Sequencing of Performance-Based Budget Reforms

PerformanceBudgeting

Posted by Maarten de Jong[1] and Alfred T. Ho[2]

Performance budgeting (PB) is increasingly viewed as challenging by countries with advanced PFM systems, but continues to be popular with many governments and development partners.  In response to its far from trouble-free history, attitudes towards PB reform have gone through a transformation during the last decade. Overrated expectations have been lowered and lessons are being learned. Today, PB is no longer considered as an effective tool to alter budget allocation but rather as a way to increase fiscal transparency, align government priorities with activities and spending, and foster organizational learning. As a result, the line between performance management and performance budgeting has become increasingly blurred. Two lessons in particular surface from recent academic studies. First, the degree to which performance information will actually be used by public sector organizations is key to the success of PB reforms. Second, the use of such information is highly dependent upon institutions such as power relationships, leadership and culture.

Apart from macro-factors such as the economic and political environment, specific institutional factors include acceptance by stakeholders, codification in laws and procedures, capacity (both people and systems), incentives and safeguards for employees to use performance logic, and power relationships between the center of government and other stakeholders. Culturally, specific barriers may stand in the way of embracing PB’s underlying assumptions of technical rationality, openness and transparency, especially in non-western cultures and political systems. Ignoring these factors may nullify a reform effort or make it vulnerable to window dressing.

During a recent Association for Budgeting and Financial Management (ABFM) Conference in Seattle, a panel of scholars and practitioners discussed how institutional factors affect the planning and sequencing of PB reform[3]. Case studies from Afghanistan, the Philippines, Poland, the Chinese city of Jiaozuo and the province of Guandong were presented and discussed, as well as evidence from various other countries in Africa, the Middle East and Asia. The discussion led to a preliminary consensus on a number of issues:

Recognizing the relevance of local institutional circumstances, and using this knowledge to determine the right form and sequence of PB reform is the next great challenge for governments and practitioners. The discussion in Seattle was an early attempt to use academic evidence from PB implementation to feed this debate, on which further study and analysis is required.

[1] Maarten de Jong PhD. is a senior budget specialist at the Netherlands Ministry of Finance and has been involved in TA and research projects in over 10 countries on behalf of the Netherlands, the World Bank, the IMF, the OECD and the EC.  m.jong@minfin.nl

[2] Alfred T. Ho is Professor of Public Administration at the University of Kansas at Lawrence. His research topics include budgeting and performance management, and he has worked on projects with IBM, the ADB, and various local governments in the US and China.  alfredho@ku.edualfredho@ku.edu

[3] This discussion took place on October 8, 2016. Members of the panel were Alfred T. Ho (University of Kansas), Maarten de Jong (Ministry of Finance of the Netherlands), Wenbin Li (South China University of Science and Technology), , Arwiphawee Srithongrung (Wichita State University), Kurt Thurmaier (Northern Illinois University), Mary Venner (University of Canberra), and Zaozao Zhao (Chinese Academy of Social Sciences).

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.

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