Beloit College Acceptance Rate, SAT/ACT Scores, GPA

Beloit  College is a private liberal arts college with an acceptance rate of 56%. Located in Beloit, Wisconsin, Beloit College is one of the Midwests top liberal arts colleges.  Beloits curriculum emphasizes experiential learning, independent research, fieldwork, and significant interaction between students and faculty. Academics are supported by a 10-to-1 student / faculty ratio and an average class size of 15. Considering applying to Beloit College? Here are the admissions statistics you should know, including average SAT/ACT scores and GPAs of admitted students. Acceptance Rate During the 2017-18 admissions cycle, Beloit College had an acceptance rate of 56%. This means that for every 100 students who applied, 56 students were admitted, making Beloits admissions process competitive. Admissions Statistics (2017-18) Number of Applicants 4,200 Percent Admitted 56% Percent Admitted Who Enrolled (Yield) 11% SAT Scores and Requirements Beloit has a test-optional standardized testing policy. Applicants to Beloit may submit SAT or ACT scores to the school, but they are not required.  During the 2017-18 admissions cycle, 31% of admitted students submitted SAT scores. SAT Range (Admitted Students) Section 25th Percentile 75th Percentile ERW 570 670 Math 550 690 ERW=Evidence-Based Reading and Writing This admissions data tells us that of those students who submitted scores during the 2017-18 admissions cycle, most of  Beloits admitted students fall within the  top 35% nationally  on the SAT. For the evidence-based reading and writing section, 50% of students admitted to Beloit scored between 570 and 670, while 25% scored below 570 and 25% scored above 670. On the math section, 50% of admitted students scored between 550 and 690, while 25% scored below 550 and 25% scored above 690. While the SAT is not required, this data tells us that a composite SAT score of 1360 or higher is competitive for Beloit. Requirements Beloit College does not require SAT scores for admission. For students who choose to submit scores, note that Beloit participates in the scorechoice program, meaning that the admissions office will consider your highest score from each individual section across all SAT test dates. Beloit does not require the essay portion of the SAT. ACT Scores and Requirements Beloit College has a test-optional standardized testing policy. Applicants may submit SAT or ACT scores to the school, but they are not required. During the 2017-18 admissions cycle, 30% of admitted students submitted ACT scores. ACT Range (Admitted Students) Section 25th Percentile 75th Percentile English 22 30 Math 20 27 Composite 21 29 This admissions data tells us that of those who submitted scores during the 2017-18 admissions cycle, most of Beloits admitted students fall within the  top 42% nationally  on the ACT. The middle 50% of students admitted to Beloit received a composite ACT score between 21 and 29, while 25% scored above 29 and 25% scored below 21. Requirements Note that Beloit does not require ACT scores for admission. For students who choose to submit scores, Beloit participates in the scorechoice program, meaning that the admissions office will consider your highest score from each individual section across all ACT test dates. Beloit does not require the ACT writing section. GPA In 2018, the average high school GPA of Beloit Colleges incoming freshmen class was 3.31, and over 50% of incoming students had average GPAs of 3.25 and above. These results suggest that most successful applicants to Beloit have primarily B grades. Self-Reported GPA/SAT/ACT Graph Beloit College Applicants Self-Reported GPA/SAT/ACT Graph. Data courtesy of Cappex. The admissions data in the graph is self-reported by applicants to Beloit College. GPAs are unweighted. Find out how you compare to accepted students, see the real-time graph, and calculate your chances of getting in with a free Cappex account. Admissions Chances Beloit College, which accepts just over half of applicants, has a competitive admissions pool. However, Beloit also has a  holistic admissions  process and is test-optional, and admissions decisions are based on much more than numbers. A strong  application essay  and  glowing letters of recommendation  can strengthen your application, as can participation in meaningful  extracurricular activities  and a  rigorous course schedule. The college is looking for students who will contribute to the campus community in meaningful ways, not just students who show promise in the classroom. While not required, Beloit recommends  interviews  for interested applicants. Students with particularly compelling stories or achievements can still receive serious consideration even if their grades and scores are outside of Beloits average range. In the scattergram above, the blue and green data points represent students who were admitted to Beloit. You can see that nearly all admitted students had a high school GPAs of B or better, combined SAT scores (ERWM) above 1000, and composite ACT scores of 20 or higher. Note that Beloit has test-optional admissions, so SAT and ACT scores are not required for most applicants. Home-schooled students and students from schools that dont provide grades do need to provide standardized test scores which may include: SAT, ACT, AP score(s), IB examination results, or grades from college courses. If You Like Beloit College, You May Also Like These Schools: Oberlin CollegeUniversity of Wisconsin - MadisonDenison UniversityBowdoin CollegeWhitman CollegeMarquette University All admissions data has been sourced from the National Center for Education Statistics and Beloit College Undergraduate Admissions Office.

Essay about Homers The Odyssey - 1646 Words

Homers The Odyssey The Odyssey is a companion to The Iliad, a story of the Trojan War. Both The Iliad and The Odyssey are epic poems written by Homer. In The Odyssey, Homer relates the misadventures of Odysseus, king of Ithaca, that occur during the decade following the defeat of Troy. In doing so, the fates of his fellow warriors are also made known. The Odyssey begins on Mount Olympus, in the palace of Zeus, king of the gods, where a discussion takes place regarding the woes of humans and their determination to blame it on the gods. Athene, daughter of Zeus, appeals to her father to help Odysseus, who through no fault of his own, has been kept prisoner on the island of Ogygia for seven years by Calypso, daughter of the god Atlas.†¦show more content†¦When he has accomplished this, Odysseus finally reunites with Penelope. As the story closes, the Ithacans are in pursuit of Odysseus, because he has killed their sons, the suitors of Penelope. Before retribution can take place, the feud ends by divine intervention. Thus the story of Odysseus and his long and troublesome return home comes to an end. When I sat down to read this poem, all I knew about it was that it was an adventure about a man named Odysseus, written by someone called Homer. What I found was not just an adventure, but an epic about an ancient Greek culture. The story provides a picture of life in early ancient Greece, a period of time before Greeks were called Greek and long before Greece became a nation. It demonstrates the politics, religion, and everyday life of early Greek civilization. Each city has a king: Odysseus is king of Ithaca; Menelaus is king of Lacedaemon. We meet other kings, also. There are assemblies to help make decisions. In chapter two, Telemachus calls for a meeting of the Assembly to ask for help in ousting the suitors of his mother from his home, and when this fails, he asks for a ship to go in search of his father. The gods and goddesses play an active part in their lives. Throughout the poem, Athene champions Telemachus and Odysseus. Zeus, Hermes, Calypso, Poseidon, and other gods and g oddesses play a part, too. In fact, many of theShow MoreRelatedThe Impacts Of The Odyssey In Homers The Odyssey1166 Words   |  5 PagesHomer’s epic poem The Odyssey follows Odysseus on his long journey home. The Epic also includes the stories of Odysseus’ family left behind: the travels of his son, Telemachus, and how plenty, of what we would now call â€Å"home wreckers†, suitors pressured his wife, Penelope, into marrying one of them. The characters are beautifully crafted and the story is truly epic. All the elements presented can bring in any reader from any century, the Cyclops, the Gods, the trickery of Penelope, and the disguisesRead MoreMasculinity In Homers Odyssey1655 Words   |  7 PagesHomer’s Odyssey is an epic tale set in the world of ancient Greece - a world dominated by men. Admirable men such as Odysseus, the story’s protagonist, are strong, cunning, and wise; they have control over their lives and the people within them. In The Odyssey, the quintessential man is characterized by his authority, including control of the women who surround him. As is suggested throughout the novel, the patriarchal world would fall into disarray without the force of intrinsic male authority.Read MoreStorytelling in Homers Odyssey1542 Words   |  7 Pagesover time, and, at some point, the youth is ready to delve into the feast that is Homer’s unabridged poetry. As the reader devours book after book of The Odyssey, he or she finds comforting familiarity in the stories, the characters, and the monsters, but something is not quite right. While hearing of Odysseus’ adventures as a child, the action was spoken from the steady voice of a omnipresent narrator, but in Homer’s work, the poet often speaks through Odysseus as a storyteller recounting his gloriousRead MoreArchetypes In Homers The Odyssey1383 Words   |  6 PagesAncient Greeks’ history consisted of monsters, creatures, gods, goddesses, fights, and battles. It shows that Ancient Greeks were very imaginative and creative. There were three main archetypes that were used in Homer’s epic ,The Odyssey, which show different aspects of Ancient Greek culture. Those three archetypes were: the hero/father figure archetype, the monster archetypes, and the search for love. The hero archetype explained the Ancient Greeks’ love for thrill and adventure; Odysseus wentRead MoreArchetypes In Homers The Odyssey1507 Words   |  7 PagesAncient Greeks’ work consists of monsters, creatures, gods, goddesses, fights, and battles. It shows that Ancient Greeks are very imaginative and creative. Three main archetypes that are used in Homer’s epic ,The Odyssey, each show a different aspect of Ancient Greek culture. The three archetypes are: the