Mauritius: Forward Results-Based Budgeting for Better Economic Management

 4. Mauritius: Forward Results-Based Budgeting for Better Economic Management

 

 

 

AK Kokil, SD Ramdeen and RC Khushiram

List of acronyms

 

CMU	Central MTEF Unit
MCSA	Ministry of Civil Service Affairs
MOFED	Ministry of Finance and Economic Development
MTEF	Medium Term Expenditure Framework
MTFF	Medium Term Fiscal Framework
NEA	New Economic Agenda
RBB	Results-Based Budgeting
SMU	Sectoral MTEF Unit

4.1 Introduction

Mauritius’ remarkable pattern of long-term economic growth has been based on traditional lines of production and services – sugar, tourism and textiles – and on a broad and effective social pact that has brought together a very diverse society. However, presently the economy is being challenged on both the domestic and the international front as a result of: 

·      the phasing out of preferential trade access, which is likely to affect the traditional sources of growth; 

·      constraints in the tourism sector due to environmental fragility and the small capacity of the island; 

·      the unsustainable level of the budget deficit, which has been worsening since FY 1999/2000, and the excessively high and gradually rising public debt burden;

·      the lack of due consideration to training and skills development; 

·      unemployment (currently at around 10 per cent), which has reached levels not witnessed since the mid-1980s; 

·      a welfare system that is increasingly coming under strain, with an ageing population and huge commitments to free education, free health care, non-contributory universal pensions and a multitude of social assistance schemes, including housing; and 

·      the growing dichotomy between social progress and economic development, which has resulted in pockets of poverty affecting some 10 per cent of the population.

 

4.2 The New Economic Agenda (NEA)

 

In 2001 the government of Mauritius set an ambitious medium-term development objective in a serious attempt to kick-start the economic reform process, confront the policy choices in restructuring the economy and build the strong macroeconomic, institutional and social underpinnings to power the country’s drive to a high-tech, high-income, service and knowledge economy. The key components of the New Economic Agenda (NEA) are: (i) improvement in the competitiveness of the economy; (ii) investment in people and society; (iii) preservation of Mauritius’ fragile environment; and (iv) improvement in economic management.

The NEA is a 5-year reform programme aimed at achieving the following specific medium-term outcomes:

 

Competitiveness and productivity

·      Introduce information technology as a new sector.

·      Strengthen the supervisory arrangements of the non-bank financial sector.

·      Improve the quality of infrastructure.

·      Modernise and streamline the public-private sector interfaces.

·      Improve the functioning of the labour market.

·      Intensify diversification efforts to move up the export value chain.

 

Investing in people and society

·      Produce a better-educated workforce that fully meets the requirements of the public and private sector.

·      Improve social cohesion and seek a fairer distribution of the benefits of growth and greater inclusion for all population groups in the country.

 

Environment and transport

·      Ensure that the liquid waste, solid waste and transport sectors are financially, institutionally and legally sustainable and operate in full compliance with the environmental standards.

 

Economic management

·      Ensure medium- and long-term fiscal sustainability.

·      Better align expenditures with the country’s strategic priorities.

·      Rethink the welfare state in a bid to streamline public expenditures on such social programmes like education, health, housing and social security. Some targeting is required as those who can afford to pay should bear the cost. 

 

4.2.1 Improving economic management

One starting point for the NEA is fiscal management. Sound budget management has been critical for Mauritius’ success in the past, and will continue to be a cornerstone of success in the future. However, Mauritius experienced some slippages in the late 1990s. The gains in fiscal management that were made in the late 1980s and early 1990s were gradually allowed to be eroded through large revenue shortfalls as a consequence of tariff liberalisation in line with regional free trade agreements and WTO commitments. 

