Credits Budget Guide for Decision Makers Advisors - Mr David Allan - Ms Natalie Fuller (supported by the Australian Volunteers for International Development program) Project Team - Hnin Phwe Phwe Oo, Zam Deih Khual Cartoon illustrators - Cartoon Lailone, Cartoon Salai Suan Pi Donor - The Asia Foundation Organizer - Spectrum - Sustainable Development Knowledge Network Cover and layout design - Cartoon Shwe Lu and SOLiD Media & Printing Services Producer - Spectrum - Sustainable Development Knowledge Network Print run - 1000 Explanatory note: This document was originally written in English and translated by Htin Kyaw Aye into Myanmar. Due to a high level of interest, it has been reproduced here in English. It contains minor amendments / clarifications to the Myanmar version. Foreword Table of Contents Myanmar's interest in Public Financial Management Reform (PFM) continues to increase and much Introduction 1 Budget literacy 3 progress has been made. After the "Budget Guide for Growing Citizens" release in 2015 we received Key terms ................................................................................................... 3 many requests for guides to offer more information to decision makers and the public in general. The Reading a Budget ....................................................................................... 5 aim is real impact on people's lives through improved utilisation of state finances. The money in the Assessing a Budget ..................................................................................... 8 budget comes from taxes and it is the role of government to manage it well. Budget transparency improves people’s understanding of how spending will be planned by government to meet the people’s Why is budgeting important? 10 needs. The budget is intimately linked to government activity and projects. Myanmar has now produced Making best use of public funds ................................................................ 10 three Union-level citizens’ budgets and is considering production of state and region citizens’ budgets Achieving long-term goals .......................................................................... 11 in at least three places. Demonstrating good governance ............................................................... 13 Controlling spending .................................................................................. 17 Improving equity and reducing poverty, social and economic vulnerabilities 19 Worldwide interest in openness and participation in public financial management is growing. Informed, actively participating citizens are critical to the overall process of improving accountability. Many What is the budget cycle? 21 countries have shown that good governance is just good economics, delivering broad social benefits Formulation and Approval .......................................................................... 24 and improved focus on the priorities for public expenditure. A government that truly empowers its Execution .................................................................................................... 27 people will reap rewards of public trust and citizens committed to nation building. Auditing ...................................................................................................... 27 Roles of Key Committees ............................................................................ 29 Reform progress in developing countries can be fragile as the creativity and innovation demanded of Resource Mobilisation 31 transparency, accountability and openness might be viewed with suspicion and resistance. Without State-owned Economic Enterprises ............................................................ 32 the necessary openness, progress can be undermined by social unrest, poor accountability, corruption Taxes ........................................................................................................... 33 and limited understanding between state and people. Where transparency and participation are Foreign Aid and Loans ................................................................................ 37 encouraged, cooperation will blossom between governments and informed citizens. Together, transparency, accountability and openness help create a virtuous cycle of governance improvement Resource Allocation 39 and social accountability. Expenditure of funds .................................................................................. 39 Allocations to States and Regions .............................................................. 41 In this way the theory of change is complete - access to information, citizen participation, budget Expenditure by Sector ................................................................................ 43 transparency and accountability improve lives. Looking Ahead ............................................................................................ 45 Enormous credit is due to the Ministry of Planning and Finance for amazing reforms, ongoing progress Appendix 46 and commitment to transparency and accountability. I also thank The Asia Foundation for project Economic Policy for the Union of Myanmar ............................................... 46 support, the International Budget Project and all involved from the Spectrum team and our many associates in the guide development. Special thanks go to Natalie Fuller (supported by the Australian Further Reading 48 Volunteers for International Development program) for her efforts in the content formulation and project management of this guide. David Allan Director, Spectrum August 2017. Since 2015-16, the Union Government has produced the Citizens’ Budget, one of the eight key documents recommended under best international practice to aid public understanding of the budget cycle and the key policies – economic, investment, taxation and social – that Introduction influence Budget decision-making. This booklet adds to information available in these Citizens’ Budgets to further strengthen the budget literacy of all stakeholders. It aims to assist decision makers by explaining in simple, easy-to-understand language: Managing a country’s finances is an exercise in public responsibility in which everyone has a Y The importance of strategic planning linked to policy aims stake. Y The components that make up a budget From the officials that help prepare the data, to the State and Regional communities that have Y How budgeting can assist in achieving long-term goals a financial interest, to the Ministers and Members of Parliament who will decide the bottom Y The budget cycle in Myanmar line, and the general public who will benefit from government services, the Union Budget is Y The principles of public participation. an important document. The Budget is also a manifestation of political will and policy priorities. As such, it provides a Enhancing budget literacy will give people the knowledge and the tools to participate in the valuable indicator of good governance, a feature of all well-functioning democracies. process. People can play a role in choosing how and where the nation’s resources are best allocated to achieve the strategic outcomes that will determine Myanmar’s future prosperity. Myanmar has taken significant strides down the path of good governance in recent times. Key reforms have included: In gaining a clear picture of the Union’s finances and policy priorities, decision makers and, in turn, the public, should develop trust in the process and confidence in the outcomes – both Y Introducing a Medium-Term Fiscal Framework to provide budget and policy critical elements for the sustainability of Myanmar’s public financial management system. continuity Y Fiscal decentralisation with budgets for the Union Government as well as for the administrations of each of the seven States, seven Regions and Nay Pyi Taw Y Introducing a formula for state and region overall funding allocation adjustments Y Establishing a credible and visible budget process and timing Y Introducing policy as a basis for budget decision-making Y Improving the transparency and accountability of the handling of public finances. The process that underpins the budget’s preparation will determine the extent to which stakeholders can engage with it. This engagement, in turn, will be influenced by the extent to which the people involved, or those wanting to be involved, understand not only the process but also the meaning behind the numbers. Budget Guide for Decision Makers Budget Guide for Decision Makers 1 2 Budget literacy Key terms In order to prepare and interpret budgets, it is important to understand a number of key terms and concepts. Budget A statement of the expected revenue (income) and expenditure (spending) Debt Not the same as deficit. A deficit is the over expenditure for a specific for a certain period of time. An annual budget is for a 12-month period for fiscal year. Debt is the accumulation of years of deficit (less an occasional the financial year – also referred to as the fiscal year. surplus.) The national debt is the total amount a government has borrowed Fiscal year (FY) A country's 12-month accounting period. The fiscal year varies between and, therefore, owes to creditors or back to itself. countries, with many using the calendar year from 1 January to 31 Inflation The rate at which the general level of prices for goods and services is rising December. In Myanmar, the fiscal year is from 1 April to 31 March of the over time. As a result