hero archetype, the monster archetypes, and the search for love. The hero archetype shows the Ancient Greeks’ love for thrill and adventure; Odysseus goes on man y thrilling adventures while onRead More Homers Odyssey Essay1132 Words   |  5 PagesHomers Odyssey On a ten-year voyage across cold and choppy seas with nothing but the bitter wind at one’s back, physical strength is a necessity. The chances of successfully trekking home with weak limbs are not great. In Homer’s The Odyssey, Odysseus is the epitome of power. His brawny physique undoubtedly grants him the strength to swim, climb, run and even kill his way back to his wife. But Odysseus cannot return home on physical force alone, as many of the obstacles he faces are mental. PerhapsRead MoreThe Odyssey : The Role Of Women In Homers Odyssey966 Words   |  4 Pagesmonsters, and people, but it was a story that showed different kinds of human interactions. The Odyssey portrays what is right or wrong in relationships between god and mortal, father and son, and man and woman. In the epic poem, the role of women is a vital demonstration of Ancient Greece. The women in the epic are unique in their personality, motives, and relationships towards men. In Homers, The Odyssey, a ll women are different, but all of them help to represent the role of the ideal woman. HomersRead More Homers The Odyssey Essay1451 Words   |  6 PagesHomers The Odyssey Works Cited Not Included In Homer’s historic epic The Odyssey the protagonist, Odysseus, is venturing home to his native land of Ithaca. Throughout the story Odysseus is faced with many great challenges and is forced to make many decisions that will greatly affect his life and that of everyone around him. Each decision is crucial to his survival and his journey home. Homer portrays many patterns that are susceptible throughout the tale. One of the major themes that heRead More Disguises in Homers Odyssey Essay954 Words   |  4 PagesDisguises in Homers Odyssey   Ã‚  Ã‚  Ã‚   In Homers Odyssey, disguises help convey a false identity that assist the characters in accomplishing their plans.   Each disguise has its own purpose, such as Athenes image as Mentor to advise Telemachos.   Her purpose was to assist and encourage Telemachos into searching news of his long lost father without revealing her true identity of divinity.   Being old and wise, and especially male, helps put more power behind the words spoken by Mentor because menRead More Loyalty in Homers Odyssey Essay601 Words   |  3 PagesLoyal Relationships in Homers Odyssey Loyalty is heroic. Loyalty is defined as faithfulness or devotion to a person, cause, obligations, or duties. In Homers Odyssey one can see loyalty in many forms. Odysseus is loyal to the gods whom he realized held his life in their hands. Penelope was loyal to Odysseus, while trying not to offend the rude suitors. Telemachus was loyal to a father whom he only knew from the stories he had been told. Time and time again we see loyalty in the strongest sense

Budget Process Free Essays

A. THE BUDGET PREPARATION PROCESS OBJECTIVES OF BUDGET PREPARATION During budget preparation, trade-offs and prioritization among programs must be made to ensure that the budget fits government policies and priorities. Next, the most cost-effective variants must be selected. We will write a custom essay sample on Budget Process or any similar topic only for you Order Now Finally, means of increasing operational efficiency in government must be sought. None of these can be accomplished unless financial constraints are built into the process from the very start. Accordingly, the budget formulation process has four major dimensions:1 †¢ Setting up the fiscal targets and the level of expenditures compatible with these targets. This is the objective of preparing the macro-economic framework. †¢ Formulating expenditure policies. †¢ Allocating resources in conformity with both policies and fiscal targets. This is the main objective of the core processes of budget preparation. †¢ Addressing operational efficiency and performance issues. This chapter focuses on the core processes of budget preparation, and on mechanisms for aggregate expenditure control and strategic allocation of esources. Efficiency and performance issues are discussed in chapter 15. Operational efficiency questions directly related to the arrangements for budget preparation are discussed in Section D below. B. THE IMPORTANCE OF A MEDIUM-TERM PERSPECTIVE FOR BUDGETING The need to address all three objectives of public expenditure management–fiscal discipline, strategic resource allocation, and operational efficiency—is empha sized in chapter 1. This calls for a link between policy and budgeting and for a perspective beyond the immediate future. Of course, the future is inherently uncertain, and the more so the longer the period considered. The general trade-off is between policy relevance and certainty. At one extreme, government â€Å"budgeting† for just the following week would suffer the least uncertainty but also be almost irrelevant as an instrument of policy. At the other extreme, budgeting for a period of too many years would provide a broad context but carry much greater uncertainty as well. 2 In practice, â€Å"multiyear† means â€Å"medium-term,† i. e. , a perspective covering three to five years including the budget year. Clearly, the feasibility in practice of a multiyear perspective is greater when revenues are predictable and the mechanisms for controlling expenditure well- developed. (The U. K. , for example, has recently moved beyond a multiyear perspective to an outright three-year budget for most budgetary accounts. ) These conditions do not exist in many developing countries. 3, The dilemma is that a multiyear perspective is especially important in those countries where a clear sense of policy direction is a must for sustainable development, and public managers are often in sore need of some predictability and flexibility. The dilemma that a multiyear perspective is especially needed where it is least feasible cannot be resolved easily, but must not be ignored. On the one hand, to try and extend the time horizon of the budget process under conditions of severe revenue uncertainty and weak expenditure control would merely lead to frequent changes in ceilings and appropriations, quickly degenera te into a formalistic exercise, and discredit the approach itself, thus compromising later attempts at improvement. On the other hand, to remain wedded to narrow short-term â€Å"management† of public expenditure would preclude a move to improved linkage between policies and expenditures. In practice, therefore, efforts should constantly be exerted to improve revenue forecasting (through such means as relieving administrative or political pressures for overoptimistic forecasts), and strengthen the linkages between policy formulation and expenditure, as well as the expenditure control mechanisms themselves. As and when these efforts yield progress, the time horizon for budget preparation can and should be lengthened. Because revenue-forecasting mprovements and the strengthening of policy-expenditure links and expenditure control mechanisms are important in any event, efforts to achieve these can yield the double benefit of improving the short-term budget process at the same time as they permit expanding the budget time horizon to take account of developmental priorities. Therefore, although in almost all countries government budgets are prepared on an annual cycle, to be formulated well they must take into account events outside the annual cycle, in particular the macroeconomic realities, the expected revenues, the longer-term costs of programs, and government policies. Wildavsky (1986, p. 317) sums up the arguments against isolated annual budgeting as follows: short-sightedness, because only the next year’s expenditures are reviewed; overspending, because huge disbursements in future years are hidden; conservatism, because incremental changes do not open up large future vistas; and parochialism, because programs tend to be viewed in isolation rather than in comparison to their future costs in relation to expected revenue. Specifically, the annual budget must reflect three paramount multiannual considerations: The future recurrent costs of capital expenditures; †¢ The funding needs of entitlement programs (for example debt service and transfer payments) where expenditure levels may change, even though basic policy remains the same; †¢ Contingencies that may result in future spending requirements (for example government loan guarantees (see chapter 2). A medium-term outlook is necessary because the time span of an annual budget is to o short for the purpose of adjusting expenditure priorities and uncertainties become too great over the longer term. At the time the budget is formulated, most of the expenditures of the budget year have already been committed. For example, the salaries of permanent civil servants, the pensions to be paid to retirees, debt service costs, and the like, are not variable in the short term. Other costs can be adjusted, but often only marginally. The margin of maneuver is typically no more than 5 percent of total expenditure. This means that any real adjustment of expenditure priorities, if it is to be successful, has to take place over a time span of several years. For instance, the government may wish to switch from blanket provision of welfare services to targeted provision designed for those most in need. The expenditure implications of such a policy change stretch over several years, and the policy therefore can hardly be implemented through a blinkered focus on the annual budget. Medium-term spending projections are also necessary to demonstrate to the administration and the public the desired direction of change. In the absence of a medium-term program, rapid spending adjustments to reflect changing circumstances will tend to be across-the-board and ad hoc, focused on inputs and activities that can be cut in the short term. (Often, these are important public investment expenditures, and one of the typical outcomes of annual budgeting under constrained circumstances is to define public investment in effect as a mere residual. ) If the expenditure adjustments are not policy-based, they will not be sustained. By illuminating the expenditure implications of current policy decisions on future years’ budgets, medium-term spending projections enable governments to evaluate costeffectiveness and to determine whether they are attempting more than they can afford. 