Ministry of Finance, Planning and Economic Development
The Second Financial Management and Accountability Programme (FINMAPII)
Terms of Reference:
TO REVIEW EFFECTIVENESS OF THE MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) BY VOTE AS A MEDIUM TERM PLANNING INSTRUMENT AND SUPPORT IMPLEMENTATION OF RECOMMENDATIONS
AUGUST 2012
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Background
Government of Uganda (GoU) has designed the second phase of the Financial Management and Accountability Programme (FINMAP II) to support implementation of financial management reforms. The primary purpose of the FINMAP II is to widen, deepen and consolidate reforms in public financial management (PFM) aiming at further strengthening and sustaining accountability and transparency in public expenditure management, improve governance, and maximize the Government’s effort towards improved service delivery. One of the reform areas that still needs further strengthening is expenditure forecasting and prioritization using the Medium Term Expenditure Framework (MTEF). Uganda was a pioneer in developing and adopting the MTEF in Africa. Its (MTEF) evolution progressed in the 1990’s through a series of processes to incorporate medium term expenditure planning into the budget process. The processes included bringing project aid on the budget, developing a Public Investment Plan (PIP), and deriving sectoral expenditure classifications that aimed to reflect poverty reducing expenditure priorities that were deliberated through the Sector Working Group (SWG) process.
In other words, the MTEF became the main instrument Government was using to increase efficiency in resources allocation and implementation of sector programs including linking expenditure priorities to the objectives of the then Poverty Eradication Action Plan (PEAP)—
which now has been replaced with the National Development Plan (NDP). One of the main potential benefits of the MTEF is the increased predictability for sector investment financing, which should result in increased absorption capacity as entities are able to plan more effectively on a multi-year framework, rather than on a stop-start basis for each budget.
However, these benefits depend on the planning capacity and understanding of MDAs, and the reliability of MTEF forecasts leading to actual allocations and releases. The MTEF identifies three year sectoral ceilings for recurrent and development expenditures and it has been useful in identifying strategic objectives for expenditure and in promoting efficiency and effectiveness in public expenditure. While Uganda’s MTEF has largely been regarded as a success compared to MTEFs in other African countries, several shortfalls within the framework still remain and need to be addressed. For instance;
The link between the National Development Plan (NDP) and the medium term expenditure framework needs to be strengthened more;
At the institutional level, the sector planning process remains weak and requires strengthening;
Absorption of investment funds continues to be a problem for many MDAs, partly due to the stop-start approach to annual investment planning, which the MTEF is designed to overcome;
Medium term projections that relate to external financing, fluctuate on an annual basis, contributing to the Budget’s being unpredictable;
The MTEF does not reflect the recently introduced programme budget classification (Vote Functions), which can help direct medium term strategic resource allocation, at a macro level.
The Ministry of Finance, Planning and Economic Development (MoFPED) now wishes to engage a consultant to help review the MTEF and advise on the necessary revisions for its effectiveness as a medium term planning instrument.
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Objectives of the Consultancy
The review will provide recommendations on what needs to be revised within the MTEF to strengthen it and make it more effective as a medium term planning instrument.
Specific objectives include;
i) Examine the above shortfalls in greater depth to identify which areas/constraints can be addressed for the FY2013/14 budget process;
ii) Develop and implement a system that can help address the identified constraints and enhance the MTEF as a medium term planning tool;
iii) Review medium term expenditure projections and design a system to enhance the MTEF as a medium term planning tool.
Scope of Work
The consultant will undertake the following work:
i) Identify key constraints to effectiveness of the MTEF and develop recommendations to address the constraints;
ii) Review the expenditure-forecasting framework and the process of identifying discretionary expenditure allocations in the budget;
iii) Design a system for capturing expenditure priorities at the programme (Vote Function) level to facilitate linkages with NDP priority areas, and have forward projections against which assessment of progress on NDP can be made;
iv) Outline a process of reconciling bottom up expenditure pressures and top down resource projections, including efficiency and strategic sectoral expenditure discussions that can be implemented in the SWG and Cabinet and Parliamentary budget review process;
v) Review and analyse the effectiveness of current budget classifications; and
vi) Make proposals to harmonise the current budget classification with the Government Financial Statistics (GFS) classification.
