Thematic Area: Democratic Governance

Project Document

Progress Report Quarter 2 2010

Progress Report Quarter 1 2010

Annual Report 2008
Progress Report Quarter 1 2008
Progress Report Quarter 2 2008
Progress Report Quarter 2 2008 Annex 1 AWP
Progress Report Quarter 3 2008
Progress Report Quarter 3 2008 Annex 1 AWP
Progress Report Quarter 1 2007
Progress Report Quarter 2 2007
Progress Report Quarter 3 2007
Annual Report 2006

[Last Updated 22 April 2010]

Project Start Date: May 2007
Project End Date: April 2012
Project Location: Budget Department, Ministry of Finance, Kabul
Status of the Project: Active
Responsible Partner: Ministry of Finance
Implementation Modality: Direct Implementation (DIM)

The public finance management system in Afghanistan has made remarkable progress over the past several years. The UNDP funded Making Budgets Work project, which has been implemented since April 2004 as the successor project to the Aid Co-ordination project, has effectively contributed to strengthening the Ministry of Finance (MoF) in its ability to support the unified national budget process as well as the nationally-led aid co-ordination process. The introduction of a weekly monitoring and reporting system, a budget calendar and a medium-term fiscal framework, as well as consultative and working groups to discuss priorities, have all improved the use and co-ordination of aid. However, budget implementation and expenditure still fall greatly short of targets.

To address this challenge, in May 2007 the former Making Budgets Work project was transformed into Making Budgets and Aid Work (MBAW). Following the progress made under Making Budgets Work, this new project is intended to enhance the partnership approach, whereby inputs and integration of the operational capacity, technical advisory support and capacity building support are co-ordinated and monitored on a regular basis by the MoF and other donor funding and advisory services supporting the Budget Department. In addition, while aid co-ordination has progressed significantly and commitments for both the Government of Afghanistan and donors are high, the new project seeks to improve predictability and alignment of aid to support country priorities by capturing aid flows more effectively in order to achieve benchmarks committed to in line with the Paris Declaration and the Afghanistan Compact. Building sustainable institutional capacity within the Budget Department at MoF is crucial as higher skill gaps have been largely filled by project staff.

The new project therefore has four components:

• A budget that is comprehensive, policy based, prepared in an orderly manner and supportive of the National Development Strategy
• Piloting of programme budgeting in the line ministries for budgets to be prepared in accordance with national sector strategies under the ANDS and the Afghan Compound and the piloting of provincial budgeting in the provinces to ensure that budgets are prepared in consultion with the provinces and in line with provincial needs and that resources are distributed in an equitable manner across the country.
• Alignment of external assistance and improved aid effectiveness to support Afghanistan’s Development Goals and Strategy.
• Implementation of an Exit Strategy to build sustainable capacity within the GoA and gradually outphase projects staff while ensuring that positions are filled with civil servants and new graduates, duly providing them with the needed training to take over the work tasks.

Achievements:

Budget Formulation
As a result of the MBAW project, budgets are now prepared on time and increasingly reflect the priorities of the ANDS and the provincial needs. Budget Officers from the project assist line ministries in formulating and submitting the budget proposals on time and in accordance with national and ministerial policies and priorities. Additionally, the Budget Department evaluates and monitores the larger projects of the ministeries to ensure delivery according to the budget and work plans and provides recommendations for follow up and the ministry Procurement Unit has provided workshops on procurement procedures for the line ministries to improve delivery and ensure transparent project procurement processes. A planning and monitoring reporting format has been finalized by the Budget Department and sent to Line Ministries in order to facilitate smooth budget planning and expenditure tracking processes. Through its Fiscal Policy Unit (FPU) the project is working on developing the Financial Programming model for Afghanistan, which links the four sectors of the economy – real, monetary, external and fiscal. Additionally, the project has developed the Multi-Year Fiscal Framework and the Medium Term Fiscal Framework (MTFF) and continuously update these

As a result of the efforts of the project, budget execution rates have risen from 31 % to 65 % in the last four years, spending are increasingly aligned to national policies and priorities and line ministries are better able to formulate, plan and implement projects and carry out multi-year budget planning.

Programme and Provincial Budgeting
The provincial budgeting pilot now covers 11 provinces and will cover all 34 provinces by 2011. The programme budgeting pilot now covers 17 ministries. Each Ministry has formed a Programme Budget Implementation Team, and training sessions on programme budgeting have been delivered to all of these teams. The Budget Integration Reform Unit of the MoF has issued a Programme Budget Manual that outlines detailed steps to be taken by Line Ministries in order to prepare their 1387 Budgets in the programmatic form.

