Public Awareness of Budget Transparency (AL0085)

Brief Description of the Commitment

According to Open Budget Survey 2021, Albania scored 52/100 points in budget transparency field, which is below the threshold defined by International Budget Partnership. A transparency score of 61 or above indicates a country is likely publishing enough material to support informed public debate on the budget. In this regard, civil society organizations should contribute on building capacities for targeted groups to exercise their role as active citizens toward public institutions responsible for using public funds in an efficient and effective way as stated in the Organic Budget Law in Albania. The main objective is to build capacities of young generations (youth and adolescents) and NGOs staff in the field of budgeting processes, involved actors etc to hold public institutions accountable toward the way they use public funds. Through a series of training sessions, we aim at sharing information and build capacities in the field of budgeting. Transparency, public participation, and legislative oversight in the development of budgets creates better outcomes and are the main issues to better improve the citizen access on fiscal documents. Increasing accountability over the budget and fiscal cycle deters waste and corruption and ensures that budgetary decisions and spending reflect the people’s interests. Through transparency, public participation and legislative oversight this openness can help combat corruption. Increasing transparency and public participation across the budget and fiscal cycle is particularly important for Albania.

Problem Definition

1. What problem does the commitment aim to address? According to Open Budget Survey 2021, Albania scored 52/100 points in budget transparency field, which is below the threshold defined by International Budget Partnership. A transparency score of 61 or above indicates a country is likely publishing enough material to support informed public debate on the budget. In this regard, civil society organizations should contribute on building capacities for targeted groups to exercise their role as active citizens toward public institutions responsible for using public funds in an efficient and effective way as required in the Organic Budget Law in Albania. The experience of recent years has underscored the need to better understand the size and nature of fiscal risks and their implications. Being better aware of fiscal risks can allow governments to put in place policies to budget for these more carefully and to take steps, where appropriate, to limit their exposure to shocks. Better understanding of fiscal risks, greater transparency, and effective risk management practices can also help underpin credibility and market confidence. Policymakers should also take fiscal risks into account when formulating fiscal targets. The involvement of the key performance indicators in the monitoring process of the budget implementation by line ministries and budget institutions, aims to improve the overall monitoring process by increasing budget transparency. Stakeholder engagement regarding fiscal transparency has long been a challenge; however, efforts to engage, consult and collaborate with civil society organizations (CSOs) and stakeholders has been an increasing focus of the MoFE’s approach.

2. What are the causes of the problem? The aim of Fiscal Risk Statement is to give a brief overview of the most relevant and significant fiscal risks that the Albanian Government is facing. As highlighted by the 2015 Fiscal transparency Evaluation, The Albania Public Finance Management Reform Strategy recognizes the need to manage fiscal risks. This has led to the need to monitor the main fiscal risks that Albanian Government is facing. Since then, the need has arisen for FRU/BMD to collaborate with different International Partners towards increasing capacities and improving the Fiscal Risk Statement. The main factor that caused this problem was the inability to monitor the overall performance of the Line Ministries and Budget institutions. In order to improve the process of monitoring and consequently to increase budget transparency, it was proposed to update the Guideline for the budget monitoring to include KPIs in the monitoring process.

Commitment Description

1. What has been done so far to solve the problem? There have been improvements, since FRU/BMD assisted and with TA in progress is working on a permanent FRS methodological guideline. The purpose of this manual is to provide methodological guidance on the preparation of a fiscal risk statement (FRS) for the Government of Albania. The aim is that the statement shall cover all relevant and significant fiscal risks. So far, the main areas that are being worked upon in order to solve the problem are: The progress made on creating new templates for the new Guideline for budget monitoring, that include KPIs in the AFMIS/BPPB reports, generated and submitted to MoFE by LM/IB during the budget monitoring process. Budget transparency has been an increasingly important of focus for the Ministry of Finance and Economy (MoFE). Within Albania’s Public Finance Management (PFM) Sectorial Strategy 2019-2022, the guiding framework for the implementation of all government PFM reforms, fiscal transparency is prioritized and is one of the strategy’s seven specific objectives.

