Greening Public Budgets in Eastern Europe, Caucasus and Central Asia

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Author(s):
OECD
Publication Date :
16 Aug 2011
Pages :
142
ISBN :
9789264118331 (PDF) ; 9789264118287 (print)
DOI :
10.1787/9789264118331-en

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Over the last two decades, the countries of Eastern Europe, Caucasus and Central Asia (EECCA) have undergone significant political and economic reforms. As part of this reform agenda, they have started modernising their public administrations and expenditure management practices, bringing them closer to international standards. However, the recent global financial and economic crisis revealed a multitude of remaining structural weaknesses in the public financial systems of these countries that badly affected their economic performance. While this crisis is a real challenge, it also provides an opportunity for the EECCA governments to speed up the implementation of public finance reforms (PFRs) in order to provide a healthier basis for further development.

This report aims to help EECCA environmental administrations to harness the potential benefits of on-going PFRs; particularly the shift to multi-year budgeting, stability of funding, and, ultimately, a more effective use of public money. More specifically, the extent to which the environmental sector is integrated into medium-term budgetary processes is analysed. On this basis, the opportunities for, and limits to, achieving financial sustainability of public environmental programmes are identified. The analysis is based on a regional survey of 10 EECCA countries that involved both ministries of environment and finance.    

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    Foreword
    Over the last two decades, the countries of Eastern Europe, Caucasus and Central Asia (EECCA) have undergone significant political and economic reforms that, for most, resulted in sustained economic growth. However, the recent global financial and economic crisis that began at the end of 2008 hit the region hard, and virtually all countries suffered a sharp contraction of their economies. Amongst other things, the crisis revealed a multitude of structural weaknesses in the public financial systems of the EECCA countries that badly affected their economic performance. While the crisis has seriously affected EECCA economies, it also provides an opportunity for the governments of these countries to speed up the implementation of public finance reforms, and, in this context, to exploit opportunities to green their budgets in order to provide a more environmentally sustainable basis for further development.
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    Executive Summary
    Public environmental expenditure remains crucial for addressing environmental problems and, more broadly, promoting a greener model of development in the countries of Eastern Europe, Caucasus and Central Asia (EECCA). Traditionally, however, the environmental sector in the EECCA countries has not been very effective in attracting domestic public financing. As the global economic and financial crisis imposes ever-tighter constraints on public budgets in the region, and as donors shift to new approaches of delivering aid via country systems, this sector becomes increasingly vulnerable to underfunding.
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  • Expand / Collapse Hide / Show all Abstracts Cross-country analysis

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      Setting the scene
      This chapter sets the scene for the analysis of medium-term budgetary practices in the environmental sector in the countries of Eastern Europe, Caucasus and Central Asia (EECCA). This concerns, specifically, the shift to multi-year budgeting, based on medium-term expenditure frameworks (MTEFs). The chapter provides a brief overview of the main premises that underpin the MTEF approach and presents the methodology used to conduct this analysis.
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      The regional and international context
      This chapter looks at the major factors that shape the context in which the environmental administrations in the region of Eastern Europe, Caucasus and Central Asia (EECCA) operate and implement their policies. The chapter starts with a brief overview of the macroeconomic and environmental situation in the region, followed by a discussion of the key public finance reforms with a major focus on medium-term budgeting practices that have been progressively initiated in most of the countries over the past ten years. Finally, the chapter looks specifically at the governance structure of the environmental authorities in the EECCA countries and the demand for good practices for the preparation of robust multi-year expenditure programmes.
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      Public environmental expenditure trends
      This section looks at the environmental expenditure trends in the ten countries over a period of four years, 2006-09, based on data provided by the countries themselves. Data collection revealed some methodological and definitional challenges that sometimes made it difficult to interpret the data. Still, the analysis provides a basis for some cautious conclusions.
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      Budget planning and management practices
      This chapter looks into issues related to budget planning and formulation and their actual implementation in the EECCA countries. A special focus is placed on the role of the legislature in this process. In addition, the chapter discusses the survey results related to medium-term budgeting practices and their linkages to the annual budgets in the countries. Some budget execution practices are discussed in the next chapter through the example of the environmental sector.
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      Budget planning and management practices in the environmental sector
      This chapter looks at the major challenges with the design and implementation of multi-year environmental programmes as input to the medium-term expemditure frameworks (MTEF) and the annual budget process. It also looks at donor support for the environment in the region of Eastern Europe, Caucasus and Central Asia and the way it is integrated into multi-year budgeting. Finally, it discusses the capacity of ministries of environment to prepare effective multi-annual programmes for inclusion in the MTEF process and of ministries of finance to guide this process.
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      Major findings and recommendations
      This chapter summarises the major findings and conclusions that have emerged from the survey conducted in the ten countries in Eastern Europe, Caucasus and Central Asia reviewed in the this publication. While designing and implementing a robust medium-term expenditure framework that encompasses the annual budget is a difficult task and requires time and experience, the chapter insists that the rules and procedures embedded in medium-term planning of budget resources provide a window of opportunity to sectoral ministries, including ministries of environment, to improve their financial planning and management procedures, as a basis to compete more successfully for obtaining adequate budget resources for the implementation of their multi-year programmes.
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      Armenia
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      Azerbaijan
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      Belarus
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      Georgia
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      Kazakhstan
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      Kyrgyz Republic
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      Moldova
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      Russian Federation
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      Ukraine
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      Uzbekistan
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    Country references
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