Moldova declared its independence after the dissolution of the Soviet Union in 1991. In spite of being one of the three Eastern Partnership countries which have signed the Association Agreement, including Deep and Comprehensive Free Trade Area (DCFTA), its progress in EU integration has been blocked by unresolved territorial integrity issues and socio-economic parameters.

With persisting challenges in the areas of rule of law and governance, as well as development of financial and business sectors, Moldova has made some progress. The country has been implementing reforms with support of international partners, such as the International Monetary Fund (IMF) and the World Bank. The country is going through the process of administrative and fiscal decentralisation. A reform of the public administration took place in 2017 with the aim to improve service delivery to citizens.

Public Finance for Development Programme in Moldova

In 2009, Moldova was assigned a priority country status in Slovakia’s national ODA strategy. Slovak Ministry of Finance started its engagement in Moldova based on the Memorandum of Cooperation between the finance ministers at the beginning of 2011. The cooperation is being channelled through the Public Finance for Development Programme, and the activities focus on strengthening public financial management. This is being achieved mainly through building capacities in budgetary and fiscal policy, and programme-based budgeting.

Budget Reform and Programme-Based Budgeting

Moldova set an objective to improve budgetary and fiscal policy to achieve efficiency, transparency and accountability in the use of public financial resources. The budget reform objectives were guided by the Government of Moldova programme European Integration: Freedom, Democracy, Welfare 2009-2013 and the National Decentralisation Strategy. This also included the improvement of the current system of local public finances to ensure financial autonomy of local administrations, while maintaining financial discipline, maximizing efficiency and ensuring equity in resource allocation.

Aware of the fact that when applied rigorously and across all levels of government, the programme based budgeting (PBB) helps articulation of policy priorities, strengthens feedback-based mechanisms, increases efficiency in public spending, and enhances accountability for results, or lack thereof; the Ministry of Finance of Moldova decided to pursue this avenue and adopted the PB concept.

Capacity Development for Programme-Based Budgeting

In the framework of the Public Finance for Development Programme, the Ministry of Finance of Moldova has received government-wide support with implementation of the performance-linked programme-based budgeting.

Through the programme-based budgeting (PBB) process, budgeted money is distributed by objectives and results to be achieved. This allows public spending efficiency to be assessed, and helps with the decision-making process when it comes to the country´s priorities.

Several outputs and results were delivered by the project in order to support the methodological and legislative work needed for implementation of programme based budgeting:

Project outcomes

Several outputs and results were delivered by the project in order to support the methodological and legislative work needed for implementation of programme based budgeting

  • A practical guide for local public authorities on PBB implementation
  • Examples of good and bad practices in setting up goals, objectives and performance indicators in programme budgeting for central and local public authorities
  • Proposal for Moldova’s sub-national fiscal rules was developed with the aim to strengthen fiscal management, and promote fiscal discipline and sustainability in the decentralized Moldovan government
  • Improvement of Moldova´s Ministry of Finance PBB monitoring and evaluation methodology

The secondary objective of the assistance was to create conditions for sustainable capacity development for PBB system in central and local public administration. Slovak Experts helped design the comprehensive capacity development plan 2016-2020, listing necessary actions to introduce the PBB system nationwide. The plan was preceded by the training-needs analysis and capacity assessment for PBB implementation. This was conducted in 2016 in order to compare progress in PBB implementation and capacity development since 2011.

Technical assistance supported the PBB expansion strategy of Moldova´s Ministry of Finance with various capacity development activities, including training system design (curricula, training materials), training of trainers at the central and local government level (with over 120 trained), delivering high-level workshops for decision-makers (ministers, deputy ministers, parliamentary commission, state chancellery).

A study visit to Slovakia was organized in November 2014 to share Slovakia´s knowledge and experience in programme budgeting. It included a peer-to peer exchange that focused on lessons learned from fiscal decentralization and PBB implementation in local governments of Slovakia, along with the role of Fiscal Councils.

The Programme also helped Moldovan central government institutions and municipalities to improve the quality of the programme budgets via desk reviews and on-the-job trainings for over 100 representatives of Moldovan public authorities.

All of these activities and outputs contributed to a better understanding of PBB principles, objective-setting, goals, and performance indicators. Monitoring and evaluation methodology was improved to provide guidance for managing and implementing M&E process, and utilizing their results for a more effective use of public funds.  

Several outputs were delivered in order to support sustainability of capacities, i.e. institutionalization of the training system:

  • Policy advice on the PBB training system institutionalisation (2017) addressed institutional and organisational aspects of the training system, preparing the training system for its future operation
  • The PBB training programme was developed in 2012, and updated in 2016 based on the results of PBB capacity assessment and training-needs analysis
  • A training package for monitoring and evaluation of programme budgets was developed in 2016 for central and local public authorities which covered performance monitoring and reporting, use of performance data, and introduction of the evaluation concept
  • Training of trainers on monitoring and evaluation of programme budgets raised capacities of 131 public officials

In 2017, Moldova´s public administration reform led to a significant reduction in number of institutions (e.g. the number of ministries reduced from 16 to 9). Having been assigned additional competences, the Ministry of Finance decided to refocus again on improving the budget analysis capacities, streamlining the inventory of the indicators and revision of the PBB methodology.

Other Technical Assistance to PFM Reform in Moldova

  • Strengthening capacities of the Congress of Local Authorities of Moldova in public finance management

Institutional capacities of the Congress of Local Authorities of Moldova (CALM) in the area of local public finance management were strengthened primarily through sharing experience with the Association of Towns and Communities of Slovakia (ZMOS) and via on-the-job learning. Empowered CALM contributions included knowledge dissemination to local authorities of Moldova and advocating for policies and reform initiatives in local public finance.  

  • Capacity development for spending reviews (in cooperation with IMF)

Additional programme assistance has been focusing on institutional strengthening of the Ministry unit responsible for spending reviews. Slovak experts participated in IMF missions in order to share recent Slovak experience with introducing spending reviews.

On-the-job coaching and enhancing of the analytical competences was realized through conducting a pilot spending review at the Ministry of Education in 2018. This was followed by the operational guidelines for spending reviews elaborated for the directorate in charge of managing the spending review process. Slovak experts will provide support with designing 2019 spending reviews.