PFM Law Reforms: Balancing Legislative and Executive Powers
Posted by Kubai Khasiani and Florence Kuteesa
A growing number of Parliaments in Commonwealth African countries are casting off their Westminster inheritance and demanding a greater role of parliaments in budget decision-making. The last decade has seen restive backbenchers in some of these countries bring forward Private Member’s Bills which look to enhancing the legislature’s powers over the public purse at the expense of the executive. This approach has sometimes been fiercely contested or not fully supported, and the product of this struggle between the branches of government leaves many unresolved issues and, in some cases, an outcome that is fiscally challenging to the country.
For almost half a century after achieving their independence, former British colonies in Africa implemented a budget preparation system that enshrined a weak legislature and a strong executive in the decision-making process. Ian Lienert examined the British influence on budget systems in Tanzania, as an example, and noted that the parliament was engaged only very late in the budget preparation process, had limited powers to alter the government budget after it was presented, and was often not consulted about changes made by the government during the budget execution phase. As a result, parliaments seldom had a significant impact on the size or distribution of government revenue or expenditure.
These constraints on parliamentary engagement in budget decision-making have served the executive well during the past decades and sustained the power of ministers of finance within the cabinet of ministers. Given their lack of formal powers over the ex ante formulation and approval of the budget, parliaments focused their financial oversight function with mixed success on holding the government to account for the ex post performance of the budget. With the support of the auditor general, for example, some African parliaments have drawn attention to examples of waste, corruption, or other misuse of funds.
During the last decade or so, restive parliamentarians in a few African countries have taken the initiative to reform the legal frameworks and traditions they inherited to give them more influence of the budget process. In particular:
- In Uganda, the Budget Act of 2001 provided for a strengthened role and early involvement of policy makers in budget formulation and enhanced parliamentary scrutiny of the national budget. The Act established both a Parliamentary Budget Committee, with a mandate to scrutinize macroeconomic and fiscal targets as well the medium-term expenditure framework, and a Parliamentary Budget Office to analyze budget proposals and related economic developments. Line ministries were also mandated to provide ministerial policy statements that detailed the allocation of resources within a medium-term framework.
- In Kenya, the Fiscal Management Act, 2009, specifically provided for parliament to regulate and oversee the national budget process, and to make amendments to the draft budget proposed by the executive. It also required the government to submit half-yearly reports on budget execution to the parliament.
While this “backbench revolt” provided parliament with a stronger voice in budget decision-making, it did not achieve a fully satisfactory legal basis for managing public finances. In Uganda, for example, the roles and responsibilities of the executive and legislative branches were not clearly stated, and there were inconsistencies in the treatment of supplementary appropriations, and budget execution. In Kenya, the comments made by parliament on the executive’s draft budget were not binding on the government.
In the last few years, however, there are encouraging signs that countries may be arriving at more coherent and lasting settlement of the issue of how to balance the legitimate financial interests of government and parliament. This new settlement is reflected in the enactment of comprehensive public finance laws that deviate substantially from the Westminster tradition:
- In Kenya, the 2010 Constitution provided for a clear parliamentary oversight mechanism deliberately whittling away the powers of the ministry of finance in having the final say on the budget. The Constitution is supported by a new PFM Act,2012 which confers detailed responsibilities to the executive’s Budget Committee of the National Assembly including the review of the Budget Policy Statement and the budget estimates for subsequent approval by the full parliament. Unlike previous laws, the new legislation gives the parliament powers to provide general direction on budgetary matters while taking into consideration the views of the executive.
- In Uganda, the government and Parliament are currently debating a new integrated PFM Bill which provides a comprehensive framework for legal reform that would address the existing gaps and inconsistencies in PFM laws and clarify the complementary roles of the parliament and executive.
Policy makers in other African countries who have been watching developments in Kenya, and Uganda, should be careful to draw the appropriate lessons from recent history. Creating an appropriate balance in the respective powers of the various branches of government is fraught with difficulty and potential risk. It is better that all branches of government work together to achieve a legal outcome that is balanced and fair, rather than acting unilaterally with the result that efforts to deal efficiently with the many fiscal challenges facing these countries are compromised.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.