2. What solution are you proposing? Approval of the new permanent Guideline on the Fiscal Risk Statement”, which will be an improvement of the existing Guideline on the Fiscal Risk Statement and where there will be expanded the number of the fiscal risks monitored, depending on the situation of each budget year. Furthermore, after the approval of the new Guideline in 2022, the implementation phase of this Guideline will be FY 2023-2024. The main solution that we are working on is the design of new templates of Guideline for budget monitoring that includes KPIs, to be generated through AFMIS/BPPM Module. Formal opportunities provided for the CSOs/NGOs to engage in the planning and execution of the budget.

3. What results do we want to achieve by implementing this commitment? Approval of the new permanent Guideline on the Fiscal Risk Statement” in 2022, and implementation of this guideline will improve the existing Fiscal Risk Statement. Through the implementation of the new Guideline for budget monitoring we aim to further improve the overall process of budget monitoring. The main purpose of the involvement of KPIs during this process is to measure the progress made by LM/BI toward specific goals and objectives. Furthermore, the understanding and evaluation of KPIs will help fulfill the commitment that Line Ministries and Budget Institutions have to responsible spending and transparency. More structured and timely engagement with citizens, civil society organizations and academia in budget planning, monitoring and reporting. Comments/reflections by Government and CSOs/NGOs.

Milestones | Expected Outputs | Expected Completion Date

Strengthen financial oversight and management of the fiscal risks in order to have an improved FRS with more fiscal risks monitored and mitigated if necessary | An improved Fiscal Risk Statement. | S II 2023- S I 2025

Monitoring the budget execution process by Key Performance Indicators | New templates of Guideline for budget monitoring, that includes KPIs, are approved | S II 2023

CSOs/NGOs MTBP hearings | Comments/reflection s by Gov and CSOs/NGOs | 2024

Workshop series with CSOs aiming to increase the awareness about fiscal risks and how they might impact budget implementation. | Descriptive explanatory document (memorandum) on fiscal risks and their tackling, based on best practices from OECD countries, for distribution to stakeholders. | S II 2023- 2024

Training sessions with youth and adolescents, vocational schools students and NGOs staff on budgeting processes and transparency. | Youth, students and CSOs staff have the knowledge and tools to participate and contribute to public consultations on budget planning and implementation. | S II 2023- S I 2025

Monitoring the implementation of gender budgeting for the declared programs | Annual monitoring report | S II 2023- 2024- S I 2025

Monitoring of the budgeting of the 2021-2027 National Strategy for Gender Equality | 3-year monitoring report | 2024- S I 2025

Monitoring gender budgeting at the local level | Annual monitoring report for 3 municipalities | 2024- S I 2025

Capacity building for local municipal staff in relation to gender budgeting | 10 Trainings | 2024-S I 2025

Action Plan Review

Commitment 12. Public awareness on budget transparency

Implementing agencies and CSO collaborators: Ministry of Finance and Economy (MoFE), Save the Children Albania (SCA), the Gender Alliance for Development Center (GADC), the Albanian Initiative for Development (AID).

For a complete description of the commitment, see Commitment 12 in Albania’s 2023-2025 action plan: https://www.opengovpartnership.org/documents/albania-action-plan-2023-2025/

Context and objectives:

This commitment aims to enhance citizen engagement in budget planning and monitoring and improve the process of budget monitoring overall. This entails publishing more information in relation to fiscal risks, improving the process and scope of budget monitoring by adopting key performance indicators (KPIs), promoting gender budgeting, and engaging citizens, civil society organizations (CSOs), and academia in budget planning and monitoring. The Ministry of Finance and Economy (MoFE) seeks to build on the 2020-2022 action plan, where it published government financial statistics and information on fiscal risk management. For this new commitment, the MoFE will design and apply templates for budget monitoring which would include KPIs. [1] The engagement activities include hearings and workshops with CSOs about fiscal risks, training young people on budget processes, monitoring the budgeting of the 2021-2027 National Strategy for Gender Equality, and implementing gender budgeting at the local level.

CSOs proposed certain milestones during the co-creation process. For example, the Gender Alliance for Development Center (GADC) proposed the gender dimensions to add gender indicators during the technical budgetary process [2] and Save the Children Albania proposed the youth trainings. [3] The MoFE and CSOs such as GADC will facilitate monitoring reports on gender budgeting. [4] Three municipalities will receive 10 training courses on gender budgeting and CSOs will monitor gender budgeting in those municipalities.

