Kojoshev A.O.

«Aspects of among budgets relations development in Kyrgyz Republic»

Basic strategic documents on fiscal decentralization tasks and financial basis of local self government in Kyrgyz Republic are accepted, and today we can ascertain, that budget reform in republic is going ahead.

Nevertheless, in number of undecided immediate tasks for more qualitative holding of fiscal decentralization on my opinion put obstacles on the way three main problems.

• Nonoptimal administrative-territorial partition

• Lack of clear functions and authorities distinguishing of local self government and local state administration.

• Imperfect among budgets relations

Notice: just 52 ail okmotu from 472 able to cover their expenditures, the rest are granted. From 2006 Ministry of economics and finance will work through territorial financial bodies with 40 regions, 11 cities of region significance, 2 cities of republic significance.

The existing 4 level system of administration in republic is inherited from times of soviet authorities, and effectively worked just under command administrative regime. But in conditions of market economy its not justified.

Excessive hierarchy of administration creates difficulties in making decisions and movement of financial stream that negatively reflects on quality of accordance of budget service to people. At the same time Ministry of economics and finance of Kyrgyz Republic offers transformation from 2007 on 2 level budget system.

New system of inter budget relations foresees consolidation of direct interrelations of republic budget with local budgets (only cities and ail okmotu) through territorial financial bodies, performing as territorial subdivisions of MEandF.

Transformation on two level system is revolution step in reforming of budget sphere, that is difficult process, demanding great capacity of preparation work. Necessary to notice that from Commonwealth of Independent States Kyrgyz republic applies practice of inter budget relations reforming with transformation on 2 level system

In this connection Ministry of economics and finance of Kyrgyz Republic developed instruction on budget compilation, calendar plan, and also optimal normative deductions from common state incomes liable to enrolment in local budget.

Beside this under support of international organizations support MEandF planning to organize intensive courses education of financial workers of local self government bodies to new principles and order of forming, viewing, approving and execution of local budgets.

We have to carry through great preparing work with all branch ministries. The aim of held events with participation of representatives of branch ministries, self government bodies, representatives of World Bank, USAID, UNDP, and other international organizations is discussion of problems and determination of priorities in process of inter budget relations reforming.

SCHEME OF BUDGET RELATIONSHIPS IN 2007 ATTACHMENT#1

Ministry of economics and finance of Kyrgyz Republic

Territirial bodies of MEF

Functions:

• Vault of local budgets;
• Reduction of parameters on categorical
• Smoothing grants and normative deductions from national taxes;
• specification of plan, analyze and preparation of matters on LSG problems;
• accounting of LSG;
• forming, redistribution of budgets (regional, district functions).

Regional functions

-Management personnel (LSA - governor);

-regional institutions (regional stadiums, dramtheaters, boarding schools, libraries, museums etc.)

SSUZ, PTU - ?

Regional

functions

-Management personnel (LSA - akim);

-district institutions (district stadiums, libraries etc.)

Cities budgets of republic significance (Bishkek, Osh)

Cities budgets of district significance

Budgets of ail okmotu

And UTC

(471)

(12)

Budgets of ail okmotu

And UTC

(471)

Cities budgets of region significance

(Jalal Abad, Mailuu Suu, Tash Kumyr, Kara Kul, Kyzyl Kiya, Sulukta, Uzgen, Talas, Karakol, Balychy, Naryn),

(11)

MEF- ministry of economics and finance; LSG-local self-government;

LSA- local state administration; UTC-urban type country;

*Notice; regional and district functions transform on financing of republic budget

SCHEME OF LOCAL BUDGETS EXECUTION IN 2007 ATTACHMENT #1-A

Central Treasury

Regional functions

• Regional departments of Treasury (RDT)

District regional departments of treasury (DRDT)

District functions

RDT of cities Bishkek and Osh

Cities budgets of republic significance (Bishkek, Osh)

Cities budgets of district significance

From the beginning of 2006 plan of events was ratified, according to that in present time is keeping and in 2007 concrete acts on changing of administration system of national finance will be taking.

In that way, in an efforts of avoidance below stated problems necessary to:

1. To analyze income potential of local self government bodies and potential of income administration

2. To finish reforming of inter budgets systems of transfers;

3. Determine personal, joint and delegated functions;

4. Determine character of relationship between LSG bodies and intermediate link bodies of government;

5. Improve mechanism of stimulating grants;

6. Develop plan of acts on changing of operational system rules of Treasury.;

7. Strengthen administration of municipal property;

8. Calling of international consultants in deciding of inter budget reforms matters.;

9. Improve systems of budget accounting on LSG bodies level(clear budget);

10. to put normative legal acts according with reforms;

11. Imperfect organizational and administrative potential of Ministry of finance to inter budget relations matters;

12. Improve level of education of LSG bodies’ workers.

Beside this under Ministry of finance created working group on improvement of inter budget relations that creates mechanisms of decisions of inter budget relations reformation and holds monitoring and analyze of local budget condition, and on their base will impute suitable arrangements and suggestions for their reforming.

Attachment #2

Calendar plan of budget project forming on 2007

ORDER OF FORMING, EXAMINATION AND EXECUTION OF LOCAL BUDGETS

Ministry of economics and finance of Kyrgyz Republic

Step 1. Till 30.05 through territorial bodies bring instruction on budget compilation, calendar plan supposing norms of deductions from national taxes and sizes of categorical and smoothing;

Step 9. Examine and specify summary of local budgets and enter on examination of GKR (till 15 of august of this year) and JK KR (till 1 of September of this month);

Step 10. After presentation in Government of KR and approval of Jogorku Kenesh present specified showings on categorical and smoothing grants and norms of deductions;

Step 11. Include local budgets in national (consolidated) budget

Step 7. Accept, summarize original projects of LSG local budgets

Step 8. Summarized projects of LSG local budgets (АO, UTC and cities of district significance) are presented to MEF до 01.07. по доходной части;

• till 01.08 on expenditure part

Step 21. Specification of plan, accounting, preparation of suggestions on LSG problems

Step 12. Bring specified special showings on incomes, expenditures, norms of deductions from national taxes, sizes of categorical and smoothing grants

Local Council

Step 5. Examine original project of local budget

Step 6. Approves original project of local budget.

City Administration, UTC, Ail Okmotu

Step 13. Forming final budget project;

Step 14. Presenting on examination of LC budget commission

LC Budget Comission

Step 3. Gives conclusion to original local budget project;

Step 4. Direct on local council examination

LC Budget Comission

Step 15. BC on meeting examines and gives conclusion on final local budget project

Step 16. Direct project of local budget on LC examination

City Administration, UTC, Ail Okmotu

Step 2. Forming original project of local budget, based on incomes prognosis, supposed of deductions norms from national taxes and sizes of categorical and smoothing grants

Step 20. Cash execution of budget realizes through RDT

Local Council

Step 17. Holds open budgets hearings;

Step 18. Examines, approves local budget;

Step 19. Direct approved local budget on execution to RDT

Successful reforms realization in many respects will depend on efforts of state authority bodies and LSG of all levels, deposit of financial funds of national and international donors.

In that way on this day we have task to unit all efforts to consolidate achieved and move reforms in fiscal decentralization area.

Necessary always attract different international institutes, offices and organizations to get financial and technical support for decentralization realization and plan of complex events.