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April 07, 2010

Role of the Legislature in Budget Processes

Posted by Ian Lienert

TNM1004 cover
Would parliaments be willing to move towards “best” international practice in budget processes? Is this a long-shot dream, given that parliamentarians have more-urgent constituency matters that fill their daily agendas? Even if they were willing to consider improvements in legislative budget procedures, is it possible to draw up a widely acceptable set of “best” practices for the role of the legislature in budget processes? After all, given that the powers, organization, and functioning of parliaments vary so much across countries (see my blog of January 20, 2010) can only country-specific guidelines be drawn up?

Despite the challenges, in a new Technical Note and Manual, I provide guidance for good practice for parliaments in five main areas of budget processes. Clearly it is not possible to provide definitive one-size-fits-all guidance on all budget issues for all countries. Nonetheless, this note identifies universally good rules for some areas of budget practice (e.g., the adoption of the annual budget law by the legislature before the beginning of a new fiscal year). In other areas, especially budget execution, it is more difficult to provide firm guidelines.

For promoting good governance and fiscal transparency, the legislature’s active engagement in the budget process is essential. When fiscal policies and medium-term budgetary objectives are debated in parliament, budget strategies and policies are “owned” more widely. However, more active participation by the legislature runs the risk that fiscal discipline deteriorates. This is a principal reason why good budget procedures at parliament are essential.

Five aspects of the role of parliament are examined in the new note:

• When, in the budget cycle, should parliaments be involved?
• What do parliaments typically approve, as distinct from what they review?
• What internal structures and support should parliaments have for scrutinizing governments’ draft budgets and budget outcomes?
• What accountability and legal requirements should parliaments impose on the executive?
• How should legislatures’ involvement in budget processes be formalized in laws and regulations?

A new Technical Notes and Manuals (TNM) series was launched by the IMF’s Fiscal Affairs in September 2009. This note has been issued as TNM/10/04, March 2010.

Download TNM1004

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