5 Finally, in purely annual budgeting, the link between sectoral policies and budget allocations is often weak. Sector politicians announce policies, but the budget often fails to provide the necessary resources. However, two pitfalls should be avoided. First, a multiyear expenditure approach can tself be an occasion to develop an evasion strategy, by pushing expenditure off to the out-years. Second, it could lead to claims for increased expenditures from line ministries, since new programs are easily transformed into â€Å"entitlements† as soon as they are included in the projections. To avoid these two pitfalls, many developed countries have limited the scope of their multiyear expenditures estimates to the cost of exis ting programs, without making room for new programs. †6 Three variants of medium-term year expenditure programming can be considered: †¢ A mere â€Å"technical† projection of the forward costs of ongoing programs (including, of course, the recurrent costs of investments). †¢ A â€Å"stringent† planning approach, consisting of: (i) programming savings in nonpriority sectors over the planned period, to leave room for higherpriority programs; but (ii) including in the multiyear program ongoing programs and only those new programs that are included in the annual budget currently under preparation or for which financing is certain. Such plans include only a few new projects beyond their first planned year (e. g. the Public Investment Program prepared in Sri Lanka until 1998). †¢ The â€Å"classic† planning approach, which identifies explicitly new programs and their cost over the entire period. This includes â€Å"development plans† covering all expenditures, or many public investment programs currently prepared in several developing countries, as well as expenditure plans prepared in developed countries in the 1970s. Where the institutional mechanisms for sound policy decision making and for budgeting are not in place, this approach can lead to overloaded expenditure programs. The feasibility of implementing these different approaches and their linkages with the annual budget depends on the capacity and institutional context of the specific country. However, the annual budget should always be placed into some kind of multiyear perspective, even where formal multiyear expenditure programming is not feasible. For this purpose two activities are a must: (i) systematic estimates of the forward costs of ongoing programs, when reviewing the annual budget requests from line ministries; (ii) aggregate expenditure estimates consistent with the medium-term macroeconomic framework (see section C). It is often objected that estimating forward costs is difficult, especially for recurrent costs of new public investment projects. This is true, but irrelevant, for without such estimates budgeting is reduced to a short sighted and parochial exercise. [Please see attached Figure 4. xls] C. CONDITIONS FOR SOUND BUDGET PREPARATION In addition to a multiyear perspective, sound annual budget preparation calls for making early decisions and for avoiding a number of questionable practices. 1. The need for early decisions By definition, preparing the budget entails hard choices. These can be made, at a cost, or avoided, at a far greater cost. It is important that the necessary trade-offs be made explicitly when formulating the budget. This will permit a smooth implementation of priority programs, and avoid disrupting program management during budget execution. Political considerations, the avoidance mechanisms mentioned below, and lack of needed information (notably on continuing commitments), often lead to postponing these hard choices until budget execution. The postponement makes the choices harder, not easier, and the consequence is a less efficient budget process. When revenues are overestimated and the impact of continuing commitments is underestimated, sharp cuts must be made in expenditure when executing the budget. Overestimation of revenue can come from technical factors (such as a bad appraisal of the impact of a change in tax policy or of increased tax expenditures), but often also from the desire of ministries to include or maintain in the budget an excessive number of programs, while downplaying difficulties in financing them. Similarly, while underestimation of expenditures can come from unrealistic assessments of the cost of unfunded liabilities (e. g. enefits granted outside the budget) or the impact of permanent obligations, it can also be a deliberate tactic to launch new programs, with the intention of requesting increased appropriations during budget execution. It is important not to assume that â€Å"technical† improvements can by themselves resolve institutional problems of this nature. An overoptimistic budget leads t o accumulation of payment arrears and muddles rules for compliance. Clear signals on the amount of expenditure compatible with financial constraints should be given to spending agencies at the start of the budget preparation process. As will be stressed repeatedly in this volume, it is possible to execute badly a realistic budget, but impossible to execute well an unrealistic budget. There are no satisfactory mechanisms to correct the effects of an unrealistic budget during budget execution. Thus, across-the-board appropriation â€Å"sequestering† leads to inefficiently dispersing scarce resources among an excessive number of activities. Selective cash rationing politicizes budget execution, and often substitutes supplier priorities for program priorities. Selective appropriation sequestering combined with a mechanism to regulate commitments partly avoids these problems, but still creates difficulties, since spending agencies lack predictability and time to adjust their programs and their commitments. An initially higher, but more realistic, fiscal deficit target is far preferable to an optimistic target based on overestimated revenues, or underestimated existing expenditure commitments, which will lead to payment delays and arrears. The monetary impact is similar, but arrears create their own inefficiencies and destroy government credibility as well. This is a strong argument in favor of measuring the fiscal deficit on a â€Å"commitment basis†, see chapter 6. ) To alleviate problems generated by overoptimistic budgets, it is often suggested that a â€Å"core program† within the budget be isolated and higher priority given to this program during budget implementation. In times of high uncertainty of available resources ( e. g. , very high inflation), this approach could possibly be considered as a secondbest response to the situation. However, it has little to recommend it as general practice, and is vastly inferior to the obvious alternative of a realistic budget to begin with. When applied to current expenditures, the â€Å"core program† typically includes personnel expenditures, while the â€Å"noncore program† includes a percentage of goods and services. Cuts in the â€Å"noncore† program during budget execution would tend to increase inefficiency, and reduce further the meager operations and maintenance budget in most developing countries. The â€Å"core/noncore† approach is ineffective also when applied to investment expenditures, since it is difficult to halt a project that is already launched, even when it is â€Å"non-core. Indeed, depending on strong political support, noncore projects may in practice chase out core projects. (See chapter 12 for a discussion of public investment programming. ) 2. The need for a hard constraint Giving a hard constraint to line ministries from the beginning of budget preparation favors a shift from a â€Å"needs† mentality to an availability mentality. As discussed in detail later in this chapter, annual budget preparation must be framed within a sound macroeconomic framework, and should be organized along the following lines: †¢ A top-down approach, consisting of: (i) defining aggregate resources available for public spending; (ii) establishing sectoral spending limits that fits government priorities; and (iii) making these spending limits known to line ministries; †¢ A bottom-up approach, consisting of formulating and costing sectoral spending programs within the sectoral spending limits; and †¢ Iteration and reconciliation mechanisms, to produce a constant overall expenditure program. Although the process must be tailored to each country, it is generally desirable to start with the top-down approach. Implementation of this approach is always necessary for good budgeting, regardless of the time period covered. The technical articulation of this approach in the context of medium-term expenditure programming is discussed in chapter 13, for the annual budget. 3. Avoiding questionable budgeting practices Certain budgetary practices are widespread but inconsistent with sound budgeting. The main ones are: â€Å"incremental budgeting,† â€Å"open-ended† processes, â€Å"excessive bargaining,† and â€Å"dual budgeting. † a. Incremental budgeting Life itself is incremental. And so, in part, is the budget process, since it has to take into account the current context, continuing policies, and ongoing programs. Except when a major â€Å"shock† is required, most structural measures can be implemented only progressively. Carrying out every year a â€Å"zero-based† budgeting exercise covering all programs would be an expensive illusion. At the other extreme, however, â€Å"incremental budgeting,† understood as a mechanical set of changes in a detailed line-item budget, leads to very poor results. The dialogue between the Ministry of Finance and line ministries is confined to reviewing the different items and to bargaining cuts or increases, item by item. Discussions focus solely on inputs, without any reference to results, between a Ministry of Finance typically uninformed about sectoral realities and a sector ministry in a negotiating mode. Worse, the negotiation is seen as a zero-sum game, and usually not approached by either party in good faith. Moreover, incremental budgeting of this sort is not even a good tool for expenditure control, although this was the initial aim of this approach. Line-item incremental budgeting focuses generally on goods and services expenditures, whereas the â€Å"budget busters† are normally entitlements, subsidies, hiring or wage policy or, in many developing countries, expenditure financed with counterpart funds from foreign aid. Even the most mechanical and inefficient forms of incremental budgeting, however, are not quite as bad as capricious