Budgeting in Kenya: Practice and Prescription
TL;DR: In this article, a three-stage model of budgeting for line ministries that would promote the discipline and adaptiveness needed to cope with these severe conditions is presented. But, the model is not suitable for the case of line ministries.
Abstract: Improving budgeting in developing countries is difficult-due to their limited and uncertain resources and the politicized process of resource allocation. This article outlines a three-stage model of budgeting for line ministries that would promote the discipline and adaptiveness needed to cope with these severe conditions. Our model of budgeting has three stages: analyzing, fitting, and implementing. The practice of budgeting in Kenya is reviewed with this budget model and prescriptions developed. Two theses are presented. First, the fitting stage (reducing budgets to ceilings) is overemphasized and the analyzing and implementing stages are neglected. Second, the budget process lacks mechanisms for promoting analysis. Budget discipline and adaptiveness can be improved with three reforms: first, a budget calendar that clearly defines and provides adequate time for the three stages of budgeting; second, workplan-based budgeting that integrates financial data and promotes rapid fitting of ceilings while maintaining balanced expenditure; and third, cost-center budgeting that links recurrent and development budgets based on complement.
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TL;DR: In this paper, the authors present a review of multi-year budgeting practices in six developed countries (Australia, Austria, Germany, New Zealand, Great Britain, and the United States) and draw lessons from these experiences for the potential application of multiannual budget techniques by developing and transitional countries.
Abstract: In recent years, many developed countries have moved to develop their annual budget process in a strategic multi-year framework. While a common feature of multi-year budgeting approaches is the inclusion of revenue forecasts and expenditures estimates for two or three years beyond the current year, multi-year budget practices vary substantially between countries. This article reviews multi-year budgeting practices in six developed countries (Australia, Austria, Germany, New Zealand, Great Britain, and the United States) and attempts to draw lessons from these experiences for the potential application of multi-year budget techniques by developing and transitional countries. We draw five lessons from the multi-year budget practices of developed countries that are relevant for developing and transitional economies: (1) a multi-year dimension could be a valuable fiscal policy and management tool for developing and transitional countries; (2) the approach chosen in each developing or transitional economy should reflect the country's policy objectives, unique budget institutions and traditions, and administrative capabilities; (3) the introduction of a multi-year budget dimension is a gradual process; (4) the multi-year budget should be used to encourage the constructive involvement of line ministries in the budget process; and (5) the usefulness of the multi-year budget approach will crucially depend on the reliability and accuracy of the medium-term budget estimates.
55 citations
TL;DR: In this article, the authors address the determinants of public expenditure policies, by reviewing theories and empirical investigations of what features explain the budget process and how the various attributes of actors, including politicians, bureaucrats, interest groups, and donors, and of institutions and political and economic governance environments affect the prioritization of public investments.
Abstract: This paper addresses the determinants of public expenditure policies, by reviewing theories and empirical investigations of what features explain the budget process and how the various attributes of actors — including politicians, bureaucrats, interest groups, and donors — and of institutions and political and economic governance environments affect the prioritization of public investments. It draws conclusions with regard to the determinants of agricultural public investments.Studies that explicitly examine the budget process as it pertains to agricultural ministries and agencies in developing countries question the relevance of the formal budget process to understanding how decisions are actually made. There exists a body of work, adhering to the so-called garbage can budgeting model, which, although clearly rejecting the notion of a textbook budget process in empirical reality, seems to also reject the notion that there are any systematic politico-economic or other influences on how public expenditures are apportioned across competing needs. The budgetary model of incrementalism, at the other extreme, models budget makers as backward looking and changes in budget allocation as incremental. Another body of literature focuses on nature in which budgetary trade-offs are or are not made. The passage of the final budget — however it is arrived at — is not the end of the budget process, as there is still the implementation and execution of that budget. Discrepancies between the approved agricultural budget and the executed budget in the sector can come in the form of leakages, or they can occur because of a lack of capacity to execute or because of changing priorities mid–fiscal year.One conception of the budget allocation process prevalent in the economics literature offers an economistic view of public resource allocation undertaken by a benevolent and autocratic (in the sense of unencumbered) social planner seeking to maximize aggregate welfare. Other distinct branches have developed within the public choice literature, including those that depart