Budget Transparency Research Articles

Is EMU a viable model for monetary integration in the Arabian Gulf?

The Gulf Cooperation Council (GCC) intends to form a monetary union using the EMU process as a blueprint, including a set of Maastricht‐style convergence criteria. Yet, as the 2010 deadline approaches, few of the necessary institutional preparations have been made. This paper argues that while GCC leaders considered the economic case (on the whole beneficial) they neglected to fully consider the political implications of monetary union. It concludes that devolving decision‐making powers to pan‐GCC institutions, the need for greater levels of budgetary transparency and fiscal discipline may presently be considered too costly for the region’s ruling elites.

CENTRAL GOVERNMENT BUDGET PRACTICES AND TRANSPARENCY: AN INTERNATIONAL COMPARISON

From an international perspective, a relationship between public sector transparency and better economic and social outcomes is something that is increasingly acknowledged. In terms of lack of transparency in budget reports both bureaucratic model and fiscal illusion theory have been argued as explanations. To assess transparency in budget practices we analyse to what extent a sample of 41 countries are meeting OECD requirements according to its Best Practices for Budget Transparency document (OBP). We find an average OBP fulfilment of 56.4 per cent. Transparency is negatively correlated with corruption and positively correlated with economic development. Countries receiving external financial and technical support meet fewer OBP recommendations than countries not receiving it. Considering the political framework, both progressive and conservative governments reach similar transparency levels. OECD members do not significantly fulfil more OBP suggestions than non‐members. In respect of 4 variables: transparency, corruption, democracy and development, four clusters of countries arise: top‐performing, low transparency‐developed, low transparency‐developing and worst‐performing.

Budgeting in Latin America

This article provides a snapshot of the status of budgetary institutions, procedures and practices in Latin American countries based on the results of the OECD 2006 budget survey. Particular elements include: the legal framework and role of the legislature; fiscal rules; medium-term expenditure frameworks; performance information; and budget transparency.

The Discipline-Enhancing Role of Fiscal Institutions: Theory and Empirical Evidence

This paper discusses the role of fiscal institutions, including budget rules and non-partisan agencies, in enhancing fiscal discipline. A dynamic model of fiscal policy shows that optimal institutions lack credibility unless the costs to bypass them are sufficiently high. In our model, a combination of complete budgetary transparency and strong democratic accountability suffice to establish credibility. Under incomplete budgetary transparency, accountable governments may also use institutions as a signal of competence to increase their reelection chances, which in turn erodes the penchant for excessive deficits. In light of the theory, empirical tests of the effectiveness of institutions are undertaken. The results further emphasize that analysis should pay due attention to simultaneity bias (because disciplined governments may be more likely to adopt strict institutions). Also, interactions among different fiscal institutions, and between the latter and key features of the political system need to be explored further.

The Discipline-Enhancing Role of Fiscal Institutions: Theory and Empirical Evidence

This paper discusses the role of fiscal institutions, including budget rules and non-partisan agencies, in enhancing fiscal discipline. A dynamic model of fiscal policy shows that optimal institutions lack credibility unless the costs to bypass them are sufficiently high. In our model, a combination of complete budgetary transparency and strong democratic accountability suffice to establish credibility. Under incomplete budgetary transparency, accountable governments may also use institutions as a signal of competence to increase their reelection chances, which in turn erodes the penchant for excessive deficits. In light of the theory, empirical tests of the effectiveness of institutions are undertaken. The results further emphasize that analysis should pay due attention to simultaneity bias (because disciplined governments may be more likely to adopt strict institutions). Also, interactions among different fiscal institutions, and between the latter and key features of the political system need to be explored further.

The Causes of Fiscal Transparency: Evidence from the U.S. States

We use unique panel data on the evolution of transparent budget procedures in the U.S. states over the past three decades to explore the political and economic determinants of fiscal transparency. Our case studies and quantitative analysis suggest that both politics and fiscal policy outcomes influence the level of transparency. More equal political competition and power sharing are associated with both greater levels of and increases in fiscal transparency during the sample period. Political polarization and past fiscal conditions, in particular state government debt and budget imbalances, also appear to affect the level of transparency. Copyright 2006, International Monetary Fund

Is There an Optimum Legal Framework for the Budget System?

Public finance specialists and constitutional theorists are very reluctant to establish legal norms for budget systems. International organisations have published guidelines for desirable features of budgetary transparency. Except for external audit standards, international bodies have not specified which features should be incorporated in domestic law. As a result, there are no international standards that specify legal requirements for desirable features of national budgeting systems. Classical and new budget principles, as well as the distinct functional responsibilities of the legislature and the executive in budgetary processes, should guide policy makers who wish to establish a “good” law for their national budget system. For budget preparation, adoption, execution, reporting and auditing, this section identifies desirable features that should be included in the law. Suggestions are also made as to which budget principles should be included in constitutions, primary law and secondary law.

Pour le meilleur ou pour le pire ?

