Notes

Introduction

Public budgeting is a vast sector that comprises the entire budget system with its components. It has been a subject of various analyses and studies over the time and it still represents a vital segment in the structure of a country and its development. Due to its large spectrum, the focus of the work is strictly centered on the importance of exercising an efficient and effective budget mechanism that would ultimately lead to a healthy functioning budget system.
Budgeting represents a complex exercise that includes political, economic and financial factors and it involves the implication at all levels of public structure authorities. It is situated in the center of the public policies and the development outlook of a country. The budget is not seen anymore as a technical document but as a “mirror of the society’s economic and social choices”, that transposes the existing policy priorities and policy objectives into a strategic financial framework. With the help of the theoretical findings the paper presents the fact that public budget is a comprehensive document that encompasses the governmental operations, the results-oriented activities and the strategic management objectives that strengthen the government’s activity and overall improve the public sectorperformance.
The paper provides a comprehensive and analytical insight of the budgetary process and the existing budget practices from the international experience perspective. It offers detailed practical review of the budget mechanisms and techniques used in designing the budget system. Furthermore, it provides an analytical review of the Moldovan current budget system by presenting the evolution of the budget development, the existing budget procedures used within the budgetary process cycles and the core features of the strategic budget planning and the output-oriented managementsystem.
An important space is dedicated to the medium-term framework and to the performance budgeting, the two most important budget reforms that have been on the agenda of most European Union member states and developing countries in the last period.

Thus, the introduction of the medium-term framework and the performance technique, including in the case of Moldova, has been seen as an improvement in budget formulation and in strengthening the links between sector policies and allocations and has lead to a better evaluation of the budgetary practices.
Overall, the two concepts are considered to be essential and imperative developments for improving and modernizing the public finance management.
The thesis is structured into two large segments–the general view of public budgeting with its components and the analytical study case on Moldova’s public budgeting exercise.
The first part presents the key issues that characterize the budget system, by reviewing the basic meaning and characteristics of the budget. It defines the general rules, norms and budgetary principles that stay behind a good budgeting exercise. Furthermore, the focus is directed to the budgetary cycles and the stages included in– budget formulation, approval, execution and the reporting and accountability stage. An important subsection of the chapter is centered on the budget practices and methods form the OECD member countries’ experience, as well as from other international frameworks. It presents the evolution the budget procedures have made, starting from the most classical method–the incremental line-item budgeting to the new public management and MTEF approaches that are based on the performance principle. Moreover, the medium-term framework tool in budgeting approach is covered by separate subsection that provides the characteristics that would lead to a well functioning MTEF, the preconditions for the MTEF implementation and the impact it has on the overall budget process. Another important subchapter covers the performance budgeting approach and it reveals the concepts behind it and the conditions for a sustainable performance budget. It also classifies the outlined types of performance budget systems resulted form the international experience perspectives and it presents the evolution of performance budgeting in selected industrial countries. Finally the last subchapter form this section, is dedicated to the budget transparency requirements and best practices viewed from OECD member countries’practices.
The second part presents the case of public budgeting in Moldova. In light of the theoretical approaches mentioned in the first part of this paper, the case of Moldova is discussed. At first, it presents the core features of the Moldovan budget system with a focus on the general background and current economic situation. Then the emphasis moves to the core budget process by presenting a thoroughly analysis of the budgetary

process. Thus, budget formulation and its components–macro-fiscal framework, expenditure ceilings and the annual budget document–as well as budget approval and execution are highlighted. In addition, similar to previous chapter, MTEF instrument is part of the budget analysis. The subchapter dedicated to MTEF presents its evolution in Moldova’s public sector, the objectives and directions that stay behind the concept and also depicts the most important phases and the elements. A further subchapter provides information on the evolution of the performance budgeting reform in Moldova and its level of implementation, the elements of a program structure and the performance indicators that assess the level of its accomplishment. The final subsection is dedicated to the enumeration of the challenges Moldova has to face in achieving a performing budget process according to the author’s point of view and the existing reforms at the budgetinglevel.
A last thing to be mentioned refers to the fact that the analysis made on the Moldovan public budgeting case is based on relevant Moldovan approved normative and legislative acts, as well as on reports and assessments done mostly by international organizations, such as the World Bank, OECD and IMF and on the author’s experience in working atMOF.

