Budget institutions in G-20 economies…

A nice paper from IMF econs on a topic which is covered very little despite its importance.

It says:

Budget institutions are broadly defined as processes, procedures, systems, legal frameworks and organizational entities which contribute to the budget process. The set of 12 budget institutions included in the analysis are: Fiscal Reporting, Macro-Fiscal Forecasting, Fiscal Risk Management, Independent Fiscal Agencies, Fiscal Objectives and Rules, Medium-term Budget Frameworks, Performance Budgeting, Intergovernmental Arrangements, Budget Unity, Top-Down Budgeting, Parliamentary Approval, and Budget Execution.

The report shows the progress made by G-20 economies on budgeting front.

The paper’s key findings include:

• That budget institutions have been strengthening across the G-20 since 2010 but that reforms have been most prevalent among advanced countries, especially those in Europe. This is creating a growing gap in institutional strength between advanced and emerging G-20 countries. Particular improvements have been seen in the areas of independent fiscal agencies, fiscal objectives, and MTBFs especially in advanced countries, but emerging markets have also led the way in some areas, including strengthening fiscal risk management and performance budgeting.

• That G-20 countries with stronger budget institutions overall have tended to plan and deliver more fiscal adjustment. Specifically, countries with comprehensive fiscal reporting, forecasting, and risk disclosure seemed to better understand their post-crisis fiscal position and prospects. Those with more credible medium-term frameworks, performance budgeting systems, and intergovernmental fiscal arrangements were quicker to announce adjustment plans and better at protecting public investment. Countries with more unified and disciplined budget processes more effectively implemented plans.

• That despite recent progress, significant weaknesses remain in budget institutions across G-20 countries and at all phases of the adjustment cycle. Further reform will be a critical element in both supporting ongoing fiscal adjustment in advanced countries and helping emerging markets to weather any fiscal storms on the horizon. Specifically, many G-20 countries still do not have a complete and reliable picture of their fiscal position and prospects. In addition, while fiscal adjustment plans are increasingly underpinned by comprehensive medium-term fiscal and budgetary frameworks, these need to be supported by mechanisms which combine multi-year discipline with the flexibility to respond to shocks. Finally, while procedures for preparing and executing budgets are relatively strong, more can be done to improve budget coverage, engage legislatures, and limit the scope for budget overruns.

However, one is not really happy reading such papers. They push these institutions in a narrow straight-jacket and compares across common indicators. Instead, such papers should show how these budget instis differ?

Some policymakers in the report did suggest to take country specific factors into account and look at their budget systems. For instance, India has got this unique (is it unique?) pattern of dividing spending across plan/non-plan and revenue/capital. How do other countries report these numbers?

Differences across these budget institutions make for a much interesting reading and a preview of how things actually work. Nonetheless, atleast there is some research on the fiscal side of story..

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: