Strategic Direction of Cambodia Budget System Reform 2013-

2020

OECD BUDGET MEETING

Bangkok, 18-19 December 2014

1 By Mr. Hav Ratanak, Director of Department of Budget Formulation

Content

• Progresses in PFM Reform

• Direction Of Budget System Reform

• Strategic Approach for Budget System Reform 2013-

2020

• Action Plan for Budget System Reform

• Conclusion

2 By Mr. Hav Ratanak, Director of Department of Budget Formulation

• Stage3: CAP3 (2016-2020)

• Stage4: CAP4 (2020-2025)

• Stage2: CAP2 (2009-2015)

• Stage1: CAP1 (2005-2008)

Platform 1: Budget Credibility

Platform 2: Financial Accountability

Platform 3: Budget-Policy

Linkages

Platform 4: Performance Accountability

Cambodia’s 4 Platforms 4 Stages

Approach

3

By Mr. Hav Ratanak, Director of Department of Budget Formulation 4

Progress in PFM Reform (1/2)

Building budget credibility (Stage 1)

Str

eng

thenin

g r

eve

nue

mob

iliza

tion

Imp

lem

ent

ing

sin

gle

trea

sury

acc

ount

and

ca

sh

ma

nagem

ent

Outcome

1. Eliminating budget Arrears.

2. Creating annual budget surplus.

3. Increasing annual revenue by 20%

By Mr. Hav Ratanak, Director of Department of Budget Formulation 5

Progress in PFM Reform (2/2)

Creating financial accountability (Stage 2) Li

ne a

ccounta

bility

Sta

nd

ard

( N

ew

CO

A/

New

Bud

get C

lass

ific

ation

Outcome

1. Readiness of New Chart of Account/New Budget Classification.

2. Improvement of BSP, readiness of BE for pilot, and of full PB

Implementation.

3. The launch of FMIS Project

Bud

get Execu

tion

FMIS

Ca

paci

ty d

eve

lop

ment /

Tra

inin

g

By Mr. Hav Ratanak, Director of Department of Budget Formulation 6

Direction of Budget System Reform 2013-2020

2020

Two key directions of Budget System reform

Strengthening discipline of public financial management

(balance/sustainability),

Improving efficiency of budget allocation (allocation to policy priorities) and

Enhancing technical effectiveness of spending

Gradually transforming from Input and centralized based budget system to

Output based budget system (Output and Performance) accompanied with

appropriate Deconcentration and Decentralization

By Mr. Hav Ratanak, Director of Department of Budget Formulation 7

Budget System in 2020

1. Budget Formulation: Should be based polices, programs and indicators along with

clear legal framework and mechanism in order to link budget to policies and

measureable results, to ensure budget discipline (balance/sustainability), efficient

allocation of budget, technical effectiveness of spending

2. Budget Approval: Moving from Categories, Chapters, to policies, programs and

indicators.

3. Budget Execution: Ensuring effective and efficient implementation of budget by moving

from input based control to output based monitoring evaluation.

4. Result and performance monitoring and evaluation: ensuring transparency,

accountability and clear responsibility in order to implement framework and

mechanism for result monitoring and evaluation, from input monitoring to result based

monitoring and evaluating along with D&D

8

Medium term framework and Annual Budgeting

National Policies (Rectangular Strategy/NSDP)

Macroeconomic policy and Public

Finance Policy

Sectoral Policies

Medium term framework of revenue

and expenditure

Budget Strategic Plan

Annual Budget Law

linking national Policies and Sectoral Policies

By Mr. Hav Ratanak, Director of Department of Budget Formulation

By Mr. Hav Ratanak, Director of Department of Budget Formulation 9

Linking Institutional Management Structure and Policy

Structure

Management and Policy Formulation (Ministerial/Organizational Level)

Technical Level and program/strategic formulation (Secretariat/General Dept) Strategies/Programs

Technical level and Formulation of sub-program/activity cluster (Department) Sub-program/activity cluster

Technical level and implementation of activities (Agency under supervision of

ministry) activities

Policy Formulation Policy Objectives,

Strategies/Programs

Formulation of

Strategy/program

Sub-program/activity cluster

formulation

Implementation of

activities

Management Structure Authority and Responsibility Policy Structure

By Mr. Hav Ratanak, Director of Department of Budget Formulation 10

Basic Change of Budget Formulation and Budget Execution Current budget system New Budget System