Tax revenue had reached 20 per cent of GDP in 1996/97, and was down to 16 per cent of GDP in 2001/02. Concurrently, expenditure reduction (and prioritisation) was not undertaken in those years, and expenditure pressures have been rising; the higher expenditure on wages and salaries and basic pensions were at the cost of an increase in expenditures on education and health. In 2000/01 Mauritius’ central government budget deficit stood at 6.6 per cent of GDP, compared to an average of 5 per cent in the preceding five years, and about 3 per cent in the period 1986–1995. The consolidated budget deficit, which includes the deficit of parastatals, amounted to around 8 per cent of GDP. The total public debt stood at 64.3 per cent of GDP (50 per cent from central government, the remaining 14 per cent owed by parastatals). The rollover risks from the government’s short-term portfolio of domestic debt, contingent liabilities (unfunded pension schemes, accumulation of important losses from parastatals) and the risk of further erosion of tax revenues also pose significant risks. The NEA is trying to restore the fiscal balance (as illustrated in Figure 4.1, years 2001/02 through 2005/06). It is aiming to bring the overall fiscal deficit down to about 3 per cent of GDP by 2007/08.

 

Figure 4.1: Fiscal aggregates (% GDP) 

 

4.2.2 Budget reform

Fiscal discipline is a major component of overall medium-term macroeconomic management. To secure fiscal discipline, government initiated a growth-friendly fiscal consolidation programme with emphasis on high-quality reduction in the deficit. The key components of the medium-term fiscal adjustment programme are revenue consolidation, expenditure restructuring and management, and the adoption of a medium-term framework and results-based budgeting as necessary preliminary phases for budget reform.

On the revenue side, government launched a major reform programme to modernise the entire revenue administration system. This includes:

·      the creation of a large taxpayers' department; 

·      the modernisation of tax and customs administration systems and procedures, including increased co-ordination and co-operation between tax and customs departments; 

·      a review of corporate taxes to address the equity and tax buoyancy issues; 

·      scaling down the large dispersions and inefficiencies of the tariff system;

·      strengthening the value added tax (VAT) administration – the registration, audit, database and enforcement functions; 

·      joint tax audits of the various revenue departments; and 

·      improving the efficiency and effectiveness of tax revenue administration by bringing the VAT administration, Customs and Excise Department, the Income Tax Department, and the Large Taxpayer Department under the single central administration of the newly created Mauritius Revenue Authority. 

 

Government is also working to restructure public spending, and improve expenditure controls and budgetary processes by:

·      restraining current expenditure; 

·      improving the efficiency of civil service and welfare expenditures, and meeting the needs of the genuinely disadvantaged; 

·      readjusting the social maintenance programmes, which will impact on the financing, structure and delivery of social services; 

·      restructuring public enterprises to restore them as viable units; 

·      looking into the efficiency, equity and sustainability of the pension system; 

·      consolidating various off-budget government funds with the central government budget to make it more transparent;

·      adopting a fiscal reporting system that compiles clear, comprehensive and timely data on budget execution; 

·      introducing public-private partnerships whereby a number of projects could be carried out jointly; and 

·      setting up a fully fledged debt monitoring unit.

 

While the ultimate aim is to move towards performance budgeting, our reform programme has adopted a phased approach. The first phase relates to the implementation of a Medium Term Expenditure Framework (MTEF). The fundamental objective of the MTEF is to enable government to prepare annual budgets within a sustainable fiscal strategy, which extends over several years, and to facilitate a progressive reshaping of budget allocations across and within sector portfolios, consistent with the strategic goals of the NEA. The second phase involves the introduction of a transitory or rudimentary form of programme-oriented results-based budgeting (RBB) – a form of RBB that retains the system of incremental budgeting, within an aggregate expenditure ceiling with a 3-year horizon, but introduces programmes and programme indicators to relate resources to results proposed and achieved. It also attempts to ensure a better allocation of resources, and involves introducing a results focus in the planning and management of resources. An increased focus on results is also part of wider reforms in public sector management. A whole range of civil service reforms are being initiated in the areas of performance appraisal, organisational structure, quality improvement and financial management.

 

Box 1: Results-based budgeting and performance budgeting  Results-based budgeting emphasises what has to be done, and helps link missions, goals, objectives and resources. A results or programme approach provides more flexibility to move resources around within programmes if there is a shift in priorities. The focus is on outputs and deliverables, together with greater delegation of authority to line ministries to improve performance in exchange for increased accountability. The aim is not to put an excessive emphasis on costs, but rather to focus on the results defined and achieved.

