Transcript Better Sharing: Bigger Pie Planning and Budgeting for Inclusive

Better Sharing: Bigger Pie
Planning and Budgeting
for Inclusive Growth
Presented by
Allen Schick
Conference on Public Sector Management
in Support of the MDGs
Bangkok, Thailand
13-15 June 2012
Development Strategies:
Economic Growth
 Focuses on raising per capita GDP
 Assumes that higher GDP will improve social outcomes
 Is bolstered by evidence that rising GDP often is associated
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with improved heath, education, and other outcomes
However, by itself growth tends to widen inequality and to
disadvantage those left behind
Poor people living in rural areas, low paid urban workers,
women and children may suffer social dislocation that makes
them worse off when growth accelerates
Assumes that public sector performance improves because
citizens expect more responsive government and better public
services
In this model, PSM modernization is a byproduct of growth,
not a precondition of development
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Development Strategies:
Targeted Results
 Focuses on pre-selected indicators of wellbeing
 Assumes that targets will spur policy changes that improve results
 Based on expectation that targets will change behavior of politicians
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and managers, and facilitate monitoring of results
Gives priority to vulnerable people who may not gain from
generalized growth
MDGs are the leading application of this strategy
The efficacy of MDGs indicates that targets generate desired
change
Many low-income countries have recently achieved HDI (Human
Development Index) gains that Exceed GDP growth
PSM modernization is a critical element of the targeted results
strategy because getting results depends on policy and managerial
actions by government
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Making Growth Inclusive
 The targeted growth strategy works best when it is
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accompanied by economic growth
But growth must include all sectors of society, especially those
who do not directly benefit from macroeconomic improvement
Combining growth and targeted results enables the
development community to assure that growth is inclusive
The role of the state is to manage economic growth and to
establish policies that distribute the benefits of growth across
society
Inclusive growth aims to transform political and bureaucratic
cultures so that society values participation and shared
benefits
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PSM Modernization Enables a
Targeted Results Strategy
 A results strategy depends on policies and actions to achieve selected
targets
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Before MDGs, countries often announced development strategies without
follow-up actions
 Plans were disconnected from budgets, and budgets were disconnected
from services
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Governments lacked the means to assure implementation of approved
plans and to monitor results
 PSM mobilizes the policy and administrative processes of government to
produce targeted results
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PSM reform may be the difference between unfulfilled promises and
genuine commitments
 PSM links core administrative processes to focus on common results
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These processes jointly and independently define, implement and assess
targeted results
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Managing the Public Sector with
Results-Focused Processes
 A targeted results strategy can be effective only when PSM processes
focus on a consistent set of results
 The core PSM processes are connected, but each contributes on its own to
changing the country’s prospects
 Each process mush address a fundamental question: What difference will it
make to the country’s future if one or another course of action is taken?
 Considering this question enlarges the window for change and
development, for a future that is different from what would occur if the
policy or action were not taken?
 Planning and evaluation – the opening and concluding PSM processes –
are most hospitable to this developmental orientation, budgeting and
implementation require significant modernization on order to be changepromoting actions
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Advocacy Planning
 Sound planning serves the two development strategies mentioned at the
outset
 It promotes economic growth through programs and policies that benefit
the country as a whole; and it promotes initiatives that assist those left
behind or disadvantaged by growth
 The second purpose is critical to planning because the vulnerable and
disadvantaged gain less from market activity, and are therefore more
dependent on government policies and actions
 National plans should be explicit about the distributive impacts of
government policies and actions
 Effective advocacy planning requires government to apply the tools of
policy analysis and program evaluation in defining national objectives and
means of accomplishing them
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Pro-Poor Budgeting
 Despite good intentions, developing countries often fail to allocate
resources to benefit the poor
 Rigid budgets and incremental decisions limit government’s capacity to
shift funds
 Programs that purport to aid disadvantaged sectors may have unintended
effects. For example, new roads may impoverish rural areas; subsidies for
higher education may go to relatively affluent families
 Governments can counter these tendencies by identifying the distributive
impacts of ongoing and new expenditures
 Active monitoring of the flow of money from the budget to end-users is
essential to ensure that funds allocated for services to poor communities
and households are actually used as intended
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Focusing National Planning on
Inclusive Growth
 In many countries, planning begins with a broad canvass of national needs and
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policy proposals
MDGs are only one of the inputs into the plan that emerges from this unfocused
process
These plans sometimes assume that growth suffices to develop the country and
uplift all its people
MDG-driven countries integrate these goals into medium-term plans by (1) adding
targets pertaining to economic growth, (2) re-targeting the MDGs so that they are
consistent with planned growth and (3) channeling resources made available
through growth to vulnerable people and communities
Realistic planning for inclusive growth should identify constraints that impede
development and realization of the country’s MDGs, as well as policy and
managerial initiatives to overcome constraints
It may be useful for the plan to present a “gap analysis” of the variance between
current (or projected) conditions and inclusive growth targets, the factors
accounting for the gaps, and the resources and steps planned to close or narrow
the gap
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Combining Performance-Based Budgeting and
Medium-Term Frameworks in a Single Process
Facilitates Inclusive Development
 Combining PBB and MTEF can be done through parallel baselines
that shift decisions on changes in resources to changes in results
 Conventional MTEFs typically has a single baseline that projects
future expenditures that will result from current policies
 PBB adds a second baseline that projects the results estimated from
current policies
 The task of budgeting then becomes changing the expenditure
baseline to generate changes in the results baseline
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Constructing the MTEF
Expenditure Baseline
 The baseline is a projection of future budget amounts (revenues,
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expenditures, and the fiscal balance) if current policies are continued
without change. Some countries include price and workload changes in the
baseline
The baseline is constructed for each year covered by MTEF. Some
governments prepare baseline projections that extend beyond the medium
term
The baseline is an essential tool for measuring the money available in the
budget for policy initiatives
The baseline takes account of medium term economic forecasts as well as
approved policy changes
The budget impact of policy changes is measured in reference to the
baseline
The central budget office maintains the baseline and estimates the budget
impact of proposed and approved policy changes
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Constructing the PB Results Baseline
 The basic idea of PB is that government can purchase results by spending
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public money
Constructing a baseline enables government to identify and (for many
activities) measure the results expected from expenditures
As in the expenditure baseline, a PB baseline projects future results if
current policies are continued without change
Identify key factors and assumptions that explain projected trends,
especially impediments to better performance. This explanation should be
supported by data and analysis that enable government to make informed
decisions on how to change the trend
Discuss policy initiatives to change to projected trend. For example,
vaccination rates are low because working parents are unable to take their
children to the health clinic during daytime hours; consider extending the
clinic’s hours of operation
Establish performance targets for policy initiatives estimated to cause
results to vary from those projected in the baseline
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Using the Baseline to Measure the
Results of Expenditure Change
_____ Baseline projection of number of villages with clinics if current spending and policies are not
changed
--------- Number of villages with clinics if spending is increased by one million
xxxxxx Number of villages with clinics if spending is increased by two million
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Managerial Conditions for
Successful MTEF/PB
 Past reforms assumed that improving the budget process suffices to
improve public management. The rationale was that if the budget is based
on results, managers will drive their organizations to perform
 It is now recognized that budgeting is shaped by the managerial culture
and context within which resources are allocated and services are
provided. If managerial conditions de-motivate public employees and
discourage performance, efforts to budget on the basis of results will fail
 To succeed, MTEF/PB must be part of a broad effort to reorient public
sector management and to promote performance-based behavior in
government organizations
 Changing the classification of expenditures and the form of the budget to
not suffice to focus government on results
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