Performance budgeting (PB) has a deep and enduring appeal. What government would not want to allocate resources in a way that fosters efficiency, effectiveness, transparency, and accountability? However, such aspirations have proven poor predictors of how performance data are actually used.
The potential benefits of identifying and tracking the goals of public spending are undeniable, but have often justified a default adoption of overly complex systems of questionable use. Faith in PB is sustained by a willingness to forget past negative experiences and assume that this time it will be different. Without a significant re-evaluation, PB’s history of disappointment seems likely also to be its future.
There are few better ways to reveal whether a government’s rhetoric matches reality than examining how it raises and spends public money. Are funds being spent on the things it said they would be? Are these investments achieving the outcomes that were intended? In short, are government budgets accountable?
The traditional model for how accountability functions is rather simple. "Horizontal accountability" describes the oversight exerted over the executive arm of government by independent state bodies such as parliaments and supreme audit institutions. "Vertical accountability" describes the influence citizens hold through the ballot box.
Between elections and outside of formal institutions, however, opportunities for influencing how governments manage public resources are limited. As a consequence, this simple vertical/horizontal model has proved increasingly inadequate for capturing how budget accountability works (or doesn’t) in the real world; this is especially true in developing countries, where democratic processes and formal oversight institutions can be somewhat fragile and ineffective.
It is now the second week of 2016 and many people are working (or struggling) to follow through on their New Year’s resolutions. Whether they have decided to run a marathon, travel more, or save money, many people endeavor to create positive, new habits while shedding existing habits they think are less positive. These resolutions, though, tend to last one or two months, fading into the backgrounds of their consciousness as spring arrives.
It’s a typical combination of the planning fallacy, unrealistic optimism, and a bit of self-regulatory failure.
And this sort of challenge is not specific to New Year’s resolutions or even to issues pertaining to individuals. City councils frequently draw up budgets that are too lean, road construction frequently lasts much longer than expected, and advances in technology often require much more investment than planners expect. So what’s at work here? Why is it that people have a hard time judging the amount of time, energy, and resources that a project will take?
MALAYSIA has travelled far on the road to economic growth and shared prosperity. Using its natural resources, the country not only eliminated absolute poverty from 49% in 1970 to less than 1% in 2014, but also lifted the incomes of households at the bottom 40% of the income bracket. The Gini Coefficient — a measure of income inequality in an economy — dropped from 55.7 to 42.1 over the same period, implying that gaps in incomes were narrowing. This road is now leading towards a developed country, with a vibrant and growing middle class where aspirational households have access to relevant education and training, higher income opportunities, more savings for retirement and a safety net to protect the vulnerable from shocks.
Underlying this journey to developed country status is a series of structural reforms that have formed the bulk of the national development plans, most recently the 11th Malaysia Plan. The quest moving forward is therefore to sustain and finance this process. The 11th Malaysia Plan is budgeted to cost RM246 million between now and 2020. Taxation choices will matter a great deal for Malaysia’s prospects in this journey, more so in an environment of low or volatile oil and commodity prices and a global and regional economic slowdown.
At the recent “New Directions in Governance” meeting it was suggested that future meetings should bring governance advisors together with sector-specific colleagues. The different language we use in our respective disciplines is a serious barrier to taking forward an agenda of real importance and hence this message seemed particularly pertinent. I came to the meeting with a number of thoughts on how public finance management (PFM) rules often hinder health system performance, some of which I outline below.
Over the past three decades a major focus in low- and middle-income countries has been to seek new revenue sources for health services to overcome strict controls over the use of budget funds which were seen as inefficient but difficult to address. Community-based health insurance schemes have been widely introduced, as were patient user charges and payroll tax-funded social health insurance schemes. These various developments reflected a belief that governments were unlikely to increase funding to health, or to introduce the flexibility in budget funds required to incentivize improvements in service delivery.
In mid-July, when the Government of Nepal’s FY15 budget was announced live on TV, radio and social media, most Nepalis were keen to watch the latest game of the World Cup. However, in a country with a literacy rate of only 57%, where almost half of Nepalis can neither read nor write, analyzing complex GoN budgetary information would not have been their priority. The World Bank’s Program for Accountability in Nepal (PRAN), however, is hoping to change that and educate people how the GoN budget affects their lives.
PRAN, together with Institute for Governance and Development (IGD), has recently developed ready-to-use, neo-literate flip charts outlining the importance of the government budget, its priorities, and its processes. These new IEC materials have been officially approved by the Government of Nepal for use nationally. Used effectively, they can help Nepali citizens become much more aware of what is rightfully theirs.
Since 2011, PRAN has promoted increased social accountability and transparency in Nepal. PRAN seeks to educate communities about their local budget process and content. As part of this effort, these new flip charts will serve as an awareness-raising tool by offering a detailed visual explanation of how the budget is designed, reviewed and approved.
Yesterday, I discussed India’s incredible economic transformation over the last two decades and some of the challenges that the country is currently facing. So, what can India do to reduce the impact of global uncertainty and improve growth performance and boost investor confidence?
India’s firepower to respond to a crisis with traditional monetary and fiscal stimulus is much weaker now than prior to the 2008 crisis. Fiscal space for additional spending is severely constrained in light of continued high deficits. Room for monetary policy easing is modest in light of continued high inflation, and still low real interest rates. Moreover, when investor confidence is at a low ebb as it is in India, easing monetary policy would be tantamount to “pushing on a string.”
|Parents and community members are more willing to support a school from having full knowledge about the school's resources.|
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Years and years ago, when I was still in school, the interaction my parents had with the school was only during report card day, and perhaps the odd times I got into trouble. That was it. Although my son is only a year and a half old, I’ve been on the lookout for a school and I would rather not have him study at the type of school I went to.
Sitting out in the sun, in the middle of a public school premises, I intently looked at a woman clad in a patchy orange saree carrying a lean child on her lap. It was hard not to wonder whether her bare five years of primary school education really helped her understand public financial management! Indeed I was wrong. It was the sheer urge of entertainment and not curiosity about public financial management that drew her, and many more like her, to the premises of a government owned school in Hazaribaag, near the Beribaad, Mirpur area of Dhaka.