A Manual on the Provincial Programme Budgeting has been developed and circulated to concerned agencies and officials. A Training of Trainers (TOT) programme on Provincial Budgeting 2008 was successfully conducted at the Civil Service Institute, Afshar, and Kabul from March 29 to April 6. A total of 29 participants, of which 4 were women, came all the way from 17 provinces representing 8 line ministries and 5 geographical regions. Moreover, training on provincial budgeting with hands on exercises to the provincial officials in 10 provinces was completed during 2008. A list of the Provincial Development Councils (PDC) Members/Provincial Directors was collected from some provinces so as to organize intensive training programmes across the provinces, of which most have now been completed. In addition, on June 15th a workshop on Concepts and Processes of the Provincial Budgeting was presented by the focal points of provincial budgeting to the representatives from the line ministries. A brochure on Provincial Budgeting in Afghanistan: What and How? on the concept and processes of provincial budgeting was prepared for wide circulation to stakeholders.

The programme and provincial budgeting pilot have improved budget formulation processes, increased transparency in Government expenditures and ensured the foundation for increased inclusion of the provinces in the national budget formulation and implementation process, increasing equity in the distributing of resources across the country.

Aid effectiveness and Alignment
The Aid Coordination Unit has developed the Aid Policy Paper for the Government of Afghanistan based on the policies outlined in the ANDS. The policy paper serves as a guide for the ministry of finance in its aid coordination efforts and relations with donors, and clearly outlines the priorities of the government in terms of improving aid provisions. The Aid Coordination Unit (ACU) has completed the first round of the biannual Financial Reviews with all donors. This exercise helped provide updates on donor pledges, commitments and disbursements over a multi-year period until 2012. The update of the Donor Assistance Database is underway and will be finalised in 2009.

Exit Strategy
A draft Capacity Development Strategy and Methodology has been developed to improve the develivery of training and increase planning of capacity development. The strategy includes a capacity assessment of the Budget Department, which is planned to take place during the first half of 2009. The strategy will be coordinated with the Graduate Development Scheme focusing on recruiting and training new graduates from the national universities to take over tasks currently delivered through the project. Concurrently, project staff a continuously being out-phased from the project according to the project document and will all have been out-phased by the end of the project in 2012.

The exit strategy has resulted in better options for new graduates to find employment and will contribute to the long-term sustainability of activities currently implemented through the project. The exit strategy and graduate scheme of the MBAW project has served as an inspiration in the formulation of other UNDP projects and its implementation continous to be discussed at board meetings to futher ensure its successful and sustainable implementation.

Future Priorities:

• Capacity building, particularly at sub-national level continue to be a major issue for a more successful budgeting process.
• Implementation of the exit strategy should be more clearly planned. The capacity development strategy whoich has been finalised and submitted for MoF approval will, once approved, help to serve this objective. The graduate scheme should be evaluated accordingly and a more comprehensive discussion with the board and other donor assistance provided to the Budget Department and MoF at large, should be embarked on.
• The Capacity for Afghan Public service (CAP) project should be approached with a view to discuss the option of providing training to mid- and senior level staff in coaching and mentoring to improve their abilities to transfer knowledge and capacity to the new graduates and civil servants.
• Coordination of Technical Assistance provided to the Budget Department is critical to the successful implementation of the budget reforms and the MoF strategy and focus should be given to the establishment of the MoF TA committee envisioned in the project document to increase TA coordination. MoF is expected to the the lead in this endeavor.
• Further work with Government, Parliament and Donors on programme budget awareness raising is a priority.
• Upgrading of the Development Assistance Database to incorporate the Harmonized Reporting Format (HRF) and roll-out of Development Assistance Database to the ministry of Education and MoF, and to other ministries as possible within current funds.

Challenges and Risks:

• Deteriorating security conditions in the provinces has limited the ability to carry out monitoring missions and site visits to the provinces and continues to limit training initiatives in particularly the South-Eastern provinces. This risks puts in jeopardy the overall intend of the provincial budgeting pilot, i.e. to ensure equitable distribution of national resources across the country.
• Retention of civil servants and new recruits recruited to the Budget Department, Aid Coordination Unit and Fiscal Policy Unit continues to be a concern.
• A solutions must be sought to ensure the high quality of support currently provided through the project.This will include a plan for how to ensure recruitment and/or retention of highly technical and senior or mid-level staff to replace current project staff before these are out-phased.
• Insufficient compliance of donors with the Harmonized Reporting Format (HRF) requirements have complicated the process of data collection as part of the Donor Assistance Database. A considerable amount of time and capacity of the ACU is devoted to improve the quality of donor data.
• Insufficient guidance from line ministries to the provincial office on budget processes may limit the quality of provincial input to the budget process and risks delay in submissions of budget proposals from the provinces.
• Lack of provincial units in line ministries may decrease the quality of planning and implementation of provincial budgeting. The capacity of the line ministries will have to be strengthened for programme budgeting to be fully and succefully implemented.

Partnerships and Resources:

Target Budget: USD 7,541,170
Received Budget: USD 4,684,229
Commitment USD 9,104,652
Shortfall: 0.00
Donors: UNDP, Canada, United Kingdom and GTZ

Contacts:

Mustafa Aria, Project Manager, (mustafa.aria@undp.org)
Dilawar Khan, Programme Officer (dilawar.khan@undp.org)
Maya Lindberg Brink, Programme Officer (maya.lindberg.brink@undp.org)

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