 

The existing budget system

The government of Mauritius operates a dual budget system in which the recurrent and development budgets are prepared and presented separately. Both the recurrent and the development budgets are presented on a line-item basis showing types of expenditure. It is conventional incremental budgeting where current budgets are increased by some margin for the following year. The estimates for the capital budget are based on current implementation of capital projects and projected requirements for the forthcoming year. The budget documents do not present sufficient information to allow for detailed analysis of projects. Although the Budget Statement sets out government plans and priorities, these are not clearly linked to the expenditure allocations. The focus of expenditure planning is very much on individual projects, rather than on a wider programme of activities and/or projects aimed at achieving government objectives. The release of capital funds is on a project-by-project basis, rather than on an implementation plan for the whole ministry or department, thus lower priority projects may be implemented prior to higher priority projects 

 

Strengths of the existing system

Mauritius has an effective budget implementation system; there is a close match between estimated and actual expenditures, and there is a high level of compliance with fiscal regulations. Mauritius has developed expertise in running a tight budget-preparing process with proper expenditure monitoring, and much of the foundation for the MTEF and RBB already exists in Mauritius. A state-of-the-art accounting system has been introduced and has been made fully operational in a relatively short period of time. Reports on actual expenditures are produced in a timely fashion and there is a high level of compliance with laid down procedures. The Ministry of Finance and Cabinet discuss government priorities and the translation of these into ministry allocations. Some sector ministries have developed sub-sector master plans and/or reform programmes, and most have developed mission statements and objectives. Policy analysis and reforms have been started in a number of ministries, and financial monitoring systems and compliance to existing rules are strong. Overall fiscal discipline is maintained by tight cash controls. A broad range of output statistics are collected and used to some extent in taking management decisions.

 

Box 2: The budgetary process in Mauritius The budgetary process in Mauritius is driven by the Ministry of Finance and Economic Development (MOFED), which is solely responsible for the preparation of the budget. Other agencies participating in the preparation are the line ministries and the Ministry of Civil Service Affairs (MCSA). The budget cycle begins around February, about five months prior to the commencement of the fiscal year on 1 July. The MOFED requests line ministries to submit their expenditure proposals for the forthcoming budget year, given the expenditure envelopes. On the basis of the macroeconomic fiscal framework, ceilings are issued to all ministries in a Budget Circular that sets out overall government objectives as well as detailed instructions for the recurrent and capital budgets. Line ministry submissions are then reviewed by MOFED staff. Since expenditures are generally well above the notional expenditure envelopes indicated by MOFED, formal meetings are held between line ministries, MOFED and MCSA to iron out the differences.

 

Rationale for reform

The main shortcomings of the budgetary system are that well-structured interactions and thorough discussions on the prioritisation of the competing proposals of line ministries are not carried out; resource allocation decisions do not clearly reflect the trade-offs between and within sectors; and, given the focus on inputs rather than a programme of activities or outcomes aimed at achieving government objectives, funding proposals are not made subject to expected performance. 

These have contributed to a lack of effectiveness in public expenditure projects. The budgetary system falls short on development policy and sectoral programme design as well as monitoring and evaluation of outcomes. It is particularly ill-equipped to engage in good strategic planning. It does not allow government to effectively evaluate its earlier measures, rethink its key policy objectives and prioritise expenditures in the best possible way. The lack of cohesion in expenditure programmes, formulated on an ad hoc basis and on insufficient analytical foundations, makes trade-offs between different priorities difficult. It only encourages line ministries, as a convenient short cut, to put forward a shopping list of projects, not necessarily in line with their genuine needs. 

Most of the time, ministries tend to regard the ceilings set by the MOFED not as firm envelopes but simply as departure points for a bilateral budget negotiating exercise. These overestimated budget submissions by line ministries often result in arbitrary cuts by the MOFED. The present budgetary procedures for the allocation of resources do not allow for greater contestability and transparency. Moreover, the dual budgeting process is seen as a means of fragmenting the decision-making process. The national budget does attain aggregate fiscal discipline, but fails to some extent on the other two core budgetary outcomes, namely allocative efficiency and effective service delivery.

