Budget Transparency and Development in Resource-Dependent Countries

Abstract

The objective of this paper is to examine empirically the nature and extent of budget transparency in resource-dependent countries, as a potential foundation for improving governance and development impact. The resource curse hypothesis claims that resource-dependent countries, despite their riches, grow slower than resource-poor countries. Recent research has attributed part of the explanation to the quality of governance and institutions. Based on data drawn from the Open Budget Initiative 2006, we developed an index of budget transparency and accountability for 24 resource-dependent countries. While resource-dependent countries do suffer from a transparency gap, their performance both with regard to budget transparency and to development outcomes varies greatly. While our index and the United Nations Human Development Index are positively correlated, this relationship cannot be interpreted as a causal one. In order to shed light on the links between the two variables we look at three case studies of countries with very different performances: Peru, Vietnam and Angola. Some of the factors that seem to contribute to shape these linkages include the type and degree of dependency on natural resource revenues, the nature of the political regime and the nature of budget institutions, and the existence of an active civil society.