large swings in budget allocations in response to purely political power shifts. b. â€Å"Open-ended† processes An open-ended budget preparation process starts from requests made by spending agencies without clear indications of financial constraints. Since these requests express only â€Å"needs,† in the aggregate they invariably exceed the available resources. Spending agencies have no incentive to propose savings, since they have no guarantee that any such savings will give them additional financial room to undertake new activities. New programs are included pell-mell in sectoral budget requests as bargaining chips. Lacking information on the relative merits of proposed expenditures, the Ministry of Finance is led to making arbitrary cuts across the board among sector budget proposals, usually at the last minute when finalizing the budget. At best, a few days before the deadline for presenting the draft budget to the Cabinet, the Ministry of Finance gives firm directives to line ministries, which then redraft their requests hastily, themselves making cuts across the board in the programs of their subordinate agencies. Of course, these cuts are also arbitrary, since the ministries have not had enough time to reconsider their previous budget requests. Further bargaining then taxes place during the review of the budget at the cabinet level, or even during budget execution. â€Å"Open ended† processes are sometimes justified as a â€Å"decentralized† approach to budgeting. Actually, they are the very opposite. Since the total demand by the line ministries is inevitably in excess of available resources, the Ministry of Finance in fact has the last word in deciding where increments should be allocated and whether reallocations should be made. The less constrained the process, the greater is the excess of aggregate ministries’ request over available resources, the stronger the role of the central Ministry of Finance in deciding the composition of sectoral programs, and the more illusory the â€Å"ownership† of the budget by line ministries. . Excessive bargaining and conflict avoidance There is always an element of bargaining in any budget preparation, as choices must be made among conflicting interests. An â€Å"apolitical† budget process is an oxymoron. However, when bargaining drives the process, the only predictable result is inefficiency of resource allocation. Choices are based more on the political power of the different actors than on facts, integrity, or results. Instead of transparent budget appropriations, false compromises are reached, such as increased tax expenditures, reation of earmarked funds, loans, or increased contingent liabilities. A budget preparation process dominated by bargaining can also favor the emergence of escape mechanisms and a shift of key programs outside the budget. 7 A variety of undesirable compromises are used to avoid internal bureaucratic conflicts—spreading scarce funds among an excessive number of programs in an effort to satisfy everybody, deliberately overestimating revenues, underestimating continuing commitments, postponing hard choices until budget execution, inflating expenditures in the second year of a multiyear expenditure program, etc. These conflict-avoidance mechanisms are frequent in countries with weak cohesion within the government. Consequently, improved processes of policy formulation can have benefits for budget preparation as well, through the greater cohesion generated in the government. 8 Conflict avoidance may characterize not only the relationships between the Ministry of Finance and line ministries, but also those between line ministries and their subordinate agencies. Indeed, poor cohesion within line ministries is often used by the Ministry of Finance as a justification for its leading role in determining the composition of sectoral programs. Perversely, therefore, the all-around bad habits generated by â€Å"open-ended† budget preparation processes may reduce the incentive of the Ministry of Finance itself to push for real improvements in the system. d. â€Å"Dual budgeting† There is frequent confusion between the separate presentation of current and investment budgets, and the issue of the process by which those two budgets are prepared. The term â€Å"dual budgeting† is often used to refer to either the first or the second issue. However, as discussed earlier, a separate presentation is needed. â€Å"Dual budgeting† refers therefore only to a dual process of budget preparation, whereby the responsibility for preparing the investment or development budget is assigned to an entity different from the entity that prepares the current budget. â€Å"Dual budgeting† was aimed initially at establishing appropriate mechanisms for giving higher priority to development activity. Alternatively, it was seen as the application of a â€Å"golden rule† which would require balancing the recurrent budget and borrowing only for investment. In many developing countries, the organizational arrangements that existed before the advent of the PIP approach in the 1980s (see chapter 12) typically included a separation of budget responsibilities between the key core ministries. The Ministry of Finance was responsible for preparing the recurrent budget; the Ministry of Planning was responsible for the annual development budget and for medium-term planning. The two entities carried out their responsibilities separately on the basis of different criteria, different staff, different bureaucratic dynamics, and, usually, different ideologies. In some cases, at the end of the budget preparation cycle, the Ministry of Finance would simply collate the two budgets into a single document that made up the â€Å"budget. † Clearly, such a practice impedes the integrated review of current and investment expenditures that is necessary in any good budget process. (For xample, the Ministry of Education will program separately its school construction program and its running costs and try to get the maximum resources for both, while not considering variants that would consist of building fewer schools and buying more books. ) In many cases, coordination between the preparation of the recurrent budget and the development budget is poor not only between core ministries but within the line ministries as well. While the Ministry of Finance deals with the financial department of line ministries, the Ministry of Planning deals with their investment department. This duality may even be reproduced at subnational levels of government. Adequate coordination is particularly difficult because the spending units responsible for implementing the recurrent budget are administrative divisions, while the development budget is implemented through projects, which may or may not report systematically to their relevant administrative division. (In a few countries, while current expenditures are paid from the Treasury, development expenditures are paid through a separate Development Fund. ) The introduction of rolling PIPs was motivated partly by a desire to correct these problems. Thus, the crux of the â€Å"dual budgeting† issue is the lack of integration of different expenditures contributing to the same policy objectives. This real issue has been clouded, however, by a superficial attribution of deep-seated problems to the â€Å"technical† practice of dual-budgeting. For example, dual budgeting is sometimes held responsible for an expans ionary bias in government expenditure. Certainly, as emphasized earlier, the initial dual budgeting paradigm was related to a growth model (Harrod-Domar et al) based on a mechanistic relation between the level of investment and GDP growth. This paradigm itself has unquestionably been a cause of public finance overruns and the debt crises inherited in Africa or Latin America from badquality investment â€Å"programs† of the 1970s and early 1980s. The implicit disregard for issues of implementation capacity, or efficiency of investment, or mismanagement, corruption and theft, is in hindsight difficult to understand. However, imputing to dual budgeting all problems of bad management or weak governance and corruption is equally simplistic and misleading. Given the same structural, capacity, and political conditions of those years (including the Cold War), the same outcome of wasteful, and often corrupt, expansion of government spending would have resulted in developing countries—dual budgeting or not. If only the massive economic mismanagement in so many countries in the 1970s and early 1980s could be explained by a single and comforting â€Å"technical† problem of budgetary procedure! In point of fact, the fiscal overruns of the 1970s and early 1980s had little to do with the visible dual budgeting. They originated instead from a third invisible budget: â€Å"black boxes,† uncontrolled external borrowing, military expenditures, casual guarantees to public enterprises, etc. 10 Public investment budgeting is submitted to strong pressures because of particular or regional interest (the so-called pork barrel projects) and because it gives more opportunities for corruption than current expenditures. 11 Thus, in countries with poor governance, there are vested interests in keeping separate the process of preparing the investment budget, and a tendency to increase public investment spending. However, under the same circumstances, to concentrate power and bribe opportunities in the hands of a powerful â€Å"unified-budget† baron would hardly improve expenditure management or reduce corruption. On the contrary, it is precisely in these countries that focusing first on improving the integrity of the separate investment programming process may be the only way to assure that some resources are allocated to economically sound projects and to improve over time the budget process as a whole. 