Budgeting for results requires strong political will

Pakistan’s budgetary process continues to be predominantly on conventional lines


Mehdi Hassan Khan June 29, 2020
PHOTO: REUTERS

KARACHI:

Result-based budgeting, an impor- tant aspect of fiscal administration, is premised on the notion that it is not enough that governments just make budgetary allocations to pol- icy areas, but it is also essential that they strive to efficiently achieve the policy outcomes.

In advanced economies char- acterised by an efficient public expenditure management sys- tem, the budget-making process essentially starts with a few very important questions.

These include what results are to be achieved in the areas of spend- ing reflected in the budget docu- ment? What is the value of the public money being spent? What standards of service delivery are expected by users of public services?

When these questions, which provide results in exchange for budgetary allocations, are given due consideration in the budget- making process, it is termed “bud- geting for results”.

Unlike the traditional incremental budgeting, the focus of budgetary control in result-based budgeting shifts from input to output of the budget and from what the govern- ment departments are buying to what they are producing.

Therefore, the result-based bud- geting is an “output-class” budget ie all the items in the budget document are reflected in terms of ob- jectives, programmes, purposes and activities, which are to be financed during a fiscal year, and not in terms of inputs, which are to be consumed for achieving such objec- tives, programmes and activities.

Moreover, the budget controllers, in result-based budgeting, are in- terested in “what” aspect of the performance of spending agencies rather than the “how” aspect ie the output-driven budgeting also gives complete freedom to managers of the spending agencies to decide on the input mix.

Pakistan, in a bid to make its bud- getary process result-based, intro- duced the Medium-Term Budgetary Framework (MTBF) with the sup- port of UK-based Department for International Development (DFID) in 2003 and claims to be following the same budgetary framework to date for its annual budget-making.

In the legislative framework, Section 5 of the Fiscal Responsibility and Debt Limitation Act 2005 calls for the MTBF in Pakistan. Theoretically, the MTBF attempts to integrate policy-making, planning and budgeting in a medium-term framework with the aim of achiev- ing macroeconomic stability and fiscal discipline and this framework is a good fit into the output-class budget paradigm.

However, the extent to which Pakistan has been able to institu- tionalise the MTBF is far from sat- isfactory. In practice, Pakistan’s budgetary process continues to be predominantly on conven- tional lines. Contrary to dictates of the MTBF, the Annual Budget Statement of the federal govern- ment for fiscal year 2020-21 does not entail budget estimates for three years on a rolling basis. Similarly, the public sector’s performance management, which is an integral part of the MTBF, is glaringly miss- ing in the budget-making process.

The potential challenge to Pakistan in switching completely to the MTBF largely stems from the lack of institutional framework for informational requirements, which is essentially involved in the implementation of MTBF.

A key drawback associated with the traditional input-based bud- geting is that it pays no heed to certain critical aspects of public administration such as operational efficiency, performance account- ability, etc. That is why several developed economies have been mastering the output-based bud- geting and that too since long.

For example, the government of United Kingdom published performance targets, which were central to its management reform initiatives undertaken in the late 20th century.

The “Next Step” initiative intro- duced in 1988 and the “Citizen’s Charter” launched in 1991 were so successfully administered by the Conservative government of the UK that those policies were con- tinued by the Labour government, when elected in 1997.

In the “Next Step” programme, the service delivery was devolved from the UK’s central government to 133 independent service agen- cies, which were assigned specific performance indicators in the form of public sector agreements, which were monitored by the central government.

The “Citizen’s Charter” was an attempt to improve the quality of public services by publishing the standards which users of public services could expect from the pub- lic service agencies and it entitled the public to seek explanation if the standards of services were not met. Thus, it introduced the concept of public accountability of govern- ment departments.

Needless to mention that the challenges to a sound result-based budgeting process, particularly for a country like Pakistan with a huge informal market and public sector, are massive. A successful implementation of budgeting for results requires comprehensive in- stitutional arrangements coupled with a strong political will.

Nevertheless, the existing MTBF infrastructure in Pakistan, which is in its formative phase, can serve as a fairly strong base for promoting result-based budgeting.

It is high time, when public sec- tor reforms are already on the cards, that key performance indicators are designed, negotiated and enforced across all government departments.

It is because of the fact that without having the standards of performance specified, the public departments would continue to spend the allocated funds, in accor- dance with the approved budgetary rules and procedures, but without achieving optimum results.

THE WRITER IS A CHEVENING SCHOLAR AND HAS GRADUATED FROM THE UNIVERSITY OF BIRMINGHAM, UK IN PUBLIC ADMINISTRATION


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