<titre>For Better or for Worse&#160;? The Role of Parliament in the Budgetary Process of Developing Countries</titre> Can parliaments contribute efficiently to budgetary processes while preserving fiscal discipline&#160;? Greater budgetary transparency and a stable taxation system are crucial challenges for emerging economies concerned with the efficient management of public finance and the fight against corruption. Considerably neglected during the first stage of economic reforms, legislative budgetary institutions reappeared with the second wave of reforms in financial administrations. However, due to the predominance of their executive r&#244;le as well as their own lack of knowledge on the subject, parliaments often have little to do with budgetary matters. Although they possess a wide range of powers in budgetary affairs, only rarely do they manage to make efficient and responsible use of them. The article examines the contribution of parliaments to budgetary processes in developing countries with both presidential regimes and centralized budgetary systems, and evaluates the conditions and constraints of a greater parliamentary role in budgetary matters. It analyses the political economy of budgetary processes in Latin America, underlining the risks of insufficient government participation in budget management and the advantages of parliamentary control of public finances. It argues that in Latin America as elsewhere, the main challenge of parliamentary participation in the budgetary process consists in preserving the advantage of a strong executive authority able to ensure fiscal discipline, while at the same time procuring the restraint and institutional counterbalance that guarantee financial responsibility, the rendering of accounts and democratic control. Good fiscal governance is the fruit of a harmonious blend of government prerogatives and parliamentary control.

Parliaments and Budgeting: Understanding the Politics of the Budget

Can parliaments make an effective contribution to the budget process while preserving fiscal discipline? Increasing budget transparency and anchoring fiscal responsibility are critical tasks for emerging economies seeking to enhance fiscal governance and curb corruption. Largely neglected in the first stage of economic reform, legislative budget institutions are being re-discovered as part of a second wave of reform in governmental financial administration, in particular as it pertains to their role in overseeing public finances and enforcing government accountability. Nevertheless, parliaments' role in the governance of the budget is often subdued and dysfunctional, partly as a result of executive predominance, but also because of their own deficiencies. While they possess a wide range of formal budgetary powers, they often fail to exercise them effectively or responsibly, lacking the necessary institutional capacities and individual incentives. This article explores the contribution of parliaments to the budget process in presidential systems of government with highly centralized budgetary systems. It offers a political economy perspective on the budget process in Latin America to assess the constraints to and conditions for enhancing the role of parliaments in public budgeting. It underscores the risks of excessive executive discretion and potential benefits of increased external scrutiny and legislative oversight. It argues that a greater role for parliaments in the budget could improve transparency and accountability in public finances. Ultimately, the governance of the budget reflects a delicate balance between executive prerogatives and legislative oversight. The key challenge of legislative budgeting in Latin American is how to retain the advantages of strong executive authority required to ensure fiscal discipline while providing the institutional checks and balances that guarantee effective accountability.

Budget transparency and development in resource‐dependent countries

The objective of this chapter 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.

Reforming the Stability and Growth Pact

A rules-based fiscal framework, such as the EU’s Stability and Growth Pact (SGP), can be an important bulwark against short-sighted policies. Although policies have improved following the SGP’s adoption, shortcomings remain. These, however, are rooted in the policies rather than the rules, where few changes seem necessary. Specifically, the Excessive Deficit Procedure needs a stronger focus on policies rather than outcomes, while staying operationally simple and transparent. Furthermore, reforms are needed to foster time-consistent national policies, budgetary transparency, and ownership of the Pact. Accordingly, parliaments should debate national Stability Programs and national fiscal councils should review these programs for parliaments.

Program Evaluation in British Columbia in a Time of Transition: 1995-2000

Abstract: Program evaluation has undergone a major transformation in the British Columbia government during the past five years. Although conventional program evaluations continue to be conducted in some ministries, the dominant trend is towards performance measurement. The recently passed Budget Transparency and Accountability Act mandates strategic and business planning, performance measurement, and public reporting. This article identifies nine issues that need to be addressed if public performance reporting is to mature into sustained performance management in the B.C. government. Given resource scarcity and the organizational and political culture, it will be very challenging to implement performance-based public accountability in B.C.

SECURITY SECTOR PLANNING IN AFRICA

The security sector in Africa has often been a threat to citizens instead of being a benefit. Military leaders, feared by politicians for their ability to seize power by force, are often reluctant to be open about problems within the military. The lack of dialogue between politicians, citizens and soldiers has made it difficult for the real problems to be identified or addressed. States need to take stock of their security sector assets, decide how they are to be used and then agree on a clear vision for the future of the military forces within the context of the broader national interest. A defence review, the restructuring of personnel, and a transparent budgeting process can all help to achieve a more motivated and better-equipped force. A properly planned transition from the old system to the new will ensure that only manageable steps are attempted and long-term goals are not sacrificed because of short-term crises.

