Posted by Asad Maken and Claude Wendling
On November 3, the United Nations Development Program (UNDP) and the International Monetary Fund (IMF) jointly organized a roundtable on green budgeting practices in the Asia Pacific Region. The roundtable aimed to provide a comprehensive picture of green budgeting practices in Asia and sought to move the dialogue beyond the current focus on green budget tagging. The Asia Pacific Region is a forerunner in green budgeting. This can be attributed to these countries’ direct experience with the impact of climate change leading to a strong emphasis on building home grown capacity and intensive support by international organizations such as UNDP and the World Bank. Building on countries’ experiences the roundtable aimed to address the following set of questions: What are the critical capacity constraints for putting in place green budgeting? How can countries integrate green budgeting practices into the budget process while maintaining the effectiveness of this ? Which green budgeting practices are more likely to make a difference in terms of influencing actual decision making and policy?
Speakers from Bangladesh, Fiji, Indonesia and the Philippines shared their experiences. The presentations and discussions illustrated the intense level of innovation and activity in the field of green budgeting. Their experiences demonstrated the different approaches to incorporating green budgeting practices into the public financial management cycle. Some countries such as Fiji follow a bottom up approach where the initiative resides with line ministries. With this approach, the challenge is then to “scale up” good practices, for example the risk-based project development approach. Other countries such as the Philippines follow a more top down approach where the central budget authority is clearly tasked with creating the tools and processes to integrate climate change concerns into budget formulation and execution. The challenge is then to mobilize line ministries and agencies and to develop capacity.
Institutional choices on role of the organization in charge of the environment also differ from country to country. For example, the Philippines give their environmental watchdog (Climate Change Commission) a role in the budget formulation process to screen the budget submissions of line ministries and agencies from an environmental standpoint. Bangladesh tries to internalize environmental concerns and analytical capacity within the Ministry of Finance, with the objective of having climate change issues adequately reflected in strategic documents such as the Bangladesh Economic Review, the Budget Speech or the Medium-Term Macroeconomic Policy Statement.
Lastly, the presentations also showcased the strong links between green budgeting and green financing issues, for example Indonesia discussed how the green (a green bond compliant with Islamic law) and other green financing vehicles are underpinned by green budgeting practices.
Overall, the roundtable highlighted that green budgeting systems and processes are already quite advanced. For example, progress has been in tracking expenditures by incorporating green concerns into financial management information systems, developing green performance audits and greening budget circulars. However, there is still a need to illustrate how green budgeting leads to actual changes in terms of budget allocations and ultimately to better decisions. The Fiji example was in this respect quite powerful in showing the actual impact of climate change investments and their economic . The examples shared by Bangladesh, Indonesia and the Philippines are strategic and critical and put them in a good position to achieve systematic implementation and increased effectiveness of climate investments. The degree of comprehensiveness of the green budgeting approach could also be a challenge, as highlighted by a stressed the importance of taking into account other environmental concerns such as biodiversity and not just those purely climate .
UNDP and IMF look forward to continuing this conversation with other countries and partners on the effectiveness and impact of green budgeting. The proceedings of this roundtable have been recorded and the presentations are available .
Asad Maken is a Governance and Public Finance Specialist in the Governance of Climate Change Finance team of the UNDP, based at its Bangkok Regional Hub. Claude Wendling is a Technical Assistance Advisor with the IMF’s Fiscal Affairs Department.
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