.) should be considered as
part of the private sector but have staff on the State
payroll;
 The Economic Unit Budget does not trace flows from
other budgets (operational expenditure, investments
and subsidies).

17. Consequence of the lack of integration
 General budget does not encompass all state fiscal
activities (lack of comprehensiveness).
 Status of a number of parastatal funds not included in
the Economic Unit Budget is unclear
 The State is bearing fiscal risk on state-owned
enterprises through implicit and explicit guarantees. The
resulting volume of contingent liabilities is not known
but is high enough to threaten the fiscal stability of the
country.
 Profit from SOEs is not treated as direct revenue for the
State as it transits through the Economic Unit Budget;
 State control on economic units is weak.

18. Action considered
 Assessment of E.U. to define typology and determine which unit
should be integrated in the general budget and which unit should
be excluded.
 Revision of budget classification and chart of accounts according
to the new typology.
 Transformation of the Economic Unit Department into a State-
Owned Enterprise Department (after 2015)
 Drafting of new legislation and regulation for the management of
SOEs, parastatal funds and other parastatal entities not included
in the general budget;
 Development of a risk management system to assess and track
fiscal risks resulting from E.U. Activities + risk mitigation
strategy.

19. Part 3
Revenue Mobilisation Strategy

20. Characteristic of the Revenue Mobilisation
Strategy
 The revenue mobilisation strategy is essentially
based on improving revenue management;
 Revision of the tax policy, especially in relation to tax
exemption and tax holidays;
 Tax policy and tax administration reforms will be
closely linked;
 Importance of capacity development;
 Necessity of developing local revenue representing
only 6% of State resources

21. Improving Tax Management
 Computerisation is necessary to centralise data and
develop efficient procedures;
 Focus on improving tax compliance and reducing tax
evasion and leakage;
 Development of forecasting capacity in liaison with
MOF Planning Department (MTFF) to harmonize
methodologies;
 Development of the tax analysis capacity base on risk
management;
 Development communication strategy to develop tax
awareness

22. Improving Custom Management
 Upgrading existing ASYCUDA system
 Expanding database to include more information
regarding good prices, transport costs, market
conditions, etc.
 Establishing anti-smuggling unit
 Enhancing customs investigations and risk
management system

23. Part 4
Fiscal Decentralisation

24. General Principles
 Fiscal decentralisation policy should be prepared
ahead of Constitution in order to ensure that
principal of fiscal decentralisation are fiscally
sustainable.
 Whatever is the form of the new Constitution, a
substantial amount of fiscal decentralisation will be
introduced.
 Fiscal decentralisation is relatively independent from
political and administrative decentralization.

25. Planned Actions
1. Linking fiscal decentralization to budget policy, planning,
and budget through a Fiscal Decentralization Strategy
Paper
2. Preparing concept note on different options for a system of
intergovernmental transfers
3. Reengineering the budget execution process in line with
fiscal decentralization
4. Developing new legal and regulatory framework for fiscal
decentralization
5. Developing revenue and expenditure management capacity
at the sub-national level

26. Fiscal Decentralisation Study
 Assess existing imbalance in existing transfers at the sub-
national level to measure additional fiscal needs for
correcting measures
 Assess tax base and existing tax resource in each
province;
 Measure existing gap between responsibility and
expenditure assignment and existing fiscal resources and
transfers at the sub-national level.
 Identify potential changes that can be made in the
revenue and expenditure assignment.
 Prepare recommendations based on different options for
a formula-based intergovernmental transfer system.

27. Part 5
The Way Forward beyond 2015

28. PFM Reforms after 2015
 Planning for the period 2016-2020 should start in 2015.
 It should be based on a PFM Assessment facilitated by
development partners (PER, PEFA or other)
 It will require a more substantial effort than the 2014-
2015 Action Plan and more technical assistance will be
needed to ensure support to the different sectors.
 Putting reforms of the PFM system on tract requires
developing a vision of the future system with a time
horizon of 10 to 15 years, and being ready for structural
reforms such as the introduction of a new PFM Law,
Revision of the tax code, introduction of a system of
intergovernmental transfers, etc.

29. THANKS