Budget preparation

The increased emphasis placed on budget reform within development policy reflects the importance of effective financial management to a growing economy. But without understanding the political economy of the partner country, efforts to introduce budgetary reforms can flounder. In our experience, reform programmes need to focus as much on institutional analysis and change management disciplines as on financial management theory.

A national budget is (or should be) the mechanism by which policy is delivered. That is precisely why there is such a desire amongst governments and development partners to move away from input-based budget approaches towards a stronger performance orientation and a focus on outcomes.

To achieve that focus, however, there first needs to be a clear articulation of policy goals and priorities, across the whole of the government. There needs to be an accurate understanding of the available resource envelope. And there needs to be, above all, an open dialogue between senior ministers and officials about how those resources can best be allocated towards the agreed policy goals.

In many countries, such an approach not only represents a significant shift in the way the budget is prepared, but a substantial change in the way the administration operates. Vested interests will be challenged; established processes and protocols threatened. Hence our work to support and enable budget reform places a premium on understanding the administrative history of a country, its current governance structures and the way in which decisions are made in practice. Without this understanding and the commitment of senior officials within the government budgetary reforms – by their nature a complex, long-term process – will not succeed.

Our experience in helping develop medium-term budget frameworks in countries such as Pakistan, Georgia, Palestine and Rwanda has repeatedly shown that the real challenges are not technical, but in understanding and influencing the political economy framework within which budgets are negotiated and agreed. By securing and maintaining political support for budget reform, and embedding this commitment through a process of administrative change our economists, public finance and sector policy specialists can work closely with partner governments to help devise approaches that will make performance-orientated budgeting a reality.

For more on our effective public financial management, see our brochure below.

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