What are the links between public expenditure and poverty reduction? Can the successes of OECD countries in achieving better performance in public expenditure programmes be transferred to developing countries? Is it premature to expect governments in the South to handle performance-oriented approaches to expenditure management?

Research from the Overseas Development Institute’s Centre for Aid and Public Expenditure (ODI/CAPE) uses seven case studies of states with Poverty Reduction Strategy Papers (PRSPs) to determine their capacity to implement results-oriented public expenditure management. Showing how performance budgeting and management can assist the PRSP process and pro-poor service delivery, it calls on governments and donors to work together to encourage locally-driven reforms.

The report presents evidence of progress, national commitment and capability. In all states, officials are talking to each other and taking note of civil society and public service user groups. Ghana, Tanzania and Uganda have introduced results-oriented budgeting as part of their medium-term expenditure frameworks (MTEFs). Bolivia has annual performance plans for ministries, departments and officials in central and local government. Burkina Faso and Mali are working to put into action three-yearly, rolling statements of strategy, objectives and targets. In Cambodia, medium-term sector strategies are becoming more effective.

Uganda and Tanzania are singled out for their particular progress in establishing durable performance budgeting and management systems and for building a culture of responsibility for performance in civil servants. In both states, strong pre-PRSP commitment to poverty reduction has been combined with macroeconomic stability, a requirement obliging spending ministries to account for their performance when bidding for budget resources, an accountable decentralisation process and civil service reforms which have stipulated responsibility for performance by administrative units and particular officials.

However, it is also the case that:

• Erratic aid inflows and unpredictability about future financing erodes spending ministries’ and agencies’ willingness to make serious plans for performance improvement.
• Burkina Faso and Mali introduced programme budgeting with too much haste and too little preparation and staff training.
• Inconsistent political commitment in Bolivia has led to the dispersal of authority and the survival of patronage systems guilty of allocations at odds with the spirit of intended reforms.
• Though annual MTEF updating forces ministries of finance to restate and adjust their objectives and targets, other ministries may only do so if pushed by ministerial heads.
• Countries are stronger in strategy and target setting than in monitoring and evaluation.
• Weak national audit offices rarely complete basic statutory financial audits on time.

The report urges donors to switch the focus of their budget support from macroeconomic and public financial management towards poverty reduction goals delivered through results-oriented public expenditure management practices. Achieving this requires recognition that:

• Performance budgeting and management is a circular, self-correcting and self-reinforcing process.
• Without high level political commitment and external accountability loops, even well-conceived initiatives are precarious and vulnerable to personality or political change.
• Denying line managers flexibility in managing resources is inconsistent with the spirit of results-based management.
• There should be a single institution at the centre, driving performance budgeting and management.
• Donors need to fund training, capacity-building and national and regional seminars.
• Civil society’s capacity to hold service providers to account should be developed.

Source(s):
‘Results-Oriented Public Expenditure Management: Will it Reduce Poverty Faster?’, ODI Briefing Paper, by John Roberts, April 2003 Full document.
‘Managing public expenditure for development results and poverty reduction’, ODI Working Paper 203, by John Roberts, 2003 Full document.

Funded by: Department for International Development, UK

id21 Research Highlight: 6 October 2003

Further Information:
John Roberts
Centre for Aid and Public Expenditure (CAPE)
Overseas Development Institute
111 Westminster Bridge Road
London SE1 7JD
UK

Tel: +44 (0)20 7922 0300
Fax: +44 (0)20 7922 0399
Contact the contributor: j.roberts@odi.org.uk

Centre for Aid and Public Expenditure (CAPE), ODI, UK

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