Category/Chapter Budget Amount (Million Riel) Policies Indicator/Goal Budget Amount (Million Riel)

Category #1 100, 000 (1) Policy #1 Indicator #1

Indicator #2

94,000

60 41, 000 1.1- Program #1 Indicator #1

Indicator #2

47, 000

61 14, 000 1.1.1- Sub-Program

62 13, 000 1.1.1.1- The numbers of Activity

64 32, 000 1.2- Program #2 Indicator #1

Indication #2

47, 000

Type #2 - 1.2.1-Sub-program

66 - 1.2.1- The numbers of activity

Type #3 22,000 (2) Policy #2 Indicator #1

Indicator #2

Indicator #3

141, 000

65 22, 000 2.1- Program #3 Indicator #1

Indicator #2

47, 000

Type 4 113, 000 2.1.1- Sub-program

63 113,000 2.1.1.1- The numbers of activity

2.2- Program #4 Indicator #1

Indicator #2

47, 000

2.2.1- Sub-program

2.2.1.1- The numbers of activity

2.3 Program #5 Indicator #1

Indicator #2

47, 000

2.3.1-Sub-program

2.3.1.1 The number of activity

Total 235, 000 Policy #2/Program #5 Indicator #5/10 235, 000

By Mr. Hav Ratanak, Director of Department of Budget Formulation 11

Strategies for Budget System Reform (1/2)

Five strategic approaches for budget system reform

First,

Strengthening the implementation and improving the effectiveness

of budget strategic plan (BSP).

Second,

Strengthening and implementing full program budgeting (PB) for

lines ministries, including Ministry of Economy and Finance.

Third,

Introducing and implementing budget entity (BE).

By Mr. Hav Ratanak, Director of Department of Budget Formulation 12

Strategies for Budget System Reform

Five strategic approaches for budget system reform

Forth,

Reviewing, Revising and implementing new budget classification,

new chart of accounts and financial management information

system (FMIS).

Fifth,

Introducing and implementing new budget system.

Action Plan for Budget System Reform (1/3)

I- Budget Strategic Plan (BSP)

- Strengthening and Enhancing the effectiveness of BSP.

- Working with line ministries to set policy objectives and indicators incorporating in

BSP and monitoring and evaluating performance of budget implementation.

II- Program Budgeting (PB)

- Fully implementing program budgeting for 10 ministries and expand to other line

ministries towards realization of full implementation of the program budgeting for

all ministries by 2020.

- Encouraging line ministries to voluntarily implementing program budgeting from

2015.

- Reviewing and developing guideline for and strengthening full implementation of

program budgeting for line ministries.

By Mr. Hav Ratanak, Director of Department of Budget Formulation 13

Action Plan for Budget System Reform (2/3)

III- Budget Entity (BE)

- Preparing for implementation of BE (2014)

- Piloting implementation of BE for 10 ministries in 2015.

- Reviewing and strengthening the strategy and extending the implementation of BE to

other line ministries.

- Fully implementing BE for all ministries by 2020.

IV- Budget Classification

- Preparing for step-by-step implementation of seven segments of budget classification.

- Fully implementing economic classification and partially implementing geographical

classification, functional classification, administrative classification, program budget

classification, financial source classification.

- Reviewing and improving its implementation for 2016 or 2017

- Fully implementing 7 segment of classification by 2020.

By Mr. Hav Ratanak, Director of Department of Budget Formulation 14

Action Plan for Budget System Reform (3/3)

V- Capacity building for Officials Involved

- Training for trainers (General Department of Budget; Financial and Budget

Department of Line Ministries.

- Training for responsible Officials

- Training for Officials of Line Ministries by trainers.

VI- Workshop and Seminar

- Conducting workshops to disseminate and consult regulatory frameworks related to

budget formulation and budget execution at both technical level and management

level.

By Mr. Hav Ratanak, Director of Department of Budget Formulation 15

Conclusion

I. Previous result and good preparation for budget system reform are

significant for ensuring that we are on the right track and thus move forwards

to the realization of the strategy.

II. Direction of budget system reform can be achieved through strong political

will and commitment, and leadership of the top management of all ministries.

III. Need to build human resource and institutional capacity to support the

implementation of new budget system as they are a key to the success and

sustainability of the implementation of budget system reform.

By Mr. Hav Ratanak, Director of Department of Budget Formulation 16

Thank you for your attention

By Mr. Hav Ratanak, Director of Department of Budget Formulation 17