Chile may be a new OECD member country, but in the realm of public financial management and fiscal policy it has a few things to teach many existing OECD members. The OECD Journal on Budgeting has just published a review of Chilean budgeting practice prepared by an OECD mission comprised of myself and two OECD staff members Read the rest of this entry »
Top-down budgeting is today widely regarded as a key element of good budgeting practice, and with good reason. In its core sense, agreed by all, top-down budgeting calls for the budget preparation process to be framed by a hard aggregate expenditure ceiling – approximately speaking, a limit which applies to the totality of government expenditure. The aggregate ceiling should be set in a top-down manner, which means that it is set at the start of the budget preparation process prior to any consideration of “bottom-up” spending requests from spending ministries. It should also be hard in the sense that, once set, it is essentially not varied during the budget preparation process. Establishing and enforcing such an aggregate expenditure ceiling is today generally viewed as crucial to ensuring that aggregate expenditure does not grow faster than is consistent with government’s aggregate fiscal policy objectives, and in particular with deficits and debt discipline.
This pertains to aggregate expenditure ceilings. But what does it mean for the setting of ministry expenditure ceilings. This is where the consensus disappears. Read the rest of this entry »
In the years since the onset of the global financial crisis in 2007, spending review has come to be widely used by OECD governments, principally as a tool for reducing aggregate expenditure to achieve fiscal consolidation. Spending review is, however, much more than a tool for cutting aggregate expenditure. Properly viewed, it is a core instrument for ensuring good expenditure prioritization – more specifically, for expanding the fiscal space available for priority new spending in a context of firm aggregate expenditure restraint. Read the rest of this entry »
The manual Performance-Based Budgeting is now available in Russian and Bosnian-Serbo-Croat translations, thanks to PEMPAL, the organization of Eastern European budget officials. The manual, written by myself and originally published in 2010 by CLEAR/World Bank, is a primer on the key forms and elements of performance budgeting. It covers a wide range of topics including program budgeting, the performance information underpinnings of PB, and the relation of PB to other budgeting and accounting reforms. To access the manual, please go to the following links: English version; Russian version; Serbo-Croat version. It is anticipated that a Spanish translation will be prepared in the near future.
Now that the content of the European-wide balanced budget treaty has been finalized, how does it stack up? In my last blog, I noted out that any permanent balanced budget rule is inappropriate because, in the long-term, it implies zero public debt. This is inconsistent with the proposition that moderate levels of public debt have a legitimate role to play, particularly in the financing of infrastructure. In the final version of the treaty, we now have a provision which relaxes marginally the budget balance requirements for countries which have debt levels significantly below 60 percent. Does this then solve the problem? Read the rest of this entry »
EU fiscal rules have never been fully coherent. The adoption of constitutional rules requiring European governments to run permanent structural balanced budgets – pursuant to the treaty currently being negotiated in Brussels – will, however, make them totally incoherent and contradictory. Read the rest of this entry »
The global CLEAR initiative – led by the World Bank – has just published an important new manual on performance budgeting. Read the rest of this entry »
Program budgeting has many critics. One of the most prominent is Allen Schick, who has advanced the proposition that budgeting by programs is unworkable because it is inconsistent with budgeting by organizational unit. Schick’s argument (2007: 113-6) is based on three propositions Read the rest of this entry »
Nowhere are the difficulties arising from conflicts between program and organizational structure more of a challenge than in developing countries. As discussed in a previous piece, the most serious technical challenge arises from the existence of organizational units which contribute to several programs. Where this is the case, it is necessary to allocate the expenditure of these organizational units between multiple programs in budget preparation and financial reporting. This is a challenge which is beyond the capacity of most developing countries. Read the rest of this entry »
The importance of good baseline expenditure projections – discussed in recent blog entries by myself and Jordi Baños Rovira – has just been underlined further by the European Commission’s recently-published proposal to make it compulsory for member countries to produce detailed medium-term expenditure (as well as revenue) projections “based on unchanged policies”. This underlines further the pressing need to improve methodologies for estimating baseline expenditure. Read the rest of this entry »