Looking Beyond the Budget Deficit

292 Pages·2005·1.73 MB·English

by  World Bank Group

d
e
z
ri
o
h
ut
A
e
r
u
s
o
cl
s
Di
c
bli
u
P
d
ze PUBLIC SECTOR
ri
o
h GOVERNANCE AND
ut
A
e ACCOUNTABILITY SERIES
r
u
s
o
cl
s
Di FISCAL
c
bli
u
P
MANAGEMENT
d
e
z
ri
o
h
ut
A Edited by ANWAR SHAH
e
r
u
s
o
cl
s
Di
c
bli
u
P
d
e
z
ri
o
h
ut
A
e
r
u
s
o
cl
s
Di
c
bli
u
P

FISCAL
MANAGEMENT
Introduction to the Public Sector Governance and Accountability Series
Anwar Shah,Series Editor
A well-functioning public sector that delivers quality public services consistent with citizen preferences and
that fosters private market-led growth while managing fiscal resources prudently is considered critical to the
World Bank’s mission ofpoverty alleviation and the achievement ofMillennium Development Goals.This
important new series aims to advance those objectives by disseminating conceptual guidance and lessons
from practices and by facilitating learning from each others’experiences on ideas and practices that promote
responsive(by matching public services with citizens’preferences),responsible(through efficiency and equity
in service provision without undue fiscal and social risk),and accountable(to citizens for all actions) public
governance in developing countries.
This series represents a response to several independent evaluations in recent years that have argued that
development practitioners and policy makers dealing with public sector reforms in developing countries and,
indeed, anyone with a concern for effective public governance could benefit from a synthesis of newer
perspectives on public sector reforms.This series distills current wisdom and presents tools ofanalysis for
improving the efficiency,equity,and efficacy ofthe public sector.Leading public policy experts and practitioners
have contributed to the series.
The first seven volumes in the series (Fiscal Management,Public Services Delivery,Public Expenditure
Analysis,Tools for Public Sector Evaluations,Macrofederalism and Local Finances,International Practices in Local
Governance,and Citizen-Centered Governance) are concerned with public sector accountability for prudent
fiscal management;efficiency and equity in public service provision;safeguards for the protection ofthe poor,
women,minorities,and other disadvantaged groups;ways ofstrengthening institutional arrangements for voice
and exit;methods ofevaluating public sector programs,fiscal federalism,and local finances;international
practices in local governance;and a framework for responsive and accountable governance.
Public Services Delivery Public Expenditure Analysis
Edited by Anwar Shah Edited by Anwar Shah
Tools for Public Sector Evaluations International Practices in Local
Governance
Edited by Anwar Shah
Edited by Anwar Shah
Macrofederalism and Local
Finances Citizen-Centered Governance
Edited by Anwar Shah Matthew Andrews and Anwar Shah
PUBLIC SECTOR
GOVERNANCE AND
ACCOUNTABILITY SERIES
FISCAL
MANAGEMENT
Edited by ANWAR SHAH
THE WORLD BANK
Washington,D.C.
©2005 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone:[phone]
Internet:www.worldbank.org
E-mail:[email protected]
All rights reserved
1 2 3 4 08 07 06 05
The findings,interpretations,and conclusions expressed herein are those ofthe
author(s) and do not necessarily reflect the views of the Executive Directors of
the International Bank for Reconstruction and Development / The World Bank
or the governments they represent.
The World Bank does not guarantee the accuracy ofthe data included in this
work.The boundaries,colors,denominations,and other information shown on any
map in this work do not imply any judgement on the part of The World Bank
concerning the legal status ofany territory or the endorsement or acceptance ofsuch
boundaries.
Rights and Permissions
The material in this publication is copyrighted. Copying and/or transmitting
portions or all ofthis work without permission may be a violation ofapplicable law.
The International Bank for Reconstruction and Development / The World Bank
encourages dissemination of its work and will normally grant permission to
reproduce portions ofthe work promptly.
