Making Budget Reform Matter for the Poverty Reduction

1
Making Budget Reform Matter for the Poverty
Reduction

• Linking PRSPs and Budgets

Bill Dorotinsky Public Sector Governance Washingt
on, D.C. April 27, 2006
2
Challenge

• Reflecting PRSP policies in the budget
• Fund allocation follows policies
• Funds spent as intended
• Services to poor increase
• Poverty reduced
• Seemingly straightforward challenge
• Identical to broader challenge of incorporating
  policies in budgets

3
Institutional Hurdles

• Assumes budget is policy instrument
• Assumes institutions in place to develop, cost
  policy
• MTEF
• Separate processes for PRSP may not advance
  integration
• Assumes sector ministries also prefer PRSP
  policy, as well as MoF and Government
• And that budget is executed as planned

4
MTEF Experience

• Challenging reform
• Frequently too much attempted at once
• Short-run results have been mixed
• Sometimes itself a separate process
• Takes more time than expected to build
  institutions, change incentives, and incorporate
  political officials into process
• But there are smaller steps that can be taken

5
Unbundling MTEFs
6
Unbundling MTEFs (2)
7
Unbundling MTEFs (3)
8
Unbundling MTEFs (4)
9
MTEF Sequencing

• Start with macro (1,2,4)
• With sector ceilings (4), can select some sectors
  for strategy and costing (5)
• And within sector ministry, can focus on some
  programs, and some aspects of policy (new
  recurrent, new capital, existing current and
  capital)
• Program and performance reforms can follow later

10
Incentives The Greater Challenge

• Beyond the technical is the incentive issue
• Why would Government choose to reflect pro-poor
  policies in budget?
• Are PRSP priorities really Government priorities?
• If not, how to change incentives?
• What other policies would be displaced? What
  interest groups would be affected?
• What country conditions existed that enabled
  better reflections of PRSP policies in the budget?