 

4.3 The introduction of the MTEF

 

The NEA is an extensive reform programme. Government’s initial assessment of the total investment costs of the 5-year programme amounted to some Rs50 billion or about 6 per cent of GDP per annum. Thus, the NEA entails ambitious plans and large public investments compared to pre-NEA levels. The low levels of tax revenue combined with increased levels of public spending have meant increasing pressure on the budget, and highlight the need to manage fiscal policies carefully by prioritising and phasing expenditures. 

Government recognised the need to move to multi-year budgeting and to introduce clearer links between development objectives and the budgetary process, and embarked on reforms aimed at introducing an MTEF as a first step. In public expenditure management terminology, improvements had to be made in terms of fiscal discipline, inter-sectoral allocations and intra-sectoral efficiency. The definition of realistic and sustainable fiscal targets and political commitment to those targets can go a long way in addressing these concerns; however, better capacity in aligning government spending with development priorities is also important, as are strong a priori analyses of spending programmes and the fiscal risks on the expenditure and revenue sides. 

Building on the systems already in place, an MTEF was introduced for the 2003/04 budget, mainly as a central tool for prioritising and allocating resources between sectors. The chief elements of this top-down approach were the development of a macroeconomic framework, medium-term fiscal targets, an aggregate expenditure limit, and sectoral allocations. 

To fill a critical gap in the machinery for co-ordinating macroeconomic policy, a Macroeconomic Technical Committee, comprising the Ministry of Finance and Economic Development, the Central Bank, and the Central Statistics Office, was set up to develop a Medium Term (3–4 year) Fiscal Framework (MTFF). The MTFF discusses critical macroeconomic and fiscal issues facing the economy, and incorporates likely and consistent medium-term macroeconomic and fiscal frameworks for the budget. It also sets out the fiscal policy trade-offs faced by the government and associated implementation issues. The MTFF details targets for total revenue, spending and the deficit for the forthcoming budget and successive framework years, based upon the government’s current assessment of the development path of the economy and its strategic intentions for fiscal policy.

The MTFF is presented to Cabinet in February, four months before the presentation of the budget, for discussion and endorsement ahead of the issue of a Budget Circular. The current process of setting budgetary ceilings involves assessment of the macroeconomic forecasts, agreement on overall recurrent and capital expenditures, and allocation of resources between ministries according to priorities. The capital budget ceilings are based on mid-year implementation assessments of capital projects. As part of this process, lower priority projects are dropped from the budget. The ceilings are consolidated in a Cabinet report, which outlines the overall macroeconomic situation, targets, and broad issues for reallocation of resources between sectors. The ceilings are then issued to all ministries in the Budget Circular, which sets out overall government objectives and macroeconomic targets as well as detailed instructions for the recurrent and capital budgets.

The Budget Circular process entails the conveying of ceilings to line ministries for the following three fiscal years. With the MTFF as a point of departure and debate, government agrees on medium-term fiscal targets and inter-sectoral allocations (i.e. a set of medium-term sector or ministry ceilings presented in the Circular).

The Budget Circular then incorporates these medium-term (3-year) ceilings for each ministry, consistent with the priorities emerging from Cabinet discussions. These ceilings are consistent with the aggregate fiscal framework. The purpose of the medium-term ceilings is to give ministries an indication of the level of funding they may reasonably expect to receive for existing programmes and policies in the outer years. The expectation, however, would be that ministries frame their spending proposals, both recurrent and capital, within these medium-term resource envelopes. Compliance with these rules is strong at the time of the budget submissions. However, Cabinet decisions on new policy initiatives are still made on an ad hoc basis during the spending year, as line ministries prepare new policies, programmes and projects for presentation. This can serve to undermine the budget process.

