Credit Nuthawut Somsuk/iStock
Credit Nuthawut Somsuk/iStock
Credit Nuthawut Somsuk/iStock
Credit Nuthawut Somsuk/iStock
In an earlier post, it was discussed how ministries of finance can make every penny count, fostering the integration of Spending Reviews (SRs) into budgeting systems. Over the past five years, the World Bank has supported SRs in more than 75 countries and helped improve spending efficiency and fiscal space through Public Finance Reviews, which use similar tools and approaches. SRs are gaining momentum, particularly across the OECD, and in nearly all EU countries. SRs are powerful tools, helping governments examine baseline spending, identifying what works (and what doesn’t), and reallocating resources where they matter most. Progress has been uneven, with reform fatigue, stalled SRs, and challenges turning findings into budget decisions, especially when easing fiscal pressures.
This post outlines the main challenges in institutionalizing SRs and offers practical tips to address them, to facilitate developing countries when starting their journey with SRs.
Overambitious Objectives and Lack of Clear Focus
SRs often fail when governments pursue too many goals, take on an overly broad scope, or focus only on short-term cuts. This overloads limited capacity, produces superficial results, and can even harm service delivery. Successful SRs are narrow, purposeful, and aimed at a single core objective — typically creating fiscal space while protecting priority programs.
Ireland is a good example: after broad post-crisis reviews, the government shifted to more focused, topic-based SRs, led jointly by the Irish Government Economic and Evaluation Service and line ministries. For low-income and developing countries, early SRs should start “small and smart”—light or medium-depth, with one clear goal (e.g., generate fiscal space)—then scale up as institutions strengthen.
Limited Engagement from Line Ministries
Effective SRs require strong political backing and active engagement from line ministries. They often gain traction during fiscal stress but lose momentum once pressures ease. When ministries see SRs as simple budget-cutting exercises, they disengage, and ownership disappears. In France, early SRs had limited ministerial involvement, which weakened buy-in and reduced savings. The more consensual, participatory approach adopted in 2023 is already showing promising results.
Durable political mandates, clear institutional anchoring in finance ministries, and incentives—such as letting ministries reinvest part of the savings—can all strengthen engagement in SRs. Canada’s 2007–2010 Strategic Reviews used this model, allowing ministries to keep approved savings, including “spend-to-save” investments. In lower-capacity settings, starting with high-impact sectors and providing clear incentives helps ensure that savings measures are implemented effectively and deliver real results.
Weak Planning and Organization
With strong planning, clear governance, and stable institutions in place, SRs can effectively expand fiscal space, enhance efficiency, and improve resource allocation. Weak design, vague goals, ad hoc setups, or overreliance on consultants undermine both effectiveness and learning. Dedicated SR units in finance ministries help ensure continuity, accountability, and lasting impact. For example, Denmark shifted from consultant-led reviews to a permanent internal SR unit, which strengthened ownership and improved implementation. In contrast, Catalonia relied on non-dedicated staff and completed only a few SRs over eight years.
In developing countries, small, dedicated teams (with some external expert support) focusing on high-impact sectors—with clear goals, timelines, and monitoring—can deliver stronger SRs and expand their role as capacity grows.
Shortage of Reliable Data and Analytical Expertise
A key barrier to effective SRs is the lack of reliable data and analytical capacity, which often leads to shallow, low-impact recommendations. Good practice is to begin with basic financial and administrative data and gradually build up to performance and evaluation information, guided by a clear plan for improving data quality. South Africa shows the value of this approach. A standardized, modular SR methodology and a centralized pool of expertise helped the country make steady progress despite institutional constraints.
Creating permanent analytical teams, investing in staff skills, and using simple tools—such as baseline reviews, cost analysis, and benchmarking—can greatly improve the quality of SRs, especially when supported by standard templates and a focus on sectors with stronger data.
Weak Integration with the Budget Process and Limited Monitoring and Accountability
SRs can expand fiscal space and improve efficiency, but their impact fades when they are not aligned with the budget cycle. Reviews done after key budget preparation deadlines or disconnected from expenditure ceilings risk becoming “technical exercises” with little real influence. In Slovakia, weak integration into the budget cycle and low follow-through on savings measures reduced SRs’ effectiveness, prompting current efforts to strengthen alignment.
Good practice includes linking review outputs to budget planning, assigning clear leadership, setting fiscal targets and timelines, and reporting progress regularly. In lower-capacity countries, tying SR results directly in budget ceilings and/or requests, and establishing basic monitoring mechanisms can help secure savings and improve service delivery.
Conclusion and Way Forward for World Bank Support
Effective SRs require a clear goal, strong political backing, and incentives for ministries. Governments should target high-impact areas, build internal capacity with external support, and use simple analytical tools. Most importantly, SRs must be linked to budget processes to generate meaningful and lasting fiscal space.
SRs can be introduced in developing countries, but they should be rolled out carefully, only when feasible, and sized to the country’s political will, institutional strength, data quality, and technical capacity. Where foundational PFM systems are weak, priority should be given to strengthening these basics before pursuing more comprehensive reviews. In the short term, SRs should focus on a limited number of sectors or programs where data are sufficiently reliable and simple, practical methods can be applied, with a narrow set of objectives such as identifying fiscal savings or improving resource allocation.
This phased approach supports gradual capacity building, helps build credibility and institutional buy-in, and reduces the risks of overambitious reforms. Over time, as institutions, capacity, and data systems improve, the scope and depth of SRs can be expanded. International frameworks from the IMF, OECD, and EU can provide useful guidance, but they should be adapted to country contexts and anchored in locally led design and stakeholder engagement.
To boost introducing and institutionalizing effective SRs in developing countries, the World Bank Global PFM program aims to strengthen SRs workstream by rolling out practical toolkits to fill existing gaps in methodological issues (e.g., analytical toolset to conduct SRs), as well as providing actionable insights and offering hands-on support and capacity building.