from the notion of an unencumbered policymaker. One such branch of this literature analyzes budget outcomes emerging from the interface between budget-maximizing bureaucrats and vote-seeking politicians. In the collective action literature, characteristics of interest groups (in the broadest sense of the term) affect these groups’ ability to press for public policies, including agricultural investments, subsidies, and other public interventions, that are favorable to them. An interesting phenomenon in policy processes is the seeming existence of a status quo bias among policymakers, such that policies that have outlived their usefulness, such as agricultural input subsidies, appear to often fail to be discontinued. A diverse literature examines donors as actors, with their sets of incentives, constraints, and preferences, and the reach of their influence over public spending in developing countries.It is often difficult to attribute to policymakers’ actions the creation or improvement of certain services. Incorrect or imperfect attribution, in turn, dampens policymakers’ (political) incentives to undertake effort in improving services and infrastructure and drives the prioritization of investments. The extent to which attribution is achieved depends on the visibility of the investments, and on the length of lag between the time when resources are allocated to provide a good or service and the time when the good or service is created. This helps explain the underinvestment in agricultural research.Areas of public spending in which large infrastructural or other capital investments are undertaken lend themselves more to rent-seeking activities by public officials. The prevalence of corruption in a society thus affects the composition of public spending, by increasing aggregate public investments, although the quality of these investments will be lower. The effect of wider political governance features of countries on the composition of public investments is more complex, nonlinear and not fully conclusive in the literature.
40 citations
TL;DR: In this paper, the authors provide three frameworks for understanding the process of implementing a financial reform in an African country that has adopted a policy of devolution, based on four years of experience in implementing financial reform under Ethiopia's Civil Service Reform.
Abstract: This article provides three frameworks for understanding the process of implementing a financial reform in an African country that has adopted a policy of devolution. The article is based on four years of experience in implementing a financial reform under Ethiopia's Civil Service Reform. The first framework, which we have termed the Framework for Financial Reform, provides an overall conception of financial reform. It has two dimensions: the stages of development of financial systems (external control, internal control, management, planning) and the steps to changing financial systems (comprehension, improvement, expansion). The second framework, the Four Tasks of Managing a Financial Reform, elaborates the steps in changing financial systems. These tasks include: reforming the approach to financial reform, improving the design of the reform, managing the implementation of the reform, and protecting the reform. The third framework focuses on the task of managing the implementation of financial reform and details the phases, variables and dilemmas of implementation. The phases of implementation are design, pilot and operation. Associated with these phases are variables that affect the implementation (resources, interdependence, sequence and timing) and dilemmas (comprehensiveness and monitoring). These frameworks support the article's two theses: (1) that reform of financial systems in Africa must be evolutionary, not revolutionary; and (2) that evolutionary reform of financial systems is especially needed in devolved African countries. Evolutionary reform is needed because financial systems in the public sector are fragile traditions that need first to be comprehended. Before more complicated financial ‘management’ reforms can be introduced that focus on outputs and outcomes, the existing ‘administrative’ financial systems which control inputs have to be understood, implemented and improved. ‘Best Practice’ is often the enemy of ‘feasible’ practice in developing countries. Copyright © 2001 John Wiley & Sons, Ltd.
19 citations
01 Jan 2010
TL;DR: This report examines equitable financing and resource allocation at decentralized levels for family planning (FP) and reproductive health programs in Kenya and how decentralization affects equity in resource allocation for FP and RH.
Abstract: Decentralization has been a stated policy objective for Kenya since 1994; however the allocation of health sector financial resources remains highly centralized and opaque relying primarily on previous years budget allocations rather than on health needs indicators. Equitable or fair resource allocation can only be accomplished by considering variation in needs across geographic and economic groups. The Health Policy Initiatives research revealed that the allocation of health sector funds in Kenya has not accounted for differences in health achievement access and provision costs across the regions provinces and districts. This report examines equitable financing and resource allocation at decentralized levels for family planning (FP) and reproductive health (RH) programs in Kenya. The USAID |Health Policy Initiative Task Order 1 investigated the institutional legal and political environment affecting budgetary decisionmaking in the public health sector. The research team focused on how budgetary planning and resource allocation functions under decentralization and how decentralization affects equity in resource allocation for FP and RH.
16 citations