Medium Term Expenditure Framework-III (MTEF-III) –FY 2004/05 – 2006/07 DfID Funded (Three Years Rolling Programme – Budget)

Project Description

The main problem in Nepal’s planning and budgetary process is the over-optimism of five-year plans and annual budgets in terms of both resource availability and implementation capacity. Moreover, planned goals, objectives, outputs and resource allocations are not adequately integrated into annual budgeting. Lack of effective prioritization, proper costing, and outputs and expenditures estimation of programs/projects in line with planned goals and objectives have also led to wide gaps in plan targets and actual achievements. In many cases, the expected outputs of each project/program are stated in general terms rather than in quantity with the level of quality anticipated. The MTEF therefore aims to correct these problems by: (i) linking annual programs and budgets with periodic plan; (ii) prioritizing programs along with costing, outputs and expenditures in accordance with the periodic plan’s sectoral & national goals and objectives; (iii) adjusting the annual expenditure programs of the Tenth Plan to a level consistent with resource availability; (iv) maintaining macro-economic stability; and (v) providing funding guarantee to top priority programs/projects. In essence, the MTEF is expected to effectively bridge the gap between the Tenth Plan and the annual programs and budgets while, at the same time setting resource forecasts and physical targets for the budget itself at a realistic level.
The objectives of MTEF-III are: (i) to streamline the budget for on-going activities in consistent with resource availability; (ii) to protect the Tenth Plan’s key priorities in the event of further resource shortfalls; (iii) to ensure effective utilization of resources allocated to the prioritized activities; and (iv) to source found internally and externally to meet the funding gap.

Assignment Description

The MTEF III was completed along with the budget formulation process for FY 2004/05. • Worked under the directives of The high-level steering committee chaired by the NPC member for the economic sector • Facilitated/assisted the working teams of the respective ministries to prepare the MTEF (three years rolling plan) along with the programs for the next fiscal year. • Assisted in arriving development budget ceilings, which were taken as the basis for the formulation of MTEF III – macro and sectoral level. • Prepared a guidelines/directives and provided to line ministries to streamline programs dropping unnecessary ones, and not to add anymore unless agreed upon with the donors. As a consequence of this there is control in the number of unproductive projects during the last three years of MTEF • The Ministry of Finance in consultation with the NPC and the line ministries initiated the process of classifying budget into two categories i.e. recurrent and capital spending from development and regular budget heads and the team assisted in the process. • Although the complete transformation of the budgetary system from regular and development classification to recurrent and capital spending, and executing budget under these budget lines may take some time, this exercise would nonetheless make fiscal authority fully prepared for the formulation and execution of budget from the new classification system from the next fiscal year. • The project wise development budget is also categorized into recurrent and capital budget. • The distribution of development projects included in MTEF I, II and III are categorized into three priority groups. • The prioritization criteria have been improved while adopting more objective and scientific basis. • Interactive meetings were organized with different ministries to finalize project within the budget ceiling. • Poverty monitoring indicators were also used to assess the degrees of relationship of the project goals with poverty reduction objective. • Weightage has been developed to each criteria adopted to assess the priority ranking score of the projects. • The methods of estimating projects cost unit cost and output/outcome were developed with inter linkages and the ministries were requested to estimate costs as per the prescribed methods. • Sectoral papers have been prepared with the vision, mission, goal, strategies major objectives, relationship with the Tenth Plan, three-year outputs and outcomes of MTEF year, and the projection of remaining two years of the Tenth Plan. In the ministry of Agriculture and Cooperatives, the MTEF process has already been initiated to the district level as well. • Assessment of the sector has been carried out to understand the implications for development partners. • Identification of new programs and projects has also been made. • The effective implementation, monitoring and evaluation and institutional system has been proposed for projects/programs and sector levels. • Preparation of database in Excel Spreadsheet for analysis for all sectors. • Linking program/projects of all the sector to national and sectional objectives. • Training (MTEF cum TOT) provided to the government official selected from all the ministries and NPCS involved the preparation of MTEF • Various workshops organized and conducted to finalize MTEF documents. • Deliverables/ reports • MTEF III – Macro Level/ National Level – main report with Appendices – Directives, Form and Formats; Summary of Estimated Expenditures of all sectors/ministries • Sectoral MTEF papers with necessary annexes; estimated budget/ expenditure for three years