Some two months before the budget, consultations are carried out with line ministries. The budget estimates are reviewed by the MOFED, which has all the information on the status of each project and is thus in a position to decide on the amounts that should be allocated to each project. During the bilateral discussions of the spending proposals, ministries are required to present supporting information, as available, on policy objectives, outputs and outcomes. 

4.4 The introduction of results-based budgeting (RBB)

 

Once the top-down approach had been implemented, it was decided to introduce programme-based or results-based budgeting (RBB), the first component of the bottom-up process of our budget reform – an important stage on the road map to fully fledged performance budgeting, as depicted in Figure 4.2.

 

Figure 4.2: Performance budgeting

 

 

The key elements of the bottom-up approach are policy design and implementation, programme monitoring and costing. This requires that line ministries are staffed both by administrators and accountants, and by a multi-disciplinary team comprising policy specialists and economists, who not only formulate polices (including government and private sector roles) according to medium-term budget availability but also monitor outputs and outcomes (where possible) that feed into the annual budget exercise. This would help line ministry managers to ensure that resources are used to achieve their intended results. The bottom-up budgetary process would also enable government to better gauge progress in implementation and allow activities to be linked to performance indicators. Such a performance focus, or increased emphasis on service delivery, would increase the transparency of government and strengthen democratic accountability. Pilot ministries could be required to prepare annual reports. Finally, ministries would estimate the costs of implementing policy and achieving agreed outputs through the preparation of 3-year, integrated, performance-based budgets, and provide this information to the MOFED and Cabinet, so that adjustments in the allocations between sectors and ministries are based on the costs of implementing priority policies and programmes.

Government decided that, parallel with the existing traditional line budgeting, RBB would be introduced in stages over a longer time frame, initially covering the following sectors on a pilot basis – Education, Training, Health, Social Security, Environment (including Waste Water) and Public Infrastructure (including Transport). The remaining sectors are expected to follow suit as implementation progresses. 

Despite being both top-down and bottom-up in design, the RBB approach has been a largely top-down exercise to date. It is only in the current RBB cycle that the MTEF cells in ministries are being built up to improve the bottom-up aspects of policy formulation, prioritisation and costing of programmes in the context of RBB. 

However, a very elementary form of RBB in Education and Training has been completed with a recasting of the present line budgeting to a 3-year rolling budget of the total recurrent and development budgets within the incremental budget framework. It emphasises the allocation of resources on a sector and programme basis. Introducing a focus on results means that government can begin to move from reporting on inputs (i.e. how much money was spent on a particular project) to reporting on results (i.e. the efficiency of what was produced as a result of the project and its effectiveness, and whether this had a positive benefit to specific groups). Focusing on results also enables managers in ministries to take decisions based on performance information to improve the impact of their programmes, rather than simply ensuring that funds are spent. Such information was presented in a separate document along with the 2004/05 budget on 11 June 2004. In the case of the Education sector pilot, the document set out the financial allocations for the fiscal year (by programme and economic line-item classification), with projections for the two forward years, together with indicators for the three years. For example, in the school education programme, the results-based objectives were targets for the final examination pass rate and for reducing the drop-out rate and rate of absenteeism. 

The rolling out of the new budgeting process necessitated a reorganisation of the existing institutional structure. In this regard, government decided in December 2003 to merge the Ministry of Economic Development (MED) with the Ministry of Finance (MOF) and set up a Central MTEF Unit. In addition to the complementary nature of the functions of the two ministries, an important rationale for the merger was the need to bring together their respective accumulated experience and ensure enhanced economic management with special emphasis on efficient expenditure management.  

The Central MTEF Unit (CMU) spearheads the implementation of the MTEF/RBB in the MOFED and line ministries. Multi-disciplinary Sectoral MTEF Units (SMUs) are being set up in line ministries to implement the MTEF/RBB. Some economists from Economic Development sectoral units have been posted to the SMUs. They will be assisting in undertaking policy analysis, working out sectoral MTEFs, identifying measurable outcome indicators and preparing reports on programme management, as well as acting as co-ordinators between the SMUs and the CMU.

