Punjab Government is implementing a plan to improve the co-ordination of the medium-term budget framework (MTBF) and medium-term plans (MTP), while, the existing MTBF cell within the Finance Department (FD) and the MTDF Cell within the Planning and Development Department (P&DD) will be strengthened and joint protocols will be developed, with financial assistance of Asian Development Bank.
Planning and Development Department of Punjab (P&DD) sources disclosed that the new ADB supported Programme also seeks improved mobilisation of tax revenues at both provincial and local government levels.
It is aimed at consolidating reform efforts already undertaken during the PRMP in three main areas of tax policy and tax administration, namely: (i) developing a provincial database of stamp duty collection to improve revenue yields; (ii) supporting the implementation of the provincial agriculture income tax policy to improve efficiency in the assessment and collection of the agriculture income tax; and (iii) improving tax administration by bringing all tax collection functions under a unified authority. The proposed revenue-augmenting measures will be adopted under second plan to increase the fiscal autonomy of the provincial government by generating additional revenues.
The Programme is also aimed at improving local government capacity for revenue administration through better co-ordination with the provincial government in tax policy formulation and administration. Planning and Development Department sources mentioned that the compartmentalised approach to the preparation of medium-term plans (MTP) and budgets (MTBF) is a major obstacle to effective public financial management.
Therefore, a major objective of reform under the Punjab Government Efficiency Improvement Program (PGEIP) will be to improve the integration between the MTP and MTDF and increase the transparency and accountability of the annual budget process.
This plan will be achieved through increased co-operation between the FD and the P&DD (ie central departments), and between central and line departments. Increased co-operation will further facilitate the integration between the top-down and the bottom-up dimensions of the MTBF and MTP, including timely communication from the FD to other departments of the resources available over the next 3 years.
Official sources mentioned that Quality and timeliness of the MTP and MTBF are essential to improved planning and budgeting. Closer integration between the two will lead to better prioritisation of expenditures, with emphasis on productive development spending. While the MTDF for FY2008-2010 has been published, MTBF forecasts are 2 years overdue.
As part of first plan, the FD has finalised the fiscal forecasts and publishes the MTBF for the period FY2008-2010. The new MTBF will provide more transparency and predictability in the interdepartmental allocation of resources.
To improve the co-ordination of the MTBF and MTDF processes, the existing MTBF cell within the FD and the MTDF cell within the P&DD will be strengthened and joint protocols will be developed.
This will result in clearer expenditure ceilings across line departments, and greater sustainability of development projects through the allocation of resources for recurrent maintenance needs. Under Second Plan, timely annual updating of the MTBF is supported to ensure a more reliable and realistic assessment of the resources available over the medium term.
Depending on the progress of the first two plans, a unified MTEF consolidating the planning and budgeting dimensions could be adopted under third plan. For the MTBF/MTDF to be a meaningful tool for the effective allocation of resources, it has to be fully integrated with the annual budget process.
For this purpose, under first plan, a revised annual budget statement format has been introduced, providing for an organisational and economic classification of expenditures along with a functional classification in the interest of increased transparency in the allocation of resources, sources explained.
P&DD sources mentioned that the Budget Call Circular (BCC) is a key document, as it is circulated by the FD to line departments at the start of the budget cycle for the submission of their expenditure estimates. In its current format, the BCC is not suited to the integration of the annual budget with the MTBF.
Under Second Plan, the format of BCC will be revised and made more conducive to the full integration of the annual budget and the MTBF, including the notification of recurrent budget ceilings to line departments and the improvement of co-ordination between the FD and the P&DD. Infusing greater fiscal discipline into public expenditure management is another important objective of reform under this component.
To this end, a policy and regulatory framework for fiscal responsibility will be developed under second plan to promote principles of prudent fiscal and financial management in both central and line departments. A review of the existing mechanism of excess and surrenders will also be made under Second Plan for the purpose of improving budget execution.