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February 23, 2022

How to Strengthen Performance Based Budgeting

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Posted by Imran Aziz, Robert Clifton and Kubai Khasiani[1]

 

In October 2021, a workshop on Performance Based Budgeting (PBB) organized by three of the IMF’s Regional Technical Assistance Centers in Africa brought together over 80 technical staff from ministries of finance in 18 countries and Zanzibar. It explored some of the key challenges that countries have faced in implementing PBB. The countries represented[2] consisted of a mix of early PBB reformers, newer reformers, and those yet to embark on the reform process.

Key reform challenges included: (i) overly complex PBB structures that are not well understood by citizens and parliamentarians, (ii) forging a strategic alignment between national development plans and budgets, and (iii) changing mindsets to avoid resorting to traditional input-based forms of budgeting. As a result, reform efforts have been undermined or even reversed in some cases. In most countries PBB remains largely presentational and is not systematically used to inform budget decisions. The plenary and working sessions at the workshop discussed five main approaches to better manage these challenges and improve PBB outcomes.

  1. Apply PBB to the main service delivery and growth sectors

Focus on the main growth and service sectors in the economy and ensure PBB is used to address key policy issues and priorities. The main challenges identified in a country’s National Development Plan and Sector Strategic Plans (such as energy shortages or low vaccination coverage) should be prioritized for implementation under PBB, thus providing an opportunity to address their root causes and develop workable solutions. 

  1. Adopt a higher strategic focus for PBB with limits on what is presented

Restrict the presentation of PBB to core strategic elements (such as programs and outcomes) and place a strict limit on the number of programs, indicators, and targets. This approach helps nurture a better understanding of PBB and allows senior managers and political leaders to appreciate and support the reforms. It also prepares a solid basis for monitoring, reporting, and evaluating the performance of PBB and assessing both its impact on budgetary spending and the adoption of measures to that ensure service delivery targets are on track. It also helps hold key line ministries to account for achieving these targets. 

  1. Adopt adequate technical tools to support the legal framework for PBB

Promote the use of practical tools to support capacity building and improve the quality of performance information. Whilst several countries have sufficient legal anchoring for PBB, supporting technical tools and guidelines are often lacking. The use of “how to” manuals, workbooks, and checklists (as Rwanda has adopted) to improve the quality of performance information should be encouraged. These guidelines should migrate to technical budget instructions such as budget call circulars.  

  1. Support integration across the planning, budgeting, and reporting cycles

Adopt a clear and consistent PBB structure that is agreed between planning, budgeting, and reporting institutions. Country representatives noted the proliferation of actors who champion PBB implementation. This can create fragmented and at times conflicting approaches to PBB. Institutional arrangements and technical instruments, such as IT systems, should be harmonized to support a unified approach. All key stakeholders should be involved in a dialog on how to streamline PBB processes, which should precede plans to automate PBB.

  1. Establish a PBB framework that supports cross-cutting policy measures

Ensure cross-cutting policies are easily identified through the program structure. PBB can play an important role in promoting transparency of cross-cutting policy issues such as gender equalization and climate change. When designing and implementing PBB approaches, efforts should be made to avoid creating parallel structures. Instead, key targets and results in cross-cutting areas should be identified and tracked.

Next steps and reform plans to reengineer countries’ PBB architecture

Countries welcomed further support on simplifying their PBB architectures drawing on the five principles indicated above. Due to the heterogeneity of PBB structures across countries, this will involve targeted technical assistance to individual countries, supported by the IMF’s regional technical assistance centers and other development partners.

 

[1] Imran Aziz, Robert Clifton and Kubai Khasiani are PFM Advisors in the IMF’s respective Technical Assistance Centers for Southern Africa, Anglophone West Africa, and East Africa. Contributions to this article also came from the short-term experts that supported this workshop: Wilfried Engelke, Rehemah Namutebi, Nompumelelo Radebe, Gerhard Steger and Edwin Vela-Moyo.

[2] Angola, Botswana, Cabo Verde, Comoros, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mauritius, Mozambique, Nigeria, Rwanda, Seychelles, Sierra Leone, Tanzania-ZNZ, The Gambia, Uganda, and Zimbabwe.

 

 

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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