12 By contrast, in countries without major governance weaknesses, dual budgeting ften results in practice in insulating current expenditures (and especially salaries) from structural adjustment. Given the macroeconomic and fiscal forecasts and objectives, the resources allocated to public investment have typically been a residual, estimated by deducting recurrent expenditure needs from the expected amount of revenues (given the overall deficit target). The residual character of the do mestic funding of development expenditures may even be aggravated during the process of budget execution, when urgent current spending preempts investment spending which can be postponed more easily. In such a situation, dual budgeting yields the opposite problem: unmet domestic investment needs and insufficient counterpart funds for good projects financed on favorable external terms. Insufficient aggregate provision of counterpart funds (which is itself a symptom of a bad investment budgeting process) is a major source of waste of resources. Recall that the real issue is lack of integration between investment and current expenditure programming, and not the separate processes in themselves. This is important, because to misspecify the issue would lead (and often has) to considering the problem solved by a simple merger of two ministries—even while coordination remains just as weak. A former minister becomes a deputy minister, organizational â€Å"boxes† are reshuffled, a few people are promoted and others demoted. But dual budgeting remains alive and well within the bosom of the umbrella ministry. When coordination between two initially separate processes is close and iteration effective, the two budgets end up consistent with each other and with government policies, and â€Å"dual budgeting† is no great problem. Thus, when the current and investment budget processes are separate, whether or not they should be unified depends on the institutional characteristics of the country. In countries where the agency responsible for the investment budget is weak, and the Ministry of Finance is not deeply involved in ex-ante line-item control and day-to-day management, transferring responsibilities for the investment budget to the Ministry of Finance would tend to improve budget preparation as a whole. (Whether this option is preferable to the alternative of trengthening the agency responsible for the investment budget can be decided only on a country-specific basis. ) In other countries, one should first study carefully the existing processes and administrative capacities. For example, when the budgetary system is strongly oriented toward ex-ante controls, the capacity of the Ministry of Finance to prepare and manage a development budget may be inadequate. A unified budget process would in this case ri sk dismantling the existing network of civil servants who prepare the investment budget, without adequate replacement. Also, as noted, coordination problems may be as severe between separate departments of a single ministry as between separate ministries. Indeed, the lack of coordination within line ministries between the formulation of the current budget and the formulation of the capital budget is in many ways the more important dual budgeting issue. Without integration or coordination of current and capital expenditure at line the ministries’ level, integration or coordination at the core ministry level is a misleading illusion. On balance, however, the general presumption should be in favor of a single entity responsible for both the investment and the annual budget (although that entity must possess the different skills and data required for the two tasks): Where coherence is at a premium, where any consistent policy may be better than several that cancel each other out, where layers of bureaucracy already frustrate each other, and where a single budget hardly works, choosing two budgets and two sets of officials over one seems strange. The keynote in poor countries should be simplicity. Designs for decisions should be as simple as anyone knows how to make them. The more complicated they are, the less likely they are to work. On this basis, there seems little reason to have several organizations dealing with the same expenditure policies. One good organization would represent an enormous advance. Moreover, choosing the finance ministry puts the burden of reform where it should be—in the budgetary sphere. 13 D. THE MACROECONOMIC AND POLICY CONTEXT 1. Macroeconomic framework and fiscal targets a. Importance of a macroeconomic framework The starting points for expenditure programming are: (i) a realistic assessment of resources likely to be available to the government; and (ii) the establishment of fiscal objectives. (There follows, of course, significant iteration between the two, until the desired relationship between resources and objectives is reached. ) As noted earlier, the capacity to translate policy priorities into the budget, and then to ensure conformity of actual expenditures with the budget, depends in large part on the soundness of macroeconomic projections and revenue forecasts. Overestimating revenues leads to poor budget formulation and therefore poor budget execution. (As mentioned earlier, this may sometimes be a deliberate ploy to evade the responsibility for weak budget management and discipline. ) The preparation of a macroeconomic framework is therefore an essential element in the budget preparation process. Macroeconomic projections are not simple forecasts of trends of macroeconomic variables. Projections are based on a definition of argets and instruments, in areas such as monetary policy, fiscal policy, exchange rate and trade policy, external debt policy, regulation and promotion of private-sector activities, and reform of public enterprises. For example, the policy objective of reducing inflation normally corresponds to targets such as the level of the deficit, and the specific instruments can include tax measures and credit policy measures, among others. 14 Projections should cover the current year and a forward period of two to four years. b. Fiscal targets and indicators The establishment of explicit fiscal targets gives a framework for budget formulation, allows the government to state clearly its fiscal policy and the legislative and the public to monitor the implementation of government policy, and, ultimately, makes government politically as well as financially accountable. Fiscal targets and indicators should cover three areas: current fiscal position (e. g. , fiscal deficit), fiscal sustainability (e. g. , debt-, tax-, or expenditure-to-GDP ratios), and vulnerability (e. . , analysis of the composition of the foreign debt). The summary indicator of fiscal position used most commonly is the overall budget deficit on a cash basis, defined as the difference between actual expenditure payments and collected revenues (on a cash basis) plus grants (cash or in kind). 15 The cash deficit is by definition equal to the government borrowing requirements (from domestic or foreign sources) and is thus integrally linked to the m oney supply and inflation targets and prospects. The deficit is therefore a major policy target to ensure that the budget will be financed in a noninflationary way and without crowding out private investment, while keeping the growth of public debt under control. The cash deficit must always be included in the set of fiscal targets. The cash deficit does not take into account payment arrears and floating debt. In countries that face arrears problems the deficit on a cash basis plus net increase of arrears is also an important indicator, and is very similar (but not necessarily identical) to the deficit on a commitment basis, i. e. the difference between annual expenditure commitments and cash revenues and grants. 16 The IMF Code of Fiscal Transparency requires at least a memorandum reporting arrears, when the country does not use accrual or modified accrual accounting (which would systematically generate reports on overdue accounts; see chapter 10). As discussed in chapter 6, the precise definition of commitment varies from one 17 country to another . Commitments include orders not yet delivered, may concern multiyear contracts, or, in some countries, be only the administrative reservation of appropriations. Therefore, when using the deficit on a commitment basis as fiscal indicator, it is necessary to specify what transactions are included in the expenditures on a commitment basis. This indicator would be meaningless if it includes multiyear commitments and commitments that are merely reservations of appropriations. Moreover, to estimate arrears more accurately, orders not yet delivered should be separated from actual expenditures (â€Å"accrued expenditures,† or â€Å"expenditures at the verification stage†). As discussed in chapters 6 and 10, this requires an adequate accounting system for tracking the uses of appropriations. The primary deficit (on either a cash or a commitment basis) is the difference between noninterest expenditures and revenues and grants. As a target for budget policy, it does not depend on the vagaries of interest rates and exchange rates, and is therefore a better measure of the government’s fiscal adjustment effort. In high-inflation countries, to take into account the impact of inflation on the stock of debt, a frequent indicator is the operational deficit, which is equal to the deficit on a cash basis less the inflationary portion of interest payment. 18 The current deficit is the difference between current revenue and current expenditure. It is by definition, the â€Å"government saving,† and thus, in theory, the contribution of government to investible resources and economic growth. However, since the current spending of a government may be as important for growth as capital spending, the macroeconomic meaning of this indicator should be interpreted with care. Depending on the circumstances, it may also be necessary to isolate once and for all the fiscal results from other operations, as, for instance, the sale of public assets, or a special recovery of tax arrears. 