1. DIALOGUE WITH MINISTRY OF FINANCE SENIOR OFFICIALS

(by Robert Bauchmüller, CEF Senior Program Officer)

In January 2015, the CEF welcomed together with the Dutch National Academy of Finance & Economics (NAFE) senior officials of ministries of finance in South East Europe at a regional conference. The aim of this conference was to share experience and identify good practice in strengthening the role of line ministries in the budget process. Delegates emphasized the importance of strengthening the coordination and relationship between the ministries of finance and line ministries in this process, and expressed their views on directions to further develop capacities of line ministry finance officials in that regard.

With respect to processes, delegates concluded that line ministries need to be involved in the process as early as possible, so that they have enough time to set internal priorities and elaborate a credible budget. Delegates observed a large share of policy-decisions in the region being established as laws. They expressed advantages that more flexible ministerial budgets could bring along, e.g. to provide space for changing external conditions and new policies. Delegates saw both negative and positive incentives of encouraging line ministries to look for savings. Savings identified by line ministries might quickly be cut away by the ministry of finance; yet, rules assuring line ministries could keep part of the saved money may be difficult to establish – strict (multi-)annual ceilings were seen as better practice. Also, the introduction of program budgeting has been associated with strengthening line ministries’ capacity to identify savings. Delegates observed that there is a difference in capacities between ministries of finance and line ministries, which poses problems in the budget process. They pointed out that line ministries (and some agencies) show less commitment to overall fiscal discipline than ministries of finance; their weaker understanding of the overall fiscal position has been recognized as a possible reason. Yet, the ministry of finance officials stressed that their counterparts from line ministries better understand the content of policies.

With respect to competences, delegates reflected on the role of ministries of finance in recruiting finance directors of line ministries. Different opinions were put forward on whether ministries of finance should have an active say in this regard. Delegates emphasized the importance of line ministries being in charge of their own staff, and ministers trusting their finance directorate. However, there was a shared understanding of ministries of finance being responsible for sufficient capacity of the system as a whole. Delegates reflected also on alternative options, for example, with respect to ministries’ of finance role in approving the appointment of finance directors, co-selecting finance experts among available candidates, or proposing own candidates. The discussion showed variation in appointment practices for senior finance staff at line ministries in the region. Delegates expressed concerns that a stronger involvement of the ministry of finance in assuring finance competences of line ministries may harm the trust relationship between line ministries’ sector directorates and agencies on the one side, and the finance directorate on the other side. They also addressed the different channels through which the role of line ministries in the budget process could be influenced, i.e. via regulation of the process, via regulation with respect to expenditures, or via providing supportive information to line ministries.

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