For permission to photocopy or reprint any part of this work, please send
a request with complete information to the Copyright Clearance Center Inc.,
222 Rosewood Drive,Danvers,MA 01923,USA;telephone:[phone];fax:978-
750-4470;Internet:www.copyright.com.
All other queries on rights and licenses,including subsidiary rights,should be
addressed to the Office of the Publisher, The World Bank, 1818 H Street NW,
Washington,DC 20433,USA;fax:[phone];e-mail:[email protected].
ISBN-13:978-0-8213-6142-9
ISBN-10:0-8213-6142-2
eISBN:978-0-8213-6143-6
DOI:10.1596/978-0-8213-6142-9
Library ofCongress Cataloging-in-Publication Data
Fiscal management / edited by Anwar Shah.
p. cm.— (Public sector,governance,and accountability series)
Includes bibliographical references and index.
ISBN 0-8213-6142-2 (pbk.)
1.Government productivity—Evaluation.2.Country services—Evaluation.
3.Municipal services—Evaluation.4.Budget.5.Finance,Public.6.Expenditures,Public.
I.Shah,Anwar.II.World Bank.III.Series.
JF1525.P67F57 2005
352.4—dc22
2005043245
12
Contents
Introduction to the Public Sector Governance
and Accountability Series ii
Foreword xi
Preface xiii
Acknowledgments xv
Contributors xvii
Abbreviations and Acronyms xx
Overview xxi
by Anwar Shah
Budgeting Institutions
1
and Public Spending 1
by Jürgen von Hagen
Ex Ante Controls 3
Political Systems:Competition and
Accountability 6
Limiting the Common Pool Problem:
The Budgeting Process 12
Institutional Design ofthe Budgeting Process 19
Institutional Reform 24
v
vi Contents
CHAPTER
2 Performance-Based Budgeting Reform:
Progress, Problems, and Pointers 31
by Matthew Andrews
Introduction 33
Progress 36
Problems 41
Points for Proceeding 52
Conclusion 66
3 Simple Tools for Evaluating Revenue
Performance in a Developing Country 71
by Mahesh Purohit
Introduction 71
Concepts and Methodology 73
Database and Empirical Estimates 78
Summary ofConclusions and Policy Prescriptions 80
4 Evaluating Public Expenditures:
Does It Matter How They Are Financed? 83
by Richard M.Bird
The Orthodox Tradition 85
The Marginal Cost ofPublic Funds 92
Are Public Funds Always Costly? 93
Efficiency and Equity 96
The Wicksellian Connection 99
5 Guidelines for Public Debt Management 109
by the International Monetary Fund and World Bank Staff
What Is Public Debt Management and
Why Is It Important? 109
Purpose ofthe Guidelines for
Public Debt Management 111
Summary ofthe Debt Management Guidelines 113
Discussion ofthe Debt Management Guidelines 117
Contents vii
CHAPTER
6 Looking Beyond the Budget Deficit 151
by Homi Kharas and Deepak Mishra
Debt and Deficit:Some Simple Algebra 153
Size ofHidden Deficits 154
Sources ofHidden Deficits 158
Concluding Remarks 160
7 Addressing Contingent Liabilities and Fiscal Risk 163
by Hana Polackova Brixi
Current Risk Exposures:Examples from New EU
Member States 169
Public Risk in Private Infrastructure 171
Local Government Risk 175
Implications for Fiscal Management 179
Concluding Remarks 188
8 On Measuring the Net Worth of a Government 191
by Matthew Andrews and Anwar Shah
The Three Dimensions ofGovernment Value 193
Incentives Associated with Short-Run Evaluations and
Concern for Government Value 196
Choosing Tools That Measure and Report on Net Worth
in All Its Dimensions 198
Conclusion:Accounting and Reporting for Government
Net Value 204
9 On Getting the Giant to Kneel: Approaches to
a Change in the Bureaucratic Culture 211
by Anwar Shah
Introduction 211
Why the Road to Reforms Remains a Field ofDreams
in Developing Countries 212
The Genesis ofExperiences ofIndustrial Countries 216
Results-Oriented Management and Evaluation Chain 218
Implications ofROME for Civil Service Reform 219
viii Contents
Experience with ROME 221
Beyond ROME:Measuring Performance When There Is
No Bottom Line 224
Epilogue:ROME—A Road Map to Wrecks and Ruins or
to a Better Tomorrow? 225
CHAPTER
10 A Framework for Evaluating Institutions
of Accountability 229
by Mark Schacter
Why Institutions ofAccountability Matter 229
Horizontal versus Vertical Accountability 230
Analytical Framework for Evaluating Institutions of
Accountability—Working Model 232
Annex 10.A:Performance Indicators Related to Institutions
ofAccountability 246
Index 251