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Fazeer Sheik Rahim, Mr. Claude P Wendling, and Ms. Eliko Pedastsaar

Expenditure baseline projections (hereafter, “base¬lines”) are a key analytical concept in budget preparation that refers to estimates of future expenditure on the assumption that current policies remain unchanged. They serve as reference points against which other data, such as proposed or approved budgets, or expenditure ceilings, can be compared. In many countries they are a basic tool for starting the preparation of the budget. They represent neither future spending allocations nor total expected outturn as they do not incorporate estimates of the cost of new policies and the expected impact of saving measures. Other features of baselines are that they are generally produced over a multiyear period, they can be calcu¬lated at any level or form of the budget classification (that is, ministries, economic classification, specific policies, functions or programs), and can be summed up to higher levels (such as the whole budget). Hence, they can be useful at both a micro and an aggregate level. This note aims to clarify and establish a framework that covers baselines’ various purposes and uses. It first discusses the definition and objectives of baselines and the methodology used for producing them before outlining how they should be prepared. It concludes with a discussion of the key success factors for making the most effective use of baselines.

Fazeer Sheik Rahim, Mr. Claude P Wendling, and Ms. Eliko Pedastsaar
Expenditure baseline projections (hereafter, “base¬lines”) are a key analytical concept in budget preparation that refers to estimates of future expenditure on the assumption that current policies remain unchanged. They serve as reference points against which other data, such as proposed or approved budgets, or expenditure ceilings, can be compared. In many countries they are a basic tool for starting the preparation of the budget. They represent neither future spending allocations nor total expected outturn as they do not incorporate estimates of the cost of new policies and the expected impact of saving measures. Other features of baselines are that they are generally produced over a multiyear period, they can be calcu¬lated at any level or form of the budget classification (that is, ministries, economic classification, specific policies, functions or programs), and can be summed up to higher levels (such as the whole budget). Hence, they can be useful at both a micro and an aggregate level. This note aims to clarify and establish a framework that covers baselines’ various purposes and uses. It first discusses the definition and objectives of baselines and the methodology used for producing them before outlining how they should be prepared. It concludes with a discussion of the key success factors for making the most effective use of baselines.
Sailendra Pattanayak, Racheeda Boukezia, Yasemin Hurcan, and Ramon Hurtado
Sailendra Pattanayak, Racheeda Boukezia, Yasemin Hurcan, and Ramon Hurtado

Fiscal institutional capacity in most fragile states (FS) and several low-income developing countries (LIDCs) is much lower than in other countries. Governments in these countries face several cash management challenges because they often lack credible budgets, have smaller and less diversified revenue bases, have limited access to financial markets, and rely largely on donors to fund a large portion of their budgets. Available public funds in these countries often remain dispersed outside the control of the ministry of finance. In the absence of a good cash forecasting function, these countries typically resort to cash rationing to meet their priority spending needs, often in an ad hoc manner, which can adversely affect budget execution and achievement of fiscal policy targets. This note sets out the key objectives and building blocks of a cash management function in FS and LIDCs. It suggests several measures to progressively build cash management capacity in three interrelated areas: consolidating cash resources, forecasting cash flows, and managing cash balances with sound institutional setups.

Sailendra Pattanayak, Racheeda Boukezia, Yasemin Hurcan, and Ramon Hurtado
Fiscal institutional capacity in most fragile states (FS) and several low-income developing countries (LIDCs) is much lower than in other countries. Governments in these countries face several cash management challenges because they often lack credible budgets, have smaller and less diversified revenue bases, have limited access to financial markets, and rely largely on donors to fund a large portion of their budgets. Available public funds in these countries often remain dispersed outside the control of the ministry of finance. In the absence of a good cash forecasting function, these countries typically resort to cash rationing to meet their priority spending needs, often in an ad hoc manner, which can adversely affect budget execution and achievement of fiscal policy targets. This note sets out the key objectives and building blocks of a cash management function in FS and LIDCs. It suggests several measures to progressively build cash management capacity in three interrelated areas: consolidating cash resources, forecasting cash flows, and managing cash balances with sound institutional setups.