19 September 2023, 12:55
At the Government session chaired by Prime Minister Alikhan Smailov the draft of the new Budget Code was considered. Minister of National Economy Alibek Kuantyrov made a report.
As the Minister noted, before the development was made an assessment of the current Code. This is one of the conditions for joining the OECD.
IMF experts gave the current Budget Code an assessment - "advanced level". Therefore, continuity with the current Code was preserved, but the realities of the present time were taken into account.
"We analyzed and structured all the reforms and trends of recent years, the instructions of the President and his Administration, looked at international experience, took into account the recommendations of international organizations, the Supreme Audit Chamber, the expert community. The new Budget Code has structured disparate and fragmentary provisions of the current Code, brought down to the level of subordinate legislation detailing norms, the document has become a framework and flexible," Kuantyrov said.
According to the current legislation, planning starts in February-March and ends on December 30 and lasts 9-10 months.
Taking into account the establishment of permanent base limits once for 3 years, the budget process can be started from June 1 after the formation of PSER in a simplified form - now March 15. Expenditure limits will be communicated by June 7.
Accordingly, the deadline for submission of budget request by ABP is shifted - within 10 working days from the date of spending limits instead of the current deadline of May 15.
The deadlines for submitting the draft law on the RB to the Government and Parliament remain unchanged - August 15 and September 1, respectively. On local budgets - similarly.
As emphasized by the Minister of National Economy, block budgeting has been introduced within the framework of simplifying budget procedures, strengthening budget flexibility and increasing the independence of the BPA.
First. It is the optimization of budget procedures.
"Two separate documents - budget program and budget request are united. Now ABPs will form a budget request, where information about it will be disclosed, a passport of the budget program, calculations will be drawn up and submitted to the authorized bodies in one package. The budget program will not be agreed and approved, but will be signed by the head of the budget program, including in electronic format. This will strengthen responsibility for the quality of its compilation," said Mr. Kuantyrov.
Second. It is proposed to establish a block of basic expenditures of a permanent nature for 3 years.
According to the head of the department, there will be current administrative expenses of administrators and other annual fixed costs on a separate list. These expenses will not be considered in detail every year, if they do not change.
Considering that the base expenditures are about 50 - 60% of the total budget, this will significantly relieve both ABP and authorized bodies.
Third. The block budget implies increased flexibility and independence of state bodies within the processes of budget planning and execution.
For this purpose, according to A. Kuantyrov, it seems expedient to consolidate budget programs around a strategic goal.
A direct norm prohibiting to open a second or third budget program for one goal is introduced.
This will give flexibility and independence in the management of budget funds to achieve better results. It will allow to simplify the budget process sufficiently, taking into account the increase in the volume of redistribution of funds between budget programs from 10% to 15% by adjustment.
It is also proposed to determine by December 1 the pool of expenditures on ABP proposals, which will not be executed this year.
Expenditures on this list to be carried out at the expense of balances at the beginning of the year immediately after the onset of the new fiscal year without adjusting the budget.
It should be noted that in the new Budget Code there is a new section "Public Finance Management". Definitions are given for budget policy, state finances, sustainability of state finances, and an authorized body is defined (it is the MNE).
This section creates a basis for analyzing the state of public finances and determining fiscal policy.
Instruments for managing public finances are envisaged, primarily budgetary rules and their observance.
In terms of borrowing, consolidation of all debt obligations - public debt, publicly guaranteed debt, export support guarantees, PPP obligations, sureties and SCS debt - has been ensured. This is done to account for and manage them.
For transparency and accountability of quasi-public sector entities in the management of funds allocated to them from the budget, a block of norms on their participation in the budget process is included. Both at the stage of planning and execution and reporting.
Their debt is consolidated, their definition, structure, limitations, monitoring and control on the debt of quasi-public sector entities are given.
"In general, the new Budget Code strengthens transparency and accountability of participants in the budget process. The main criterion of accountability is responsibility for the quality of work and performance. Accountability by participants of the budget process is carried out through hearing officials in representative bodies during the defense of the draft budget and the report on its execution; publication and discussion of documents; conducting public audits; establishing the responsibility of officials," the Minister of National Economy explained.
For subjects of the quasi-public sector there is an obligation to publish information about their loans and strengthened responsibility for the use of loan funds.
At the same time, the section on public finance management includes chapters on the National Fund and on extra-budgetary funds.
A restriction on the use of targeted transfers from the National Fund only for critical infrastructure has been introduced, and relevant criteria have been introduced.
Critical facilities will include the construction of, for example, a factory that will provide jobs and additional taxes. Or life-supporting infrastructure.
Country-wide - such as the "Comfortable Schools" project, when the same facilities are built simultaneously in several regions.
A separate article includes provisions on the "National Fund for Children". According to the Concept of Public Finance Management until 2030, these will be targeted requirements, annually accrued to children until they reach the age of 18.
The volume of withdrawals from the National Fund is limited to the volume of target claims.
To improve the quality of planning of local budget expenditures it is proposed to define one basic document of Akim's activity - the development plan of the region. Only on the basis of the development plan the budget should be allocated.
It will include an investment plan, which will be the foundation for budget planning and development of the region.
The key thing here is that it will show the problem and priority areas in the context of settlements based on the data available to all government agencies.
From 2026, it is proposed to form a development plan based on the norms (networks) of basic infrastructure. Targeted development transfers will be allocated only for the financing of critical infrastructure and projects of national importance (from 2026). The planning procedure for general purpose transfers (GTRs) is being concretized.
"In order not to lose the targeting of expenditures that were previously financed by targeted transfers, we are allocating targeted subventions as part of TOX. They will be fully planned by sectoral ABP together with the MOF," Kuantyrov said.
And another proposed measure is to strengthen monitoring of the use of republican money of the Ministry of Education and Science, including those allocated in the form of general transfers (GT), including by strengthening the audit commissions.
They will consider the results of monitoring to assess the achievement of target indicators within the framework of the annual report on the execution of the local budget.
Also, in the new Budget Code there are general requirements for the entire budget process.
Thus, there is a new section appeared - "Fundamentals of budgeting of the RK", aimed at strengthening the principles of ROB. ROB means that each tenge of the budget should be aimed at achieving a specific result. In this regard, the concept is laid down that the basis for budgeting are the documents of the SGP - namely, the development plans of state bodies/regions/SCGS.
Another condition for the transition to ROB is the openness of budget information and accountability to the population.
"Therefore, we have structured the provisions of the current Code and the innovations into a separate chapter "Accountability and Transparency". We implement accountability and transparency through the publication of budget documentation. We have delimited the areas of responsibility of officials and participants in the budget process. We have put all this in separate articles. Now you can see the entire list of documents subject to publication and all types of responsibility for violations of budget legislation in the relevant articles," said the Minister of National Economy.
Another new chapter is "Results Management".
This is a set of tools for application in the budget process and management decision-making. This includes definitions, requirements, types of documents and responsibilities for expenditure review, monitoring, evaluation of results, and the role of public audit in terms of budgeting.
Regarding the companion bill.
Amendments have been made to bring it in line with the new version of the Budget Code. A total of 26 laws are affected.
A separate block of amendments concerns the unification of PPP mechanisms. Since concession is also a type of PPP, the planning and implementation of concession projects will be regulated by the law "On PPP", while the law "On Concessions" is put to loss.
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"In general, in the implementation of the new Budget Code, more than 200 NAPs will be adopted. For effective practical application of the norms of the document it is necessary to restructure the work of the authorized bodies that carry out the evaluation of results. There is a task to develop a normative basis for minimum standards," Kuantyrov concluded.