Potential for results: Modest

Whereas the previous action plan continued existing practices in budget transparency, this commitment is a step forward by extending the scope of information to be published and monitored, with an emphasis on activities encouraging public engagement.

According to the action plan, greater transparency and understanding of fiscal risks as well as better risk management practices can help establish greater credibility and market confidence in the Albanian economy and economic planning. MoFE representatives note that a fiscal risk report has previously been produced, but only one section summarizing the report was published, and not all the details were included in the report. [5] The MoFE states that information on fiscal risks is published as an annex in annual budget documentation such as Annual Budget Execution Reports, Mid-Year Reports and Budget Proposals. [6] The International Monetary Fund (IMF) has stated that the publication of a fiscal risk statement in 2024 is an important step towards forward-looking monitoring of fiscal risks. [7] The MoFE has established a unit responsible for coordinating the collection of information on fiscal risks and finalizing the fiscal risk statement. [8] Publishing this statement in full could mark modest improvements in transparency and indirectly improve decision-making on government finances, enable early risk detection, build confidence among investors and creditors, and increase overall stability and resilience of the Albanian economy. More broadly it could also foster good governance, reduce corruption, and enhance financial accountability. The MoFE considers the publication of the fiscal risk statement to be a considerable improvement to transparency. [9]

Improving the scope of monitoring of budget execution would also make a modest contribution towards better decision-making for future budget processes and offer the opportunity to further strengthen the budget process in the future. According to the MoFE, adding KPIs to the monitoring of implementation of public institutions’ budgets would enhance the information available for citizens to monitor the budget execution in terms of what was achieved with the spending to make sure that institutions are accountable for how they spend public funds. [10] Every budgetary institution will be required to fill out a template to explain what was achieved through its budgetary funds, as opposed to only reporting on how it spent the funds. [11]

Albania scored 6/100 in the 2021 Open Budget Survey on public participation. [12] While hearings on the budget with civil society already take place, the discussions are often overly technical and require specific knowledge, limiting civil society’s ability to contribute. [13] While the action plan is not clear on the expected outcomes of the workshops, MoFE representatives stated that they expect civil society to be able to provide more informed comments on budget monitoring and for improved government feedback on the suggestions from CSOs, which is at times missing. [14] This could mark a modest change towards more meaningful interactions between government and civil society on budget monitoring. Workshops for civil society on fiscal risk will be delivered in cooperation with the Albanian Initiative for Development. [15] In addition, the development of new and improved gender budgeting indicators could ensure that gender issues are taken into consideration when public spending is planned and executed. The extent to which, or how, trainings and monitoring of gender budgeting at the local level would lead to better gender outcomes in these jurisdictions, or more broadly, is unclear.

Opportunities, challenges, and recommendations during implementation

While the activities in this commitment seek to improve budgeting development and monitoring processes, there is scope for the commitment to strengthen the open government approaches to implementation. This could include actions that not only make information like fiscal risks more transparent, but also making sure this is available in understandable language and formats for citizens. The MoFE states that it has no plans to involve civil society in the preparation of the fiscal risk statement. [16] There could be opportunities for more engagement in drafting the fiscal risk statement as well as mechanisms for monitoring. Publishing the full fiscal risk statement would allow civil society and the media to meaningfully contribute more broadly to discussions on budgeting, for example. Workshops could specifically seek to improve civil society’s knowledge on the technical aspects of the budgetary procedure. [17]

The IRM recommends the following steps during implementation:

• While there are no plans to involve civil society in drafting the financial risk statement, the MoFE could consider possibilities for overseeing how risks are managed and mitigated (i.e., through hearings), with feedback mechanisms to explain how input has been incorporated or addressed. The IMF has previously highlighted the importance of clearly identifying risk mitigation measures, including enhancing oversight and governance of state-owned enterprises. [18]
• Ensure workshops and gender budgeting activities are sustained beyond the current reliance on donor funding. This may require specific funding. The MoFE would benefit from cooperating with Save the Children and GADC in the delivery of these planned activities, as these organizations have experience in delivering trainings. [19] Furthermore, there is a lack of clarity around the extent to which, or how trainings and monitoring of gender budgeting at the local level would lead to better gender outcomes in these jurisdictions or beyond. Clarifying the objectives on improving gender outcomes would help ensure that gender budgeting activities are more effective and targeted.