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• Integrating climate and nature related issues into the various stages of the budget cycle. Actions focusing on supporting PFM systems, and budget support operations have the capacity to encourage fiscal reforms addressing nature and climate challenges influencing processes that are centre to government.

Potential entry points for integrating the green dimension along the budget cycle include (

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See IMF on Climate-Sensitive Management of Public Finances – “Green PFM”):

• • Strategic Planning and Fiscal Framework: medium term fiscal frameworks (MTFFs), fiscal risk assessments and fiscal strategies.
  • Budget preparation: budget circular, policy impact assessments, budget tagging (to compare allocations vis-à-vis policy objectives), medium-term budgetary frameworks.
  • Budget execution, accounting and reporting: adapting chart of accounts and financial management information system (FMIS), expenditure tagging^{(2) [54]} (to compare actual vs planned spending), greening public procurement and public investment management systems.
  • Control and audit: internal and external audits, oversight bodies.

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(1)  See IMF on Climate-Sensitive Management of Public Finances – “Green PFM”.

[54] [54]

(1 Anchor(2)(2)(2⁾  Budget tagging is a process that allows identifying, measuring, and monitoring specific expenditure that are related to a certain objective or policy. Climate budget tagging, for instance, has been in place in many countries inside and outside of the EU. It can be done throughout budget preparation and implementation. The quality of tagging depends on the quality of the classification system, the clarity of the budgetary and activity definitions (i.e., defining which activities can be eligible for tagging), the level of understanding of agents in charge of the classification. More importantly, the usefulness of tagging heavily lies on its capacity to influence decision making, shall it be on acting upon expenditure slippages if they occur, or on influencing future budgets and ensuring they improve their capacity to consider climate and environmental issues.

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