OVER VIEW OF PUBLIC FINANCE REFORMS IN ETHIOPIA

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OVER VIEW OF PUBLIC FINANCE REFORMS IN ETHIOPIA

• (Presented for the Seminar on Strengthening
  budget practices in Africa, April 7-9,2009
  Dakar, Senegal)
• Prepared by
• Demelash Megersa and
• Desu Gebre

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Background of Expenditure Management Control
Reform (EMCP) in Ethiopia

• One of the five sub-programmes of the Civil
  Service Reform Programme
• Top management
• Human resource management
• Service Delivery
• Expenditure management control
• Ethics
• EMCP VISION
• create an efficient, effective, accountable
  and transparent financial management system that
  will contribute to the economic development
  effort of the Government

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There are 8 Projects under the EMCP

• The Legal Framework
• Government Procurement Reform Project
• Budget Reform
• Cash Management Reform
• Accounts Reform Project
• Internal Audit Reform
• Government Property Management Reform
• Integrated Financial Information Management
  system
• At present major reform activities of the above
  projects are implemented

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Budget Reform Project

• Objectives
• Reforming the chart of accounts and develop new
  single series of expenditure codes with the view
  to replacing the previous three series of codes
• Introducing a financial calendar with detailed
  steps for the expenditure planning and the
  budgeting processes
• Introducing cost center budgeting through the
  budget classification and integrate the
  preparation of recurrent and capital budget
• Introduce a new system of budget classification
  that will map the budget to organizations more
  consistently and in detail

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contd

• Achievements
• A new budget structure that has uniformity with
  the regions has been developed.
• The budget reform has been implemented in
  federal, regional and sub-regional levels
• Budget information system is up-grade to IBEX and
  installed in federal institution
• Currently 20 ministries are selected to test the
  program budgeting system

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Recent Budget Reform Measures

• However, there is still shortcomings in the
  current budgeting
• The budget provides little information about what
  the budget is spent on
• Recurrent budget is on the whole an incremental
  line item budget approach developed within a one
  year horizon
• Hence for a new budgeting process
• The govt has opted to introduce program
  budgeting moving from line item budgeting to
  program based budgeting through which activities
  and their associated expenditure will be
  categorized according to the intended outputs.

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contd

• Aim is to improve the allocation of resources to
  strategic priorities and strengthen expenditure
  management.
• The budget must move from an input to an output
  focus.
• Program budget requires.
• The existence of strategic planning
• Formulation of vision, mission and objective of
  each public body
• Defining programs with objectives and outputs

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Advantage of Program budgeting

• Program budget tend to present more useful
  information on service delivery
• Allows for transparency and accountability in
  service delivery
• More useful for
• Determining whether allocations reflect
  priorities
• Planning the delivery of services
• Monitoring the use of resources with each program
• Identifying areas where savings can be made or
  where more funds are needed.

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Program budgeting

• At Federal Level
• 20 ministries are selected to test the program
  budgeting system.
• Training was given
• To understand the features characteristics of
  program budget.
• To compare program budgeting with traditional
  line item budgets
• To understand the advantage and disadvantage of
  program line item budgeting

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contd

• Remaining tasks
• Finalizing the program budget procedural manual
  and preparing of the training module, and
  training of staff will continue to implement the
  reform
• Full implementation of program budgeting at
  federal level
• Rollout to federal regions

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Issue to be consider

• There will be confusion during transition
• Changes in responsibility for managers
• It is cumbersome and time consuming
• It is information intensive
• It is costly
• It has a large capacity requirement

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• Thanks for your attention