Sequencing of Performance-Based Budget Reforms
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.
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