How to prepare a Medium Term Expenditure Framework

„ How to prepare a Medium Term Expenditure Framework? The role of spending review. “ Bohdan Hejduk Ministry of Finance Czech Republic

Budgetary rules (No. 218/2000 Coll. ) • The schedule of the budget process starts in February and finishes at the end of the year and is obligatory according to the Act on Budgetary Rules. • The state budget act and medium-term expenditure frameworks for years n, n+1, n+2 as well as the limits of expenditures and revenues for the chapters` (e. g. line ministries) budgets are approved annually. 2

Medium-term outlook (since 2000) • Drawn up along with the draft state budget • Rule n+1, n+2 • Submitted to the House of Deputies 3

Medium-term expenditure framework (since 2004) • The medium-term expenditure frameworks for years n, n+1, n+2 were included into the Act on Budgetary Rules in connection with the decreasing of the general government deficit and fulfilment of the commitments towards the EU. • The medium-term expenditure frameworks involve : state budget expenditures, extra-budgetary state funds. 4

Fiscal Consolidation Effort • 2004 – 2007 rapid economic growth presented a golden opportunity for deficit reduction and structural reform. Unfortunately such opportunity was not fully exploited • No sanction for exceeding the ceilings 5

Fiscal Consolidation Effort • 2008 - for the first time the government kept spending ceilings for the 2008 state budget and even additional savings were generated. 6

Fiscal Consolidation Effort - break • 2009 - the House of Deputies did not approved spending ceilings 2010 -2012 • 2009 -The policy response to the crisis stimulus measures • General government deficit 5. 9 % of GDP 7

Fiscal Consolidation Effort • 2010 – fiscal consolidation measures enhancing revenues x cuts to expenditures • General government deficit 4. 7% of GDP 8

9

Fiscal Consolidation Effort • The new coalition government announced a multi-year fiscal consolidation strategy aimed at balancing the budget by 2016 in July 2010 starting from 2011 10

Fiscal Consolidation Effort • 2011 - to reach general government deficit 4. 2% of GDP • state budget deficit 2011 equal to 135 CZK bn must be kept 11

Budget surveillance and fiscal and structural policy coordination within the EU • 17 June 2010 - the European Semester • The Convergence Programme April 2011 takes into account the medium-term expenditure frameworks 2012 -2014 12

Budget surveillance and fiscal and structural policy coordination within the EU • COUNCIL DIRECTIVE on requirements for budgetary frameworks of the Member States shall bring into force the provisions necessary to comply with this Directive by 31 December 2013 at the latest. 13

Council Directive • • Act on Budgetary Discipline and Responsibility Formulation of numerical fiscal rule Preparation of fiscal framework Information coverage 14

15

16

17

Thank you for your attention Source: Convergence Programme of the Czech Rebulic April 2011 Fiscal Outlook of the Czech Republic May 2011 Year-end Reports 1993 - 2010 Approved State Budget 2011 Medium-term expenditure frameworks 2012 -2014