 

Figure 4.3: Institutional structure

 

 The CMU is presently working on the second stage of the RBB implementation plan, which involves the conversion of the budget allocations of Environment (including Waste Water), Social Security, and Health. A list of programmes for these sectors is being finalised in consultation with the line ministries and spending/executing bodies. The whole MTEF/RBB process for these sectors is expected to be completed by April 2005 and the document presented along with the traditional budget for 2005/06. The programmes and expenditures of Education and Training are being fine-tuned and broken down into specific activities, as shown in Figure 4.4. The CMU is also developing a monitoring and evaluation mechanism, which is a key component of the budget reform. A format has been devised and is currently being tested with the budgets of the pilot RBB ministries. It is represented below: 

 

4.5  The Treasury accounting system 

The Treasury is responsible, inter alia, for ensuring the adequacy of departmental accounting systems and procedures as laid down in the Financial Management Manual and other financial regulations and legislation; advising ministries/departments on accounting and financial matters; exercising general supervision over the receipts of public revenue and over the expenditure and other disbursements of government; and reporting on the financial position of the Republic of Mauritius periodically.

Prior to 1999, ministries and departments used stand-alone account system software to manage their expenditures and revenues. Each ministry/department would submit soft copies of their consolidated accounts to the Treasury, which in turn would integrate the different inputs into its system. The major drawback of the system was the time lag involved in the consolidation of government accounts. Furthermore, a similar exercise was being carried out at the Ministry of Finance for the monitoring of revenue and expenditure. Ministries and departments were required to submit monthly returns of revenue and expenditure within five days after month end. These were consolidated at the Ministry of Finance. It was observed that, due to administrative reasons, many ministries and departments were unable to meet the deadline for submission of returns, which resulted in delays in analysing budget performance on a monthly basis.  

In 1999 the Treasury reviewed its accounting software in addressing the ‘Y2K’ problem. It adopted an integrated system, the Oracle Public Sector Financials, whereby all ministries/departments were connected to the system. With four modules (Accounts Receivable, Accounts Payable, General Ledger and Cash Management), the system provides for a central database with an intranet interface.

Therefore, a new Chart of Accounts was adopted that, besides giving financial information, was customised to provide other information on aspects of management accounting. The system was developed with a 15-year horizon and incorporates important features for the effective implementation of the MTEF. The system also provides an up-to-date statement of accounts, as the database is updated on a daily basis. As soon as data is entered, it is instantly available online via the intranet system for analysis at the MOFED. There is no need to spend time re-keying data. Presently, the Treasury closes the government’s financial accounts for the month after only two days. The annual report is prepared within two months. Through its connection to the system, the MOFED can obtain specialised reports for monitoring purposes. The Central Statistics Office is also connected to the system to extract relevant data for the preparation of the quarterly government finance statistics and national accounts estimates.

The new system has been very helpful in the forecasting exercise. Information on any major discrepancy between estimates and actual figures is known instantly, and forecasts are revised accordingly. Two major levels of control are incorporated in the system: first, absolute control that strictly prevents ministries/departments from spending beyond their allocated budgets; second, optional (or advisory) control, whereby on the approval of the MOFED, the Treasury may increase the budget limit for certain projects and proceed with a reallocation of funds. Ministries/departments are also required to submit weekly forecasts of expenditures and revenues. In cases where expenditures exceed the forecasts, the Treasury queries the ministry/department and, if the expenditures are justified, asks the ministry/department to submit an update of its weekly forecasts. The system has established a strict control over public expenditures and has resulted in around 98 per cent accuracy in expenditure forecasts.

The whole system was designed and developed by Mauritian professionals in close collaboration with the Treasury, and was operationalised within five months. Mauritius is one of the first African countries to have adopted the Oracle Financials. 

The Treasury will soon be incorporating two new modules into the system, namely the Oracle Payroll and the Oracle Assets modules. The Payroll module is a high-performance, graphical, rules-based payroll management system that is designed to keep pace with the changing needs of government and its workforce. The Assets module will allow for a complete inventory of government assets and greater control of acquisitions, disposals and maintenance. 

