“Program and Performance Budgeting” in Egypt: Accounting and Control Considerations

Mohamed YEHIA

Senior Financial Management Specialist


Senior Public Sector Specialist


Program and Performance Budgeting (PPB) is a useful tool in enabling the alignment of the national budget with a country’s strategic priorities and policies. Performance and output indicators can measure the extent to which government organizations pursue value-for-money principles. The PPB is particularly significant for meeting the demands of accountability and transparency, whereby line ministries can be held accountable for program delivery and achieving targeted results within the approved program budget.

The new Egyptian Constitution of January 2014 specified minimum budget allocations to certain sectors as percentages of Gross National Product (GNP), including education, health, higher education and scientific research. The specified minimum percentages are 4, 3, 2 and 1 percent of GNP respectively. Program budgeting should be an effective tool to help discharge this constitutional mandate.  However, there is some overlap in some sectoral programs between more than one Ministry (for example, hospitals belonging to entities other than the Ministry of Health). Similarly, some economic classifications do not consistently recognize the sectoral mapping. For example, part of the grants, subsidies and social benefits under “Chapter 4” of the budget economic classification can belong to health or education programs.

According to the Ministry of Finance budget circular for fiscal year 2015/2016, in order to ensure better transparency and efficiency of public spending— especially with the increased allocation to sectors— Egypt has introduced “Program and Performance Budgeting” (PPB). It includes the afore-mentioned four sectors, in addition to a few other sectors, including transport and housing. The subject circular noted that the selection of these sectors was based on their available medium-term programs and strategic plans.

The Ministry of Finance has mandated certain requirements from the respective entities upon submitting their budget requests. These include: (i) presenting program budgets for all related expenditures classified per economic classification and allocated per program; (ii) presenting the Ministry’s 3-5 year strategy, including objectives, outputs, estimated implementation time, and costs; and (iii) preparing measurable performance indicators. This pilot program will be rolled out in the future. In this context, its budget will be published to enable parliamentary and community oversight and monitoring.

As PPB initiatives had already been implemented in a number of countries (Organization for Economic Co-operation and Development [OECD] members as well as others, in particular in Jordan and Morocco in MENA region), there are available lessons that can be considered. While moving to program and performance budgets should contribute to more efficient spending and clear accountability, its implementation should be guided by careful sequencing of steps, taking into consideration the adaptation of accounting systems and controls.

Among the key enabling factors is the existence of accounting and reporting systems that can support the needs of the new budget design. A compatible chart of accounts (CoA) is critical to serve the reporting requirements of the program budget, and a prerequisite for effective monitoring of program performance. The CoA should have a segment for programs in order to enable the monitoring of program commitments and funding status. Program budgeting at the preparation and formulation stages would not be effective and worthwhile— unless accurate reporting is operational.

A key question in developing any program budgeting system is the level of control exercised at the center versus at the line ministries or spending entities. Many experts argue that the center should concentrate on the “big picture” of resource allocation, while leaving considerable discretion to spending ministries regarding the details of fund allocation. The new Egyptian Constitution already promotes a gradual shifting to administrative, fiscal and economic decentralization as per Article 176. In addition, it provides for gradual application over a five-year period, as per transitional Article 242.

Guidance regarding line item controls and transfers between line items needs to be put into place in order to grant the program managers sufficient flexibility to allocate and redeploy resources as needed. The best approach would be to accompany the move to program budgeting with a review of line‐item controls which aim to retain only those controls for which a clear rationale can be expressed.   Management flexibility needs to be defined and approved in advance.

As noted, among the success factors of this pilot program will be the ability of the accounting systems to track the data by program, and serve the reporting requirements of the programs. The following features are crucial for the successful implementation of this initiative:

·         Coordination between the different departments at the time of budget preparation. This will help to ensure that the chart of accounts expenditure classification provides for a program-based coding in addition to the other traditional coding (in particular Government Finance Statistics [GFS]-based administrative-economic coding and a Classification of the Functions of Government [COFOG]-based functional coding).

·         Ensuring that the expenditure control system as well as the accounting system operate on a program basis.

·         The expenditure control system should prevent commitments from being made for spending on programs in excess of the amount voted by Parliament for that respective program.

·         If there are program transfer limits, the expenditure control system will also need to manage this.  Subject to appropriate authorization, it should permit transfers between programs up to an established limit (percentage), but not in excess of that stipulated limit.

Given the implementation challenges and major capacity needs, it is usually better to start by an indicative program budget that is presented to the Parliament for information purposes. At a later stage— after the accounting systems functionality is tested and pilot program reports are successfully generated— moving to a full program budgeting can take place. This would include legislative approvals of program budgets and budget execution in accordance with the approved programs.



Government of Egypt. 2014. New Egyptian Constitution.

________. 2015. Egypt Budget Circular for Fiscal Year 2015/16.

Robinson, Marc. Performance-Based Budgeting Manual, Center for Learning on Evaluation and Results (CLEAR) Training Material.