Assessing the Public Budget A Framework

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Assessing the Public Budget A Framework

• Public Expenditure Clinic for
• Benins Finance Committee of the Parliament
• Vinaya Swaroop
• World Bank, Washington, DC
• December 13th, 1999
• 
  
  

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Public Budget Assessment...

• should be done on the basis of two complementary
  themes
• Getting budgetary allocations right
• Helping to build well-functioning institutions.

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I. Level (Size) of Public Spending Deficit
Issues

• Public spending level needs to be consistent
  with the countrys long-run financing ability
• Persistently large deficits pose threats to
  stability growth of the economy
• Experience suggests, deficit reduction usually
  requires a cut in public spending.

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I. Level (Size) of Public Spending Deficit
Issues (contd.)

• A deficit reduction strategy should analyze the
  following questions...
• How is the deficit measured?
• What is the composition of deficit financing?
• What is the sustainable amount of fiscal
  deficits?

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I. Level (Size) of Public Spending Deficit
Issues (contd.)

• More questions...
• When and how can the user charges be introduced
  (or increased) ?
• Is it less costly to reduce public spending
  than raising revenue?

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II. Resource Allocation ExerciseHow to?

• A couple of points to remember...
• Budgetary allocation process is foremost a
  political decision
• In practice, there is no optimal allocation of
  the public budget.

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II. Resource Allocation Exercise

• The technical part should be based on
• What is the rationale for government
  intervention?
• Market failure (public goods, externalities)
• Redistribution
• What is the appropriate instrument?
• What is the fiscal cost?

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Example 1 Determinants of infant mortality in
MalaysiaAn econometric research shows that...
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Example 3. Fiscal Cost Comparison An Example
from Morocco
1989
67
20 of basic education
1990
76
1991
90
160 of preventive health
1992
107
Average
85
0
60
120
Farm subsidy, millions of dollars
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III. Efficient Delivery of Public Services

• A key requirement is to reform the incentives
  in the public sector...
• Merit based recruitment and promotion in public
  sector
• Performance-based budgeting and rewards
• Assessment of public service delivery through
  client surveys
• Retention of user fees.

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III. Efficient Delivery of Public Services
(contd.)

• Experience suggests...
• Several countries--developed and developing--have
  initiated such reforms (New Zealand and
  Malaysia)
• But such reforms take time, and the success is
  based upon initial conditions in the country
  including existing capacity and political
  readiness.