ABSTRACT: Natural resources are scarce and the need for these resources is growing. As a result, there is a need to utilize these resources in an efficient manner to achieve the government's social and economic goals and objectives. However, the traditional budgetary system as applied in the government, mainly satisfies two objectives only; control and accountability. Therefore, there is a need to modify the current budgetary system to meet, in addition to control and accountability, other objectives such as measurement of efficiency and effectiveness. Program Budgeting (PB), which is budgetary system that focuses on the purposes of government activity and the efficiency and effectiveness of that activity, is described and evaluated. Despite PB's major advantages, it has failed in all countries that applied it because of the weaknesses that are inherent in this type of budgetary system. Furthermore, the traditional budgetary system, as applied by Ministry of Education (MOE) was evaluated. Finally, an alternative budgetary system was introduced, and performance indicators were developed and applied to MOE expenditure for the years 1988, 1989 and 1990. The proposed budgetary system is a mixture of both the traditional budgetary system and PB system.