Chapter 2

Public Budgeting – GeneralView

The importance of public budget as an essential part of the economic system has been tackled and analyzed by various international organizations, such as WB, OECD, IMF etc. The current chapter will focus on the key issues related to the budget system characteristics, the fundamental budget principles and to the review of the budget cycles. An important space is devoted to the procedures and methods used in budgetary planning from the international practices perspective, with a particular focus on the medium-term framework planning and performance budgeting.


Key features of publicbudget

The budget is considered the most important governmental policy document regarding the economy, encircling and forecasting all governmental revenues and expenditures for the subsequent year. The public budget is the key instrument for the expression and execution of government economic policy and has wide implications in the national economy. By means of budgets, governments exercise their allocative, stabilization and distributive functions (Hogye).
In a more commonly perspective, the public budget is seen as a simple technical exercise but in reality, as Shah (2007) pointed out in “Budgeting and Budgetary Institutions”, public budget is the center of public policy and the development prospects of a country. Thus, it incorporates all the policy objectives that concern the society and its entire development transposed into numerical figures. The same author identifies the budget as being “the financial mirror of society’s economic and social choices at the very center of the country’s governancestructure”.
The concept of budget or budgeting can be defined in different ways and under different perspectives but the basic idea is that it should reflect all the transactions that are financed through the medium of public financial resources.
According to some literature findings and to Gildenhuys’s point of view (1997) the public budget is defined by the instrumentality of its functions. Thus, it is considered

that the budget itself is a policy statement that resumes the explicit objectives and goals the public authorities are required to accomplish, and whose realization should be of an important priority for the political sphere. At the same time, a particular attention is directed on the redistribution of wealth budget’s function and its role in the linkage of the two sides of the budget – revenue policy and spending policy. Another function considered to be of an importance is the role of the budget as coordinating and control instrument by which the executive and legislative authorities can incorporate the programs, objectives and policies into one singular document and afterwards control the execution of them. The control procedure might be done in a priori and ex post perspective. In addition, the last function identified of the public budget is the base for informing the society about the content of the budget act and its impact, and furthermore a source of information about the level of the execution of all measures included in.
Nevertheless, it is also an economic document, as well as a political one, because it reflects the link between the resource allocations along with policies–political choices and interests approved by the authorities.
The “Theoretical Approaches to Public Budgeting” (Hogue) presents some summarized features of the public budget (quoting Thornhill 1984), as follows:
after the legislature approves the budget act, it becomescompulsory
the budget is the tool at the legislature’sdisposal
the objectives and their results comprised in the budget act are hard to be quantified
the budget brings together a variety ofconsiderations
in determining the essence of the public budget, the processes are distinctive andunique

Therefore, the features of the public budget represent the basic criterions the budgetary cycles rely on.

When mentioning about a good budgeting it is necessary to do it in accordance to some useful criteria. This way, it is considered that “(i) the budget should establish a stable, sustainable fiscal position for the medium term and beyond; (ii) the budget should facilitate the shift of resources to more effective, higher priority uses; (iii) the budget should encourage spending units to operate efficiently; (iv) the budget should be accessible to citizens and responsive to their interests; (v) the budget should assure accountability in the expenditure of public money” (Schick2004),

It is also considered that budgeting, a “deadline-driven process”, is actually reflecting the beginning of democracy, even though the concern of limiting the powers of the elected politicians, in the budgetary decision-making stage, is stillactuary.
The general budget or the consolidated budget, as it is entitled in other countries, is structured in some main levels of budgets, according to the categories and forms of government. Hence, the budgetary structure consistsof:
central budget that includes the budget for all the central public authorities, its subdivisions and its extensions at the regionallevel
local budget that reflects the governmental units that exist as independent entities across the countries’territory
state budget that exists in the case of some specific structure of thecountries

Therefore, each level of government is responsible to have and to manage its own budget according to the necessities and requirements drawn init.
The public budget is derived from a complex exercise–budget process, through which the financial resources are distributed to the final destination. However, the budget process is not only a foundation for elaborating the budget act and balancing the revenue and expense side one year at a time, but as well a powerful instrument that incorporates political, financial, economic and planning features. Therefore, it is a strategic exercise that consists of multi-year financial framework based on assumed goals and objectives.
Thus, the Government Finance Officers Association (1998) classifies the most important key characteristics of a good budget process as follows:
incorporates a long-termperspective
establishes linkages to broad organizationalgoals
focuses budget decisions on results andoutcomes
provides incentives to theexecutive