Tasks and Deliverables
In pursuing the above objectives and scope of work, the Consultant will need to undertake the tasks and submit the appropriate deliverables identified in the table below:
ID Task Deliverable
1 Provide an inception report including identifying key constraints to effectiveness of MTEF and develop recommendations to address the constraints
Inception Report
2 Review the expenditure forecasting framework
a) Review the formulas and forecasting methods used for expenditure projections and the criteria used for medium term expenditure prioritisation
Operationalised revised expenditure forecasting
framework and an
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ID Task Deliverable
b) For selected MDAs and SWGs undertake a capacity assessment of medium term expenditure projections and progress in utilising MTEF for multi-year investment planning to increase absorption of funds.
c) Derive a methodology for identifying discretionary and non discretionary expenditures in budget allocations, based on a) utilising the output budget structure and b) identifying investment savings through the Public Investment Plan (PIP)
d) Explore the fiscal feasibility of the expenditure projections in line with the macro forecasting model and medium term economic growth projections
appropriate user manual.
Recommendations for further training/
capacity building for line-
Ministries/SWGs
3 To design a system for capturing expenditure priorities at the programme (Vote Function) level to enable NDP priority areas to be projected forward.
a) Re-design the MTEF format to ensure expenditure programmes (Vote Functions) reflect the medium term budget strategy.
b) Incorporate expenditure plans for core flagship projects into the medium term planning and budgeting process.
c) Produce formats to align projections for external financing to NDP priority areas to form a basis for capturing future project aid flows in the Aid Management Platform
Operationalised system and user manual (including system design) for capturing
expenditure priorities linked to NDP priorities.
Recommendations on related training/
capacity building requirements for line Ministries/SWGs 4 Outline a process of reconciling bottom up expenditure
pressures and top down resource projections, including efficiency implications
a) Develop proposals to formulate expenditure estimates within the SWGs, based on specific guidelines.
b) Develop proposals for a high level discussion on budget strategy (Cabinet level) to help match bottom up expenditure priorities over the medium term with revenue projections through adopting budget efficiency measures and key findings on budget performance
Practical
methodology and user manual for reconciling bottom up expenditure pressures and top down resource projections
Delivery Schedule
ID Deliverable Expected date to be
delivered 1 Inception Report
2 Operationalised revised expenditure forecasting framework and an appropriate user manual
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3
Operationalised system and user manual (including system design) for capturing expenditure priorities linked to NDP priorities
4
Practical methodology and user manual for reconciling bottom up expenditure pressures and top down resource projections
5
Analytical report on non wage recurrent expenditure including recommendations for appropriate levels for budget
programming purposes 6 Final consultancy report
Mode of Operations and Terms and Conditions Timeframe:
The task will be carried out within four months and is estimated to require approximately 50 person days with the intention of rolling out the system and recommendations for FY2013/14 budget preparation process.
Location of the assignment and Reporting;
The assignment will be undertaken from MFPED in Kampala. The Consultant will report to the Director Budget through the Commissioner Budget Policy and Evaluation Department (BPED). The process will involve consultations with key stakeholders.
Contractual terms;
The consultant will be engaged against a lumpsum contract with payments tied to deliverables.
Consultant’s Profile;
The Consultant should have the following profile:
Masters degree in Economics, Public Finance or other relevant discipline;
Experience in conducting similar assignments, as well as developing/ implementing Government MTEF budgeting systems (experience in developing countries preferred);
Experience in developing formats and user manuals for budget planning;
Minimum 10 years relevant professional experience in public financial management.
