The ‘top-down’ component aims to strengthen the alignment of allocations through the federal budget to the strategies and priorities of the Government.
The ‘top down’ component has 3 elements:
It is built on the Medium Term Fiscal Framework (MTFF) which is developed for reporting to the National Assembly under the Fiscal Responsibility and Debt Limitation Act (2005). The MTFF establishes available resources.
A Budget Strategy Paper (BSP) which is prepared annually (in October and February each year) and provides an analysis of pressures on the budget and the options for sectoral expenditure in the light of government priorities. The BSP is prepared by Finance Division and the Planning Commission jointly.
The setting of indicative budget ceilings for the recurrent and development budgets for each line ministry (initially the MTBF ministries) at the start of the budget preparation process – based on the analysis of the BSP
The Purpose of 'Top-Down':
The prime purpose of the BSP is to provide an analytical and informed basis for the identification of strategic priorities, and the allocation of public resources through a system of indicative budget ceilings consistent with the agreed priorities at the sectoral and ministerial level.
In addition, the BSP will provide a broader review of the budget management system and point to key issues in budgetary management which require attention with a view to improving both the resource allocation process and the effectiveness of budgetary spending.
The BSP is prepared annually in 2 rounds:
BSP1 in October will deal with the bulk of expenditure and invite key ministries to submit bids for additional resources. BSP2 in February will fine-tune the BSP1 allocations and allocate remaining fiscal space to priority sectors.
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