Medium-Term Expenditure Framework (MTEF)

1. Medium-Term Expenditure Framework (MTEF) Ministry of Finance Royal Government of Bhutan (Budhiman Rai)

2. Structure of the Presentation Legal Framework Development Philosophy Macroeconomic Framework Medium Term Horizon MTEF Approach Fiscal Sustainability & Transparency National goals, objectives and Annual Budget PFM Reforms Issues and Challenges Measures Lessons learned

3. Legal Framework Constitution of the Kingdom of Bhutan, 2008 Public Finance Act, 2007 Financial Rules and Regulations, 2001

4. Development Philosophy Development Philosophy/GNH Pillars Sustainable and Equitable Socio‐Economic Development Preservation and Promotion of Culture Conservation of Environment Promotion of Good Governance Government 10 Ministries, 20 Dzongkhags, 29 Autonomous Bodies and 205 Geogs

5. Macroeconomic Fiscal Framework Macroeconomic Framework Coordination Committee (MFCC) Chaired by Finance Secretary Macroeconomic management Facilitate regular preparation of reliable and systematically compiled macroeconomic and fiscal projections

6. - contd. Macroeconomic Framework Coordination Technical Committee (MFCTC) Technical Working members from the relevant agencies Resource Projection Provides critical technical and analytical inputs that enable the policy making body and members of the MFCC to formulate important macroeconomic decisions.

7. Medium Term Horizon Financial year- July to June Medium term- 5 years Actual - Past 2 financial years Revised aggregates Projections- 2 financial years Budget Policy and Fiscal Framework Statement Actual - Past financial year Revised aggregates Budget Projections for 2 financial years

8. MTEF Approach Multi-year revenue projections MFCTC > MFCC = Resource envelope Bottom-up cost estimation National and Sectoral Plans Formulate sector programs and set priorities Matching the cost with available resources Maintain fiscal balance below 5% of GDP

9. Fiscal Sustainability &Transparency Recurrent expenditures shall be met from the internal resources : PFA 7(a), Constitution Article 14 (6) Meeting the requirements for sustainability of the fiscal balance shall not be achieved at the expense of development projects

10. National Goals and Objectives &Annual Budget National key objectives Enhance food and nutrition security, Improve Rural Livelihood, Accelerate and sustain RNR sector growth, and Promote sustainable management and utilization of natural resources Resource based budgeting Resource envelope Sectoral ceiling- Recurrent & Capital BPFFS- Medium term budget

11. PFM Reforms Multi-Year Rolling Budget: Financial Manual 1988 > Financial Rules and Regulations 2001 Incremental to Resource based budgeting Sectoral Ceiling Local Governments- Resource Allocation Framework (GNHC) Other budgetary bodies- FYP Fiscal Decentralization No supplementary appropriations (PFA) Integrated Online Systems- PLaMS, MYRB, PEMS

12. Issues and Challenges Difficulty in gathering actual national aggregates for projection of inputs into Macroeconomic Framework/discrepancies Need for standard system for Macroeconomic Framework Sectoral ceiling > Living within funding constraints Revenue growth less than increase in expenditure Decline in Donor support Increase in costs- Geographical factor, procurement procedure

13. Measures Develop system for Macroeconomic Framework Expenditure prioritization/Rationalizing expenditure Constitutional and Fiscal Sustainability requirement Mobilize resources through concessional window and domestic financing Financial and output monitoring Harmonization of Financial Rules and Regulations Environment Friendly Construction/Improved technologies

14. Lesson Learned Legal requirement Political commitment Improved Macroeconomic Management Align and prioritize sector programs and activities Accountability for program delivery/output Real-Time and Integrated Computerized Systems Improved expenditure control and reporting Multi-Year Budgets

15. TASHI DELEK(THANK YOU)