This document outlines an agenda and objectives for a meeting on fiscal consolidation and policy review. It discusses the need for fiscal consolidation due to declining oil production and prices. The main objective of the fiscal consolidation program is to put the budget on a sustainable path and accelerate economic diversification, with targets to double fees and reduce the budget deficit. A policy review will identify structural, policy, and process reforms through analyzing programs, costs, subsidies and fees. The meeting aims to ensure the policy review and fiscal consolidation program stay on track to meet deadlines and expected results. Ministries are expected to refocus on core activities, reformulate policies, improve efficiency, and identify areas for outsourcing, privatization or cost-cutting.

1. FISCAL CONSOLIDATION AND
POLICY REVIEW
December 20th 2018

2. Agenda
1. Presentation of the Fiscal Consolidation Programme
2. Overview of the Policy Review
3. The three types of reforms to be considered
4. Implementation of the FCP

3. Objectives of the meeting
 To ensure that the Policy Review is being done according to plans
and that deadlines will be met;
 To ensure that the Policy Review will deliver the expected results;
 To raise awareness of the fiscal challenges that the State must meet;
 To clarify any point that needs clarification.

4. PART I
WHY A FISCAL CONSOLIDATION PROGRAMME?

5. Fiscal consolidation versus budget cuts
 Changes in expenditure ceilings and budget composition are the
result of changes in policies and of structural reforms.
 Structural reforms take time. We are looking at a 5 year time horizon.
No immediate result is expected.
 The policy review is the main instrument of policy changes
 Fiscal consolidation is not just about deficit reduction but also about
reprioritization of expenditure for making the economy more
competitive.
 Available fiscal space should be allocated to pro-growth
investment.

6. The fiscal challenge
 Oil production has been decreasing for the past 12 years from 216.000 bpd in
2006 to 90.000 bpd today; Rejuvenation of fields might have a positive effect in
future but in 2019 it will have a negative impact o production and taxes.
 Gas production remains stable at 12B m3 but cannot compensate for the loss oil
revenue without huge investments which are several years ahead;
 Oil and gas prices after a year of recovery are falling again. Oil companies in
exchange of investment have negotiated a more advantageous tax regime.
 Due to the recession, taxes and customs collection have also declined;
 Economic diversification is a slow and complex process that will not show results
before a decade;
 With a budget deficit in the range of 14% of GDP the fiscal position of the
country is unsustainable in the long term.

7. Objectives of the Fiscal Consolidation
Programme
Main objective:
 To put the budget back on a sustainable path
 To accelerate economic diversification
Fiscal targets have not yet been announced. However the following
objectives are under consideration:
 Doubling of fees and charges from 300M to 600M
 Reduction of budget deficit to 2 billions

8. How to achieve the objectives?
 Eliminating wasteful policies
 Increasing cost efficiency and rationalizing service delivery
 Reducing number of staff by natural attrition
 Transferring a number of services to the private sector
 Corporatizing a number of agencies or services
 Public-Private Partnership
 Privatizing some activities
 Reducing recurrent expenditure to increase productive investment

9. PART II
HOW TO DO A POLICY REVIEW

10. Policy Review
Fiscal Consolidation Plan
Sector Reform Plan
Programme Architecture

11. What is a policy review?
 Definition: A Policy Review is a process that consists of questioning the way
public policies are designed and implemented and how public services are
delivered to eliminate inefficient policies, to identify alternative ways of
delivering public services at a better cost, and to reduce the present
Government’s level of spending in an orderly manner. A Policy Review identifies
three types of reforms: (i) structural reforms, (ii) policy reforms, and (iii) process
reforms.

12. Policy Review Methodology
1. Review of the relevance of the programme and activity structure
2. Output and outcome analysis
3. Programme costing and cost efficiency analysis
4. Review of subsidies
5. Review of fees and charges
6. Identification of reforms

13. Three types of reforms are to be
considered
1. Structural reforms such as privatisation, corporatisation,
externalisation of services (Examples: seaports, airport, postal services,
printing house, water treatment, electricity, garbage collection and
treatment, etc.), economy of scale (Ex: reduction of the number of
schools), innovative financing (Ex: insurance scheme for health, etc.)
2. Policy Reforms such as (a) revision of over-ambitious development
plans, (b) reduction on the scope of service to focus on
departments’ core missions, (c) elimination of inefficient subsidies,
and (d) revision of the fee structure.
3. Process Reforms through phase 2 of PBB, efficiency reforms such as
streamlining of procedures, removing of obsolete regulation, and
better use of ICT.

14. The Sector Reform Plan
The Sector Reform Plan is the translation of the Policy
Review into Action.
List achievable reforms within the five year time frame;
Identify prerequisites to reforms;
List Implementation activities and identify possible need
for technical assistance;
Propose timeframe and milestones;
Costs all activities associated with reforms;

15. The Fiscal Consolidation Plan
The Fiscal Consolidation Plan aims at translating into monetary terms
the Sector Reform Plan. It should contain the following information as
per the FCP Manual:
1. Evolution of staff positions
2. Evolution of salaries & compensation
3. Present Baseline Budget
4. Fiscal Impact of reforms at the end of the five-year period
5. New Budget Forecast after Fiscal Consolidation

16. What is expected from your Ministry
and its Departments?
 Refocusing on core activities and shedding of burdensome
unnecessary services;
 Reformulating policies taking into consideration long term sustainability
and eliminating wasteful policies.
 Externalization/ outsourcing of services;
 Improving efficiency of service delivery while reducing costs;
 Revising fee structure
 Identifying pro-growth investments
 OTHER…OTHER…OTHER….!!!

17. THANKS