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FISCAL CONSOLIDATION AND
POLICY REVIEW
December 20th 2018
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
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.
PART I
WHY A FISCAL CONSOLIDATION PROGRAMME?
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.
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.
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
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
PART II
HOW TO DO A POLICY REVIEW
Policy Review
Fiscal Consolidation Plan
Sector Reform Plan
Programme Architecture
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.
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
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.
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;
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
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….!!!
THANKS

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Fiscal Consolidation and Policy Reviews

  • 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….!!!