Simplifying Budget Documents – Time for an International Standard?
Posted by Camille Karamaga
Improving the quality of budget documentation lies at the heart of many reforms aimed at enhancing understanding of the content of the budget estimates as well as fostering transparency and accountability. Some budget laws prescribe a minimum set of documents to accompany the budget estimates. These may include, for example, reports on: (i) the medium-term macroeconomic forecast; (ii) fiscal policies and public expenditure trends; (ii) medium-term forecasts of government revenues, expenditures, debt, and the fiscal balance; (iii) medium-term resource ceilings; (iv) government guarantees, contingent liabilities and other fiscal risks; (v) spending on expenditure programs and projects by sector; and (vi) projections of donor aid flows. In countries with a Westminster tradition, the budget speech includes much of this information, but additional documents may be presented to the parliament.
Improving the content and quantity of fiscal information is not the same, however, as improving its quality or transparency. More does not always mean better or clearer. Indeed, it often means the reverse. Governments tend to respond to demands for information from the parliament, financial markets, NGOs and ordinary citizens by producing more and more data, often in unprocessed form. This may get them off the hook of public “accountability”, but places them squarely on another hook, accusations of information overload and obfuscation.
The design of a strategic planning framework, medium-term budget frameworks and program budgets has led to a proliferation of detailed information, performance indicators, and monitoring and evaluation reports. Mountains of annual budget books are produced with separate estimates volumes being prepared by each line ministry. The excessive detail contained in the budget estimates weakens their usefulness as raw material for discussion by parliamentary committees. Nor are they meaningful to the general public. In short, much of the information produced by the government easily becomes a “data cemetery” which contributes little to the decision-making process or enlightened public debate.
Is there a way out of this dilemma? Developing an international standard on fiscal documentation is one answer. The IMF’s recently published paper on Fiscal Transparency, Accountability, and Risk notes that currently no there are internationally accepted standards for the content and presentation of the budget and related documents. However, some progress is being made. The International Budget Partnership’s Open Budget Survey, for example, periodically examines to what extent countries produce eight key documents during each budget cycle. These documents comprise the pre-budget statement; the budget proposal (budget estimates); the budget as approved by parliament; in-year financial reports; the mid-year review of budget execution; the year-end report; the report of the external audit agency on the government’s annual financial statement; and the citizen’s budget.
Many developing countries, for example in sub-Saharan Africa, are making an attempt to meet such standards of good practice. However, there is no specific guidance on the standard size and content of these reports. Some published documents turn out to be voluminous and are indigestible for many readers. Some countries’ budget books run to over 500 pages, while in others, line ministry budget estimates are over 1000 pages. Some countries have a practice of presenting highly detailed sector estimates as part of their national budget. In others, the budget speech runs to more than 300 pages!
Meaningful scrutiny of the budget proposals may thus be limited by the sheer bulkiness of the documents and the time constraint for submission and approval of the budget. In addition to core budget material, there are increasing demands for governments to publish detailed financial information on extra-budgetary funds, state enterprises, local authorities and other public entities. As a consequence, the usefulness of fiscal documents runs the risk of being compromised by their number and length.
Moreover, policy makers tend to confuse the volume of information with its quality and usefulness. Governments attempting to “play safe” may decide to publish everything, but that is not helpful to the different consumers of information, including parliamentarians, taxpayers and the general public. The objectives of accountability and transparency are often placed side by side, as twins that cannot be separated. In practice, however, the two objectives are different and are not easy to reconcile. Accountability may require countries to produce more information, transparency to produce less, or at least to be more selective in the way information is prepared and presented.
Policymakers therefore need to decide what information should be published, and in what form. Government officials, parliamentarians, academics and think tanks, the media, and ordinary citizens have differing requirements for information, which needs to be presented in a form that the recipients can understand and make use of in taking decisions, writing op-ed pieces for local newspapers, or lobbying local politicians. The assumption that all users require all information at the same time and in the same format is unhelpful from the perspective of accountability and transparency.
Some sub-Saharan countries have recognized the need to downsize their key documents without losing content. For example, Ghana, Rwanda, Kenya all produce highlights to the budget proposals in manageable volumes. Technical documents, though improved in quality for policy purposes, may still need to be simplified to suit the needs of ordinary people whose lives are impacted by the national budget. Simpler versions of budget speeches may have to be crafted for dissemination and outreach purposes to NGOs. A citizens’ guide to the budget is becoming a common feature as demands increases for more participation and transparency in the budgetary process.Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.