9 [Please see attached Table 2. xls] It is essential to underline that the broad objective of fiscal policy is not a specific level of deficit, per se, but a fiscal position that is sustainable in light of policy goals and likely resource availability. Indicators of fiscal sustainability include the ratio of debt to GDP, tax to GDP, net unfunded social security l iabilities. The calculation of the deficit on an accrual basis and the assessment of the net worth of the government allows a etter assessment of liabilities and therefore their impact on sustainability (see chapter 10). However, huge movements in net worth can be caused by valuation changes in assets such as land, that the government has no immediate intention of liquidating. Hence, â€Å"net worth measures could be dangerous if used as indicators for near-term fiscal policy. â€Å"20 An assessment of fiscal vulnerability is also needed, especially in countries that benefit from short-term capital inflows. Especially relevant to Asian countries affected by the financial crisis that began in 1997; such an assessment could be based on the analysis of the maturity of government debt, the volume of usable foreign exchange reserves, etc. There is no question that the standard deficit measures may indicate a healthy fiscal situation which is in reality fragile. However, as shown by recent developments, guidelines for assessing fiscal vulnerabilities are doubtful and unclear. This question is related to the perennial and difficult issue f â€Å"early warning systems† to predict the probability of an impending fiscal or financial crisis. It may well be that such early warnings are feasible and appropriate. Among the thorny difficulties, however, there is the risk of a self-fulfilling prophecy, where the early warning itself could cause financial markets to become concerned and hence spark a crisis. Thus, on the â€Å"balance† of the debate, against any real crisis that an early w arning system has predicted accurately, one should place other crises, that might not have happened were it not for the warning itself. . Preparation of a macroeconomic framework A macroeconomic framework typically includes projections of the balance of payments, the real sector (i. e. , production), the fiscal accounts, and the monetary sector. It is a tool for checking the consistency of assumptions or projections concerning economic growth, the fiscal deficit, the balance of payments, the exchange rate, inflation, credit growth and the share of the private and public sectors on external borrowing policies, etc. 21 Preparing a macroeconomic framework is always an iterative exercise. A set of â€Å"initial† objectives must be defined to establish a preliminary baseline scenario, but the final framework requires a progressive reconciliation and convergence of all objectives and targets. Considering only one target (e. g. , the fiscal deficit) in this iterative exercise risks defining other important targets as de facto residuals. â€Å"General government† (see chapter 2) should be considered when preparing the fiscal projections and defining the fiscal targets, but the fiscal targets should also be broken down between central and local government. In some decentralized systems, by law a fiscal target cannot be directly imposed on subnational and local government. In those cases, it is necessary to assess the feasibility of achieving it by means of the different instruments under the control of the central government (such as grants, control of borrowing). However, the constraints on running fiscal deficits are typically much tighter on subnational entities than they are on central government. The main reason is the central government’s capacity to regulate money supply. Therefore, in some federal systems (e. . , the U. S. ) many states have their own constitutionally mandated requirement of an annual balanced budget. Fiscal projections should cover the consolidated account of the general government and quasi-fiscal operations by the banking system. Future expenditures related to contingent liabilities as a result of government guarantees should be assessed (see chapter 2). In a majority of developing countries, it is de sirable to prepare â€Å"consolidated accounts of the public sector,† to identify financing requirements for the public sector as a whole. Very often, however, only the central government is included, giving a misleading fiscal picture and the temptation to â€Å"download† the fiscal deficit onto local government entities. This practice is conducive neither to sound fiscal policy nor to the subsidiarity structure appropriate to the specific country. Unfortunately, governments and international financial institutions have paid insufficient attention to this problem. The degree of sophistication of fiscal projections depends on the technical capacities within the country and the availability of data and appropriate tools. Sophisticated odels can be useful. Nevertheless, since the major objective is to set a general frame for formulating macroeconomic objectives and checking their consistency, the preparation of a macroeconomic framework does not necessarily require sophisticated modeling techniques. On the contrary, these techniques may give a sense of misplaced concreteness and a â€Å"forecast illusion† wh ich may hamper the practical value of the framework. Using simple â€Å"quasi-accounting† models would already represent significant progress in many countries. 22 Such models include mainly accounting relations (e. g. GDP plus net imports equals consumption plus investment) and only a limited number of behavioral relations defined by simple ratios (e. g. , consumption, income), without resorting to econometric techniques. The models are also easier to use in discussions on fiscal policy, whereas the outputs of a sophisticated econometric model depend on the approach adopted by the modeler, and the process is necessarily more opaque. In any case, forecasting revenues should be based on detailed analyses and forecasts by individual tax rather than on the aggregate outputs of a macroeconomic model. The problems revealed by the projections (e. g. , lack of consistency between economic growth targets and monetary policy) must be discussed among the agencies involved in macroeconomic management. The preliminary baseline scenario gives the macroeconomic information needed for preparing sectoral and detailed projections, but these projections usually lead in turn to revising the baseline scenario. Such iterations should continue until overall consistency is achieved for the macroeconomic framework as a whole. The iteration process is not only necessary for sound macroeconomic and xpenditure programming, but is also an invaluable capacity-building tool, to improve the awareness and understanding of involved agencies—and therefore their cooperation in formulating a realistic budget and implementing it correctly. [Please see attached Figure 5. xls] The preparation of a macroeconomic framework should be a permanent activity. The framework needs to be prepared at the start of each budget cycle to give adequate guidelines to the line ministries. As noted, it must then be updated throughout the further stages of budget preparation, also to take into account intervening changes in the economic environment. During budget execution, too, macroeconomic projections require frequent updating to assess the impact of exogenous changes or of possible slippage in budget execution. In addition to the baseline framework, it is important to formulate variants under different assumptions, e. g. , changes in oil prices. The risks related to unexpected changes in macroeconomic parameters must be assessed and policy responses identified in advance, albeit in very general terms, of course. The importance of good data cannot be underestimated. Without reliable information, the macroeconomic framework is literally not worth the paper it is written on. This includes the collection of economic data and the monitoring of developments in economic conditions (both of which are generally undertaken by statistics bureaus) as well as the monitoring and consideration of changes in laws and regulations that affect revenue, expenditure, financing and other financial operations of the government. 2. Aggregate expenditure estimates Typically, a macroeconomic framework is at a very aggregate level on the expenditure side, and shows total government wages, other goods and services, interest, total transfers, and capital expenditures (by source of financing). Assumptions and underlying policy objectives therefore concern the broad economic categories of expenditures, rather than the allocation of resources among sectors. Moreover, transfers or entitlements are not reviewed in sufficient detail and assumptions on future developments are not compared with continuing commitments. Thus, when elaborating a fiscal framework on the basis of the overall macroeconomic framework, estimates of the impact of the assumptions and the aggregate fiscal targets on the composition of expenditure, by sector or economic category, are required to assess whether the fiscal targets are realistic and sustainable, and to etermine the conditions to meeting these targets. Therefore, the preparation of aggregate expenditure estimates could help in assessing the sustainability of expenditure policy, and thus improve the budget preparation process (notably when defining expenditure ceilings for the various sectors). These estimates could cover: (i) the forward costs o f large investment projects; (ii) projections for the more important entitlements; and (iii) aggregate projections of other expenditures, by function and broad economic category. These estimates are less demanding in terms of capacity and institutional process than the formal Medium-Term Expenditure Framework (MTEF) described in chapter 13, but could be a step toward the implementation of a comprehensive MTEF. Indeed, this step is mandatory if some sectoral multiyear expenditure programming exercise is carried out (covering only investment or a few sectors), to prevent inconsistency between the sectoral program and the macroeconomic framework, or the crowding out of expenditure in noncovered sectors or categories. Focusing only on technical issues while neglecting the fundamental question of the division of administrative responsibility inevitably produces a weak or inoperative macroeconomic framework. Some major considerations in this respect are discussed in chapter 5. 