Award highlights huge improvement in Afghan budget process

Strengthening Afghanistan's Budgets (SAB), a DFID project running in partnership with the Ministry of Finance in Afghanistan, was awarded British Expertise Major Project of the Year by HRH the Duke of Gloucester on the evening of Wednesday, November 9 2011.

The award - which is designed to recognise innovation, value for money and considerable achievement in the face of adversity - was given for the outstanding progress the project has made in helping the Ministry of Finance develop a budgeting process that enables the Afghan Government and donors channel money to where it is most needed.

Since the project began in November 2007, the quality of the budget process has improved immeasurably. When SAB began: the budget document was a limited table of expenditures with a few pages of explanation; spending decisions consisted largely of increasing spending by a pre-determined percentage, the reasoning for which was known by only a handful of central actors; and the needs of provinces were entirely absent during the process.

In 2011, the Budget Statement is now a 150-page document detailing spending programmes and their outputs, fully in line with Government priorities.  Whereas, initially, spending was decided on an ad-hoc basis based on informal negotiations with powerful Ministers, today the budget is properly scrutinised by the Cabinet and Parliament as well as the Ministry of Finance and publicly reflects the specific policy priorities of the Afghan government. In 2012, the budget will, for the first time articulate the needs of provinces in four key sectors.

Over this period, the Ministry of Finance has moved from having a fragile and limited process whatsoever for its budget to being compliant with best international practice. Afghanistan can now direct funds in a transparent manner to implement its policy priorities, which is a critical attribute of an effective state.

Afghanistan's rating on the Open Budget Index of transparency in budget processes has improved from 8% in 2008 to 21% in 2010 and is forecast to reach 43% next year.  This is one of the largest improvements in the transparency of its Budget, as measured by the Open Budget Index, compared to any of the 94 countries surveyed.

Although Afghanistan's budget transparency is still low compared to much of the world, it is impressive given the country's poverty and ongoing conflict. Compared to other post-conflict zones, such as Iraq and the Democratic Republic of Congo, Afghanistan leads by at least 15 points. But Afghanistan's ranking is now higher than wealthier and more developed countries such as China, the Dominican Republic and Vietnam.

Specific Ministry of Finance achievements supported through SAB have included:

• Launch of the Public Financial Management (PFM) Roadmap to set out a clear vision for PFM reforms in Afghanistan
• Created a budgeting process (12 months as opposed to 3-months) that allows all stakeholders (including civil society) to participate
• Rolled out programme budgeting across all budgetary units so that budgets become explicit expressions of spending priorities
• Created the Citizen's Budget to explain in simple language what the Government is spending and why
• Developed monthly and quarterly fiscal bulletins so that information on government spending is publicly available throughout the year
• Introduced a pro-poor budget analysis to the National Budget Statement so that the Government could
• Established performance reporting as a key factor in budget decisions
• Pioneered provincial budgeting so that more money can reach the provinces and districts
• Established capacity for delivering and coordinating training for budget preparation and execution across GIRoA
• Institutionalised business processes through a performance management system that sets performance targets for all Budget Department Units

Afghan officials have been very supportive of the help they have received.  For example, Zia Ur Rahman Haleemi, Budget Policy and Reform Director, at the Ministry of Finance, stated:

"The SAB team are invaluable. They have passion, commitment and belief in what they do. Without them, making the progress we have made over the last couple of years would have been much harder."

A sister DFID project, also run by Adam Smith International, has led to a six-fold increase in the revenue raised by the Afghan Government to $1.77 billion. Slowly but surely, effective technical assistance is enabling significant improvements to the Afghan Government's ability to operate effectively and deliver benefits to its citizens. Such interventions are contributing considerably to creating both a viable and sustainable Afghan state and the conditions in which the international community can greatly reduce its involvement.