The Treasury is also envisaging adopting the Oracle Public Sector Budgeting module, which is a new application that delivers scalable planning and analysis, offering sophisticated data modelling and multidimensional analysis in a web environment. This will allow for an effective use of the Oracle Financial Analyser (the leading integrated analytical application) for financial reporting, analysis, budgeting and planning. The objective is to transform budgeting into a dynamic, transparent and collaborative process, and enable ministries/ departments to link their budgets to their strategies. The budget preparation process may undergo important changes as discussions on budget proposals, prioritisation of projects and other issues can be done online. The Budgeting module, which supports rolling budgets and forecasts, is indeed in line with the budget reforms, particularly the implementation of the MTEF.

 

4.6 Lessons learnt

    

The introduction of the MTEF is an attempt to move away from conventional incremental budgeting, where current budgets are increased by some margin for the following year, to a budgeting system based on the actual cost of service delivery. This is a long-term process that can only been implemented in stages. The whole process will have to go through the necessary learning curve. In the present phases, greater emphasis has been placed on aligning the objectives of programmes with outputs, and increasing results-accountability, than on improving cost-effectiveness. We believe that we have more chance of success if we adopt a phased approach that will first put in place the building blocks at the levels of macroeconomic stability and strategic allocation of resources, and then add the other layers of the different stages of results-based budgeting that will ultimately allow us to improve the effectiveness of expenditures through the introduction of performance-based budgeting.

For a genuine bottom-up approach, the causal links between activities and outputs and between outputs and policy outcomes have to be well established. Moreover, objectives and targets have to be properly disaggregated and cascaded down to operating units. Implementation decisions should be devolved to the lowest feasible level in the hierarchy. 

The determination of priorities becomes precise and realistic during the preparation of the budget. Thus, it is important that there should be mechanisms within the budget process that encourage the re-evaluation of policies and priorities and that facilitate the generation of policy alternatives. 

A coherent framework for MTEF/RBB preparation, training needs and implementation from the MOFED, which would serve as a foundation, is lacking; and the current level of training for line ministries is so low that it risks not generating sufficient commitment and ownership. 

The bottom-up approach will require capacity to be increased in the line ministries for policy development and programme management – these are new specialties for ministries, which have thus far relied primarily on external advisors for their analytical work. Reinforcement of the line ministries, especially the pilots, will be critical at this stage.

For an MTEF to perform its strategic allocation function, the top echelons of government need to have ownership of the medium-term inter-sectoral allocations. Ultimately, the allocation function remains the privilege and responsibility of the political leadership

 

4.7 Conclusion

 

As Mauritius faces the challenge of financing the NEA’s investment programme in the presence of budget constraints, the process of inter-sectoral choice is among the most strategic decisions that the country can make. Today, budget constraints require greater efficiency in using public resources. To assist in making better inter-sectoral decisions and improving the efficiency and effectiveness of expenditures, Mauritius is reforming its budget management and budgetary processes by:

·      more closely aligning development objectives, programme objectives and budget allocations; 

·      broadening the realm of public/private solutions for the attainment of development objectives;

·      improving the economic analysis of programmes and projects; and 

·      attempting to develop the right institutional structure that will help in guiding the ultimate choices of resource allocation across and within sectors. 

 

A crucial element in this bold reform programme is the institutional mechanism that should be put in place to support the implementation of MTEF/RBB. This will necessitate that:

·      line ministries are restructured to meet the demands of programme or results-based budgeting; 

·      strategic planning and analytical capabilities for assessing and appraising public spending are reinforced in line ministries;

·      the MOFED is redesigned to effectively co-ordinate MTEF/RBB, review sectoral policies and formulate 3-year programmes; 

·      the top-down (government, through the MOFED) and the bottom-up (sector) processes for deciding on sectoral priorities and allocation are strengthened;

·      the political will to carry forward the budget reform programme is reinforced.

 

Often the search for the appropriate mechanism to address the above issues is a learning-by-doing process. More importantly, the whole budget reform programme must be owned by the implementing agencies and be allowed to generate its own local specificities, adaptations and pace of implementation – preferably without the usual retinue of advisers.

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