Archive for the ‘Budget Preparation’ Category

Top-Down Budgeting and Fiscal Exit Strategies: Getting Spending Priorities Right

Wednesday, April 28th, 2010

As countries move to restore their public finances in the wake of the financial crisis, firm control of aggregate expenditure has become more important than ever before. Part of this is ensuring that, after an aggregate expenditure ceiling is set, it is respected throughout the budget preparation process. This is what top-down budgeting seeks to achieve. In practice, however, it is not easy. The central difficulty is how to divide the aggregate expenditure ceiling into ministry ceilings. This is an issue that I will discuss in this and a series of subsequent blog pieces. (more…)

“Fiscal Headroom”: A Flawed Approach to Expenditure Prioritization

Wednesday, March 24th, 2010

What is the best methodology for prioritizing expenditure in a medium-term context? One view is that the focus should be on the “fiscal headroom” – also referred to in francophone countries as the “marge de maneouvre”.  I’ve seen this approach up close in two countries recently. It is an approach which is not only flawed in principle, but particularly unsuited to the post-crisis fiscal circumstances of most countries. (more…)