3. Consolidating the fiscal commitments a. Making the macroeconomic projections public While the iterative process leading to a realistic and consistent macroeconomic framework must remain confidential in many of its key aspects, when the framework is completed it must be made public. The legislature and the population at large have a right to know clearly the government policy objective and targets, not only to increase transparency and accountability, but also to reach a consensus within civil society. While such a consensus may take additional time, and require difficult debates, it will also be an invaluable foundation for the robust and effective implementation of the policy and financial program. A good example is provided by the government of Hong Kong, China, which annexes its medium-term forecast to the annual budget speech (box 16 and annex VII). Box 16 Medium-Range Forecasts: The Example of Hong Kong, China The Medium Range Forecast (MRF) is a projection of expenditure and revenue for the forecast period based on forecasting assumptions and budgetary criteria. To derive the MRF, a number of computer-based models that reflect a wide range of assumptions about the factors determining each of the components of government’s revenue and expenditure were used. As summary is shown here, a fuller description is in Annex VII. Assumptions relating to developing expenditure and revenue forecast over the mediumterm period are the following: †¢ estimated cash flow of capital projects forecast completion dates of capital projects and their related recurrent consequences in terms of staffing and running costs †¢ estimated cash flow arising from new commitments resulting from policy initiatives †¢ the expected pattern of demand for individual services †¢ the trend in yield from individual revenue sources †¢ new reve nue measures in 1998-1999 In addition to these assumptions, there are a number of criteria against which the results of forecasts are tested for overall acceptability in terms of budgetary policy: †¢ †¢ †¢ †¢ Maintain adequate reserves in the long-term Expenditure growth should not exceed the assumed trend growth in GDP Contain capital expenditure growth within overall expenditure guidelines Revenue projections reflect new measures introduced in this year’s budget To summarize, the MRF of Hong Kong is shown below: (in $Hk billion) 1998-1999 Revenue 192,680 Expenditure 182,480 Surplus 10,200 Total public expenditure 288,890 Gross domestic product 1,497,880 Growth in GDP (nominal) 12. 9 (real) 5. 0 Public expenditure as a percentage of GDP 19. 3 Forecast years 1999-2000 2000-2001 211,390 242,900 200,740 227,830 10,650 5,070 315,830 354,060 1,690,740 1,908,420 12. 9 12. 9 5. 0 5. 0 18. 7 18. 6 2001-2002 271,330 258,570 12,760 393,980 2,154,130 12. 9 5. 0 18. 3 Source: Medium Range Forecast of Hong Kong, The Internet, August 8, 1998. In some countries, government projections are submitted to a panel of independent and respected experts to ensure their reliability, while preserving the confidentiality required on a few sensitive issues. In other countries, the projections are validated by the Auditor General (e. g. , the United Kingdom and the Canadian province of Nova Scotia23). The independence of the Auditor General adds credibility to the projections. However, any other form of participation of audit offices in the budget formulation process would be questionable. In any event, manipulation and alteration of forecasts would soon reduce the government’s credibility and hence its influence. b. Binding fiscal targets? Several countries have laws and rules that restrict the fiscal policy of government (â€Å"fiscal rules†). 24 For example, an earlier golden rule stipulated that public borrowing must not exceed investment (thus mandating a current budget balance or surplus). In some cases, the overall budget must be balanced by law (as in subnational government in federal countries). In the European Union, the Maastricht Treaty stipulates specific fiscal convergence criteria, concerning both the ratio of the fiscal deficit to GDP and the debt/GDP ratio. (The former has been by far the more important criterion. ) One frequent criticism of such rules is that they favor creative accounting and encourage nontransparent fiscal practices. When they are effectively enforced, nondiscretionary rules can also prevent governments from adjusting their budgets to the economic cycle. 5 Aside from the special case of European integration, one may generally consider that, in countries with fragile coalition governments, fragmented decision making, and legislative committees acting as a focus for periodic bargaining, setting up legally binding targets may be appropriate. In other countries, however, binding targets could in effect predetermine the budget before its prepa ration even begins. 26 In contrast with an approach based on rigid targets, other countries (e. g. , New Zealand) do not mandate specific fiscal targets, but refer to criteria such as prudent levels and reasonable degrees. It is left to the government to specify the targets in a Budget Policy Statement, which presents total revenues and expenses and projections for the next three years. This statement is published at least three months before the budget is presented to Parliament, and is reviewed by a Parliament committee but not formally voted by Parliament. 27 Box 17 The New Zealand Fiscal Responsibility Act Enacted in 1994, the New Zealand Fiscal Responsibility Act offers a comprehensive legal framework for formulation and conducting fiscal policy in general, and for incorporating a long-term orientation in the budget process in particular. While many OECD countries have similar practices in place, the Fiscal Responsibility Act is an example of these practices being enacted into law. The primary objective of the Fiscal Responsibility Act was to entrench sound fiscal policies and make it difficult for future governments to deviate from them. There are two provisions of the Act: (i) a regime for setting fiscal objectives that focuses attention on the long term; and (ii) an extensive system of fiscal reporting with unique mechanisms to ensure its credibility and integrity. The extensive reporting required by the act serves two purposes. First, it serves to monitor the consistency of the government’s fiscal actions with its stated fiscal objectives. Second, it brings general transparency to government finances by mandating the disclosure of all relevant fiscal information in a timely manner. The act requires two specialized reports: the Fiscal Strategy Report and the PreElection Economic and Fiscal Update. The Fiscal Strategy Report, which is presented to Parliament along with the budget, assesses the consistency of the policy framework contained in the budget with the short-term fiscal intentions and long-term fiscal objectives outlined in the Budget Policy Statement. The Pre-Election Economic and Fiscal Update contains the threeyear forecasts of all key economic and fiscal variables. Both reports contain two statements of responsibility, one by the Minister of Finance and one by the Secretary to the Treasury (a civil servant). These statements of responsibility aim to clarify the roles of politicians and civil servants in producing reports and give a greater role to civil servants in producing them, thereby increasing the overall credibility of the reports. Source: â€Å"Budgeting for the future,† OECD working paper, 1997. More important than specifying ex-ante targets and general criteria is to ensure that institutional arrangements and processes favor coherence among resource constraints, fiscal objectives, and expenditure programs. This broader issue involves the mechanisms for policy formulation, the budget preparation process, the role of the Ministry of Finance in budgeting, and the development of appropriate instruments for reviewing expenditures within a longer period than the annual budget. Box 18 A Good Macroeconomic Coordination Practice: The â€Å"Gang of Four† in Thailand The Thai system of budgeting is highly centralized. It embodies a longstanding set of arrangements, rules, and procedures that together help exert discipline on aggregate fiscal management. It grants very little autonomy to line agencies over their budgets, and imposes weak accountability on them for their performance. The hallmark of the Thai budgeting system is aggregate fiscal discipline. A â€Å"gang of four† interacts to control the level of spending and thus the deficit: the National Economic and Social Development Board (NESDB), the Ministry of Finance (MOF), the Bank of Thailand (BOT), and the Bureau of the Budget (BOB) in the Prime Minister’s Office. The gang of four is responsible for formulating the macroeconomic framework that serves as the basis for the aggregate expenditure ceiling. It also determines for the most part the ministerial ceilings. Prioritization is largely a function of the gang of four. It ensures that the budgetary requests of line agencies are consistent with the objectives of the five-year development plan. The gang of four’s control over aggregate allocations to agencies and to expenditure categories implies that it exerts considerable leverage over priority setting. In Parliament, the Budget Scrutiny Committee chaired by the Minister of Finance evaluates the government’s proposal. Cabinet members can propose amendments to the government’s proposal but seldom make significant changes in allocations to line agencies because of limited technical capability to evaluate such proposals. Politicians can alter the allocation of line agencies. After a series of deliberations and negotiations, the committee submits the budget bill to Parliament. The Parliament almost always accepts the bill. Source: Campos and Pradhan, â€Å"Budgetary institutions and expenditure outcomes, 1996. 4. Policy formulation a. Importance of policy formulation The budget preparation process is a powerful tool for coherence. The budget is both an instrument of economic and financial management and an implicit policy statement, as it sets relative levels of spending for different programs and activities. However, policy decision making is complex and involves different actors in and outside the government. It is a technocratic illusion to embed all policy formulation within the budget process (as to some extent was the ambition of the PPBS; see chapter 3). However, a coherent articulation should be sought between the policy agenda (which should take into account economic and fiscal realities) and the budget (which should accurately reflect the government’s policy priorities). The budget process should both take into account policies already formulated and be the main instrument for making these policies explicit and â€Å"operational. However, policies must be defined outside the pressure of the budget process. Making policy through the budget would lead to a focus only on short-term issues and thus to bad policy, since the policy debate would be invariably dominated by immediate financial considerations. (This is frequently the unfortunate outcome in developing countries with weak capacity faced with financial difficulties. ) In earlier times, medium-term development plans wer e intended as the instrument for setting up government strategy. However, these plans were rigid, invariant, and usually out of sync with financial realities. Paradoxically, therefore, they indirectly led in practice to the same dominance of short-term financial considerations. Organizational arrangements are discussed in chapter 5. b. The policy-budget link A bridge between the policy making process and the budget process is essential to make policy a breathing reality rather than a statement of wishes. For this purpose at least two clear rules must be established. 28 The resource implications of a policy change should be identified, even if very roughly, before a policy decision is taken. Any entity proposing new policies must quantify their effects on public expenditure, including the impact both on its own spending and on the spending of other government departments. The Ministry of Finance should be consulted in good time about all proposals involving expenditure before they go into ministerial committee or to the center of the government and certainly before any public announcements are made. Within the budget formulation process, close cooperation between the Ministry of Finance and the center of government is required, at both the political and the technical level. The role of the center is to ensure that the budget is prepared along the lines defined; to arbitrate or smooth over conflicts between the Ministry of Finance and line ministries; and to assure that the relevant stakeholders are appropriately involved in the budget process. (This is a major challenge, which can only be mentioned here but requires care and commitment on a sustained basis. ) An interministerial committee is needed to tackle crosscutting issues and review especially sensitive issues. And, most importantly, each entity involved in the budget process must perform its own role in a responsible fashion, and be given the means and capacity to do so. c. Reaching out: The importance of listening Consultations can strengthen legislative scrutiny of government strategy and the budget. Legislative hearings through committees and subcommittees, particularly outside the pressure environment of the annual budget, can provide an effective mechanism for consulting widely on the appropriateness of policies (issues related to the role of the legislature are discussed in chapter 5) . The government should try to get feedb How to cite Budget Process, Essay examples

Potential for Formal Economic Co-Operation of Djibouti

Question: Identify the potential for formal economic co-operation of Djibouti (Djibouti, officially the Republic of Djibouti, is a country located in the Horn of Africa) with other nations through relevant trade groupings. You can apply the below. (if necessary and relevant) 1) Graphs 2) Pestle 3) HDI Framework / 3 Category OF HDI Answer: Introduction The study is to classify the potential for formal economic co-operation of Djibouti, which is the country, located in the Horn of Africa with other nations through relevant trade groupings. Djibouti (Republic of Djibouti) is situated in the Horn of Africa. Djibouti is a mixed and a multi linguistic country (Publishing and Centre, 2012).The planned position on the Red Sea derives the economy of Djibouti. The economy of Djibouti is based on service activities connected with the countrys planned location and status as a free trade zone in the Horn of Africa. Here, free trade zone is a special economic zone where goods can be landed, handled, manufactured or reconfigured, and re-exported without any involvement of the customs authorities. Economy of Djibouti The economy of Djibouti is subject to the services sector which provides shipment port as well as international transshipment. The main focus of Djiboutis economy is on service sector. As regional and international trade platform Djiboutis position was strengthen by more investment in port operation, real estates, hotels and banking (DJIBOUTI: Economic Expansion, 2008). Djibouti has both export and import partners. Some exports and imports partners are as below:- Export partners:- 1. Ethiopia 2. European Union 3. Somalia 6. Brazil 5. Qatar Import partners:- 1. European Union 2. United Arab Emirates 3. Kingdom of Saudi Arabia 4. Japan 5. Ethiopia The Annual GDP of djibouti in comparison of diifernt middle east north africa are dicussed by the graph:- The starting year is 2011 in which the GDP is 4.5 , 2012 it is 4.8, 2013 is5.0, 2014 is 5.5,and its is forecasted that in 2015 is would increase will 5.5 and in futher years 2016 and 2017 it will increase to 6.0. In comparison of other middle east north africa countries it will be increasing. Figure: Annual GDP growth (%) Source: (Data.worldbank.org, 2015) The graph below shows the current account balance ,i.e, % GDP from 2011 to 2017 by comparising djibouti GDP to other middle east north African countries which are developing. In 2011 it was 4.4 , 2012 it was1.3 , 2013 it was 0.6, 2014 it was -1.0 ,2015 it would be -5.9, the forecasted year is 2016 and 2017 in which it may be -4.1, -3.9 respectively . Figure: Current account balance, % GDP Source: (Data.worldbank.org, 2015) Some partners of Djibouti are outside the Gulf States. The economy of Djibouti is free-enterprise economy and market based economy. Its market is reliant on its tactical position at the narrow straits at southern entrance to Red Sea. The largest single source of economic and commercial activity in Djibouti is the French military base. The land available in Djibouti is very little and country suffers from severe drought due to which country produces only 3% of its food needs. Livestock like goat, sheep and camels are income of more than half of the population of the Djibouti (Morrow, 2004). The country has little vulnerable natural resources and little industries, due to which it is mainly reliant on foreign aid to finance progress project and support its balance of costs. If we consider Djibouti by geographic point : to north is Ras Doumera and Eritrea, to east , a section of Red Sea coast north of Ras Bir , to south Ethiopia is situated and to the west is As Ela. There are several problems with Djibouti neighbors in perspective to security, politics and etc. There are many companies based in Djibouti which help the country in its economy. The companies are as follows: 1. Banks 1.1 Central bank of Djibouti 1.2 Dahabshil bank International and etc. 2. Construction 3. Telecommunication 4. Transportation 5. Airlines 6. Railway Djiboutian Ministry of foreign Affairs and International cooperation maintains the foreign relations of Djibouti. With government of Somalia, Ethiopia, France and the United States Djibouti have close tie up. Djibouti also has strong relation with China. The PESTLE analysis of the economics of Djibouti can be done using below mentioned factors:- (Hamilton and Webster, 2009) Eritrea After the Eritrean-Ethiopian War, Ethiopian has started his trade with Djibouti. After many disputes with Eritrea, Djibouti has broken relation with Eritrea. Ethiopia With Ethiopia relation of Djibouti is sensitive. Addis Ababa Djibouti Railroad is shared by both the countries. The Port of Djibouti is tied to railroad, which provides port facilities France After independence Djibouti is the host country for the French military. Economic and military agreement with France provides persistent safety and economic help. Kosovo Both the countries Djibouti and Kosovo have tactful relationship and they vowed to support joint cooperation with one another. Somalia In the Somalia peace process Djibouti is the dynamic participant. Likewise Djibouti has participated in many other international activities held in Somalia. Turkey Turkey and Djibouti have political as well as economic and military relations between them. United State Djibouti and U.S have strong political as well as economic relationship. Foreign Aid given from US to Djibouti plays an important role in economy of Djibouti. The government of Djibouti has allowed U.S as well as other nations to use its ports and airport facility. In many international organizations like - African Union, Arab league, La Francophonia and United Nations Djibouti is a member. The Headquarters of Inter Governmental Authority on Development (IGAD) which is responsible for development of the seven countries in East Africa is situated in Djibouti City. Djibouti is also having bilateral immunity agreement related to protection with the International Criminal Court. Economy of Neighbors Countries There are several neighbors of Djibouti like Ethiopia, Eritrea, Dorro, Yemen, Somalia, and Somaliland. In Ethiopia Agriculture is the main factor on which economy dependent. Other sectors are also responsible for the economy like forestry, fishing, minerals and mining, energy, manufacturing, transport, telecommunication and tourism. There is a policy launched by Government of Ethiopia that the right to own land is as belonging only to state and the people of state , but people who are unable to mortgage or sell they may lease there land to the needy person . Somalia is situated on Horn of Africa and is bordered in west by Ethiopia, in northwest by Djibouti, in north by Gulf of Aden, in east by Indian ocean and in southwest by Kenya . Somalia has an informal economy based on livestock, remittance/money transfer and telecommunications. Somalia economy has a gradual shift in favor of modern industry methods in both gradual as well as traditional production. Somaliland is a independent state which is self declared and also internationally recognized as Somalia (Scaglia, 2010). Eritrea is also situated in Horn of Africa and is bordered by Red Sea, Sudan, Ethiopia, and Djibouti in east, west, south, and east respectively. The main reason for the growth of economy is full operation in the field of gold and silver. Eritrea is a country which is having large amount of resources like copper, gold, granite, marble and potash. Conclusion: Djibouti economy is derived from the strategic location of the Red Sea. As the country has very harsh climatic condition and huge amount of unskilled laborers so there is limited stock of natural resources. Djibouti has also tie up with many international organizations like African Union, United Nations and etc. Djibouti economy is dependent on the trade done by different neighbor countries of it. References: Data.worldbank.org, (2015).Djibouti | Data. [online] Available at: https://data.worldbank.org/country/djibouti [Accessed 10 Feb. 2015]. DJIBOUTI: Economic Expansion. (2008).Africa Research Bulletin: Economic, Financial and Technical Series, 45(5), pp.17842A-17842C. Hamilton, L. and Webster, P. (2009).The international business environment. New York: Oxford University Press. Morrow, J. (2004).Djibouti. Philadelphia: Mason Crest Publishers. Publishing, O. and Centre, O. (2012).African Economic Outlook 2012. Paris: Organisation for Economic Co-operation and Development. Scaglia, B. (2010).The amazing continent of Africa. [S.l.: Perspicacious Press.