Budgetary Transparency for Public Expenditure Control

This paper explains why EMU countries seem unable or unwilling to undertake structural reforms of public expenditure. One of the reasons is political. What public expenditure reforms might be pursued without changing the political system? Without political reforms, technical improvements made to increase budget transparency, such as strengthening budget procedures, integrating accrual into cash accounting, and removing accounting gimmicks, could indirectly affect reforms of public expenditure. Removing gimmicks and helping prevent the emergence of new creative accounting techniques may be a partial substitute for political reforms. Implementation of the Growth and Stability Pact should be dynamically consistent with budgetary transparency. Although other EMU countries resorted as well to budgetary gimmicks to bypass difficult fiscal constraints, the Italian case is used as a reference to clarify these issues. Transparency may help discourage the use of gimmicks.

Budgetary Transparency for Public Expenditure Control

This paper explains why EMU countries seem unable or unwilling to undertake structural reforms of public expenditure. One of the reasons is political. What public expenditure reforms might be pursued without changing the political system? Without political reforms, technical improvements made to increase budget transparency, such as strengthening budget procedure, integrating accrual into cash accounting, and removing accounting gimmicks, could indirectly affect reforms of public expenditure. Removing gimmicks and helping prevent the emergence of new creative accounting techniques may be a partial substitue for political reforms. Implementation of the Growth and Stability Pact should be dynamically consistent with budgetary transparency. Although other EMU countries resorted as well to budgetary gimmicks to bypass difficult fiscal constraints, the Italian case is used as a reference to clarify these issues. Transparency may help discourage the use of gim micks.

Niger: 2000 Article IV Consultation and Request for an Arrangement Under the Poverty Reduction and Growth Facility--Staff Report; and Public Information Notice and Press Release on the Executive Board Discussion

Niger has experienced a significant program interruption. Executive Directors supported the efforts to resume the economic and structural reform program interrupted, and restore budgetary transparency, improve governance, and accelerate structural reforms. They welcomed the efforts to resume financial relations with development partners, maintain social and political stability, and stressed the need for fiscal consolidation and monitoring of banks' compliance with prudential regulations. They urged the authorities to continue efforts to improve quality and timeliness, inclusive of social data.

Defence Budget Transparency on the Internet

As the Balkans and the international community look back on more than ten years of unrest in SouthEastern Europe (SEE), many are striving to find solutions to the region’s problems. One measure being contemplated is regional defence budget transparency. It is thought that if the SEE states can come to a common agreement on sharing defence expenditure information, a mutual understanding and an enhanced dialogue on security matters can be achieved. Better understanding of each others’ concerns in turn would lead to increasing confidence between states, reducing military tensions among neighbours. With respect to the development of democratic institutions, transparency can furthermore enhance public debate and contribute to the efficiency of the democratic processes.

China's Military in Transition: Politics, Professionalism, Procurement and Power Projection

International attention is increasingly focusing on the modernization of the Chinese People's Liberation Army (PLA). Discussions about the Chinese military have moved from intelligence circles and esoteric defence journals into the global media spotlight. Chinese moves in Burma and the South China Sea, continued nuclear testing, arms purchases and, exports, lack of budgetary transparency, increasing influence in elite politics and the political succession to Deng Xiaoping, and coercive pressure against Taiwan have all drawn attention to the PLA and have contributed to growing concerns about a muscular and assertive China.

WHO under stress: Implications for health policy

A crisis is increasingly challenging the authority and prestige of the United Nations' specialized agencies. Although the World Health Organization is still held in great repute, it has not escaped criticism. Member countries have expressed concern about WHO's bureaucratic procedures, costs, proliferation of meetings, reports, lack of budget transparency. Doubts have been cast on the effectiveness of some programmes. This paper argues that such criticisms must be understood within the context of the huge changes that have occurred since WHO was established in the late 1940s. There has been a major shift in the financing of WHO, with extrabudgetary funding now providing more than half the total budget, which has implications for policy influence within the Organization. Policy is also being decided within an increasingly political milieu. These changes put significant pressure on the Organization in a number of ways, and it is essential to generate a public debate about WHO's future role if the Organization is to retain the esteem within which it is generally held. This paper makes an initial contribution to that debate.

EC Credit Assistance Programs in the Light of the US Experience: Budgetary, Financial and Political Aspects

The bulk of the subsidy cost of European Communities (EC) credit programs is not represented in the EC budget. The cost of EC loans and guarantees are not shown, and only token entries are included for the possible activation of guarantees connected to borrowing and lending. Only in the case of credit programs which entail an interest‐rate subsidy, does the budget show an amount corresponding to the subsidy cost. EC budgeting and accounting methods, like those in most member states, hide the full cost of the EC credit programs. The lack of subsidy disclosure has political implications in terms of budget decision‐making and control; budget authorities have neither adequate information to compare the trade‐offs among the various credit assistance programs and other expenditure programs, nor to evaluate or measure the efficiency and effectiveness of credit operations. Moreover, the citizens of Europe, who are taxpayers both in their states and, to a lesser extent, in the Community, do not have a clear understanding of the costs and benefits of credit programs, either at the state or the EC level. The article refers to the US experience of federal credit reform, especially with regard to the disclosure of the cost of credit programs, as a good example of budget transparency and investigates to what extent this experience could be applied to the European Communities.