Coverage

BCG.

Time period

Dimensions 16.1, 16.2 and 16.3: Last budget submitted to the legislature.

Dimension 16.4: The “last medium-term budget”’ relates to the budget approved by the legislature for last completed fiscal year and “the current medium-term budget” relates to the budget approved by the legislature for the current fiscal year.

Measurement guidance

Expenditure policy decisions have multiyear implications and should be aligned with the availability of resources in the medium-term perspective. The resulting expenditure estimates must be consistent with the fiscal aggregates determined through a fiscal strategy (considered in PI-15: Fiscal strategy). They also need to be consistent with revenue projections and ongoing expenditure policy budgetary requirements (considered in PI-14: Macroeconomic and fiscal forecasting). The estimates for the years following the budget year in a medium-term budget should provide a fiscal constraint in accordance with the fiscal strategy, as well as providing the basis for the future year’s budget allocations at an aggregate and ministry level. The medium-term budget estimates should be updated annually, building on the previous year’s budget and estimates, through a process that is transparent and predictable. Expenditure policy proposals submitted to the government should be aligned with the policy objectives set out in approved and costed strategic plans.

Dimension 16.1 assesses the extent to which medium-term expenditure estimates are prepared and updated as part of the annual budget process. The preparation of medium-term estimates is intended to strengthen fiscal discipline and improve predictability of budget allocations. Medium-term estimates should be disaggregated by high-level administrative, economic, and program or functional classification. The administrative classification should identify the relevant budget head of appropriation—for example, the ministry or department. To provide ministries and program managers with the flexibility to manage and respond to budgetary pressures within their expenditure ceilings, disaggregation by economic type may be at the 2-digit GFS (equivalent) classification only.

Dimension 16.2 assesses whether medium-term expenditure ceilings are applied to the estimates produced by ministries to ensure that expenditure beyond the budget year is consistent with government fiscal policy and budgetary objectives. Such ceilings should be issued to ministries before or when the first circular is distributed at the commencement of the annual budget preparation cycle. This dimension is distinct from dimension 17.2 (Guidance on budget preparation) because it considers only medium-term budget ceilings, whereas 17.2 allows for either annual or medium-term expenditure budget ceilings.

Dimension 16.3 measures the extent to which approved expenditure policy proposals align with costed ministry strategic plans or sector strategies. Strategic plans should identify resources required to achieve medium- to long-term objectives and planned outputs and outcomes. PI-8 (Performance information for service delivery) addresses reporting on outputs and outcomes. The plans should identify the cost implications of current policy commitments, including any funding gaps, as well as prioritize new expenditure policy proposals consistent with government policy objectives. Cost information should include recurring expenditures, capital costs, and future recurrent cost implications of investment commitments, as well as every source of funding. While sector plans tend to be aspirational, cost implications should be realistic. They should take into account the government’s fiscal policy objectives and the fiscal constraints these objectives impose on expenditure decisionmaking. Alignment between strategic plans and budget estimates will occur when they cover the same or similar policy objectives, initiatives, activities, or programs.

Countries that have introduced multiannual program or performance-based budgeting may use different terminology and methods for developing, costing, and implementing medium-term plans. Therefore, assessors should substitute references to medium-term programs, or other performance-based budget categories, in place of strategic and sectors plans in this indicator, where appropriate.