how a citizens guide tothe budget can strengthen fiscal transparency and increase public...

8/6/2019 How a Citizens Guide Tothe Budget Can Strengthen Fiscal Transparency and Increase Public Participation May 2011

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How a Citizens Guide to the Budget

can strengthen fiscal transparency andincrease public participation

Jon Shields

International Monetary Fund

ICGFM Conference Florida May 18, 2011


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Outline

What is special about a CGB?

The context for a CGB: Fiscal transparency

Distinguishing characteristics of a CGB:

Information content

Style, format and quality

Dissemination


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What is a CGB?

About 30 countries in recent years have produced atleast one CGB, of varying contents and quality.

Typically:

Self-contained document written in clear and non-technical language.

Published by the Finance Ministry.

Produced at same time as budget is presented tolegislature.

Explains budget proposals and economic context.


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Why do governments publish CGBs?

Ensure budget message is understood; broaden

informed electorate.

Explain countries economic problems.

Enhance accountability.

Counter hostile assessments.

Increase buy-in for unpopular policies.


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What do CGBs add?

Accessibility.

Snapshot of fiscal position and

decisions.

Supplement to technical informationrequired for legislatures.

Insight into specific economic,spending or revenue decisions.


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Timing of a CGB: the annual budgetcycle

Critical point is when budget is presented to

legislature.

Allows public to participate in budget debate.

Also - follow-up if budget is greatly amended. Also - outturns should be monitored and

compared.

Other citizens guides can cover :

Pre-Budget framework

Final Budget

Outturns/end-of-year financial statements


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Context for a CGB fiscal transparency

A CGB is one instrument to help assure fiscal transparency, viz.:

Being open to the public about the structure and functionsof government, fiscal policy intentions, and public sectoraccounts and projections (Kopits and Craig).

Public right to know.

Promotes accountability; market discipline; lower corruption; goodinstitutions; time-consistent behavior and sustainablepolicy; macro and micro efficiency; trust; fairness.

Fosters better governance, internal decision-making, reform in publicfinancial management, public expenditure, taxadministration, and tax policy, macro-fiscal.

Strengthens access to international financial markets.


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IMF Code of Good Practices in Fiscal

Transparency Four Pillars

1. Clarity of roles and responsibilities: Structure andfunctions of government, responsibilities withingovernment, relations between government and the rest ofthe economy

2. Open budget processes: Budget preparation, execution,and monitoring; timetable for legislature; realism ofestimates and medium-term framework; fiscalsustainability.

3. Public availability of information: Specification of the

coverage, detail, and timing of fiscal information to beprovided to the public.

4. Assurance of integrity: Quality of fiscal data, internaloversight, and external scrutiny.


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FT Code: (1) Clarity of Roles and

Responsibilities:

1.1 Scope of government.The government sectorshould be distinguished from the rest of the publicsector and from the rest of the economy, and policyand management roles within the public sector

should be clear and publicly disclosed.

Show all ramifications of central government;QFAs, EBFs, local government relations

1.2 Framework for fiscal management.Thereshould be a clear and open legal, regulatory, andadministrative framework for fiscal management.


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FT Code: (2) Open Budget Preparation,Execution, Monitoring and Reporting

2.1 Predictable and technically sound budgetpreparation. Budget preparation should follow anestablished timetable and be guided by well-defined macroeconomic and fiscal policy objectives.

Realistic annual budget set in comprehensiveeconomic policy framework, with measuresand sensitivities assessed.

2.2 Clear procedures.There should be clearprocedures for budget execution, monitoring, andreporting.


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FT Code: (3) Public Availability ofInformation

3.1 Comprehensive information.The public should beprovided with comprehensive information on past, current,and projected fiscal activity and on major fiscal risks.

Full disclosure, as for legislature, coverage, comparability,

significance, long-term outlook.

3.2 Relevance. Fiscal information should be presented in a waythat facilitates policy analysis and promotes accountability.

Citizens Guide, minimum aggregate data requirements,

results

3.3. Timeliness. A commitment should be made to the timelypublication of fiscal information.


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FT Code: (4) Assurances ofIntegrity

4.1 Quality. Fiscal data should meetaccepted data quality standards.

4.2 Oversight. Fiscal activities should besubject to effective internal oversight andsafeguards.

4.3 Auditing. Fiscal information shouldbe externally scrutinized.


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A Citizens Guide Overall Contents

Common core of information on the

budget proposals and economic context.

Relative emphasis of the topics, and the

level of detail, should reflect country

circumstances and capacity,particularly:

pre-existing general level of understanding

level and quality of media coverage


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A Citizens Guide Why the budgetmatters

Explain role of budget in public financial

management (and requirements in constitution

or budget law).

Describe the budget process, including theroles of the executive branch, in preparing the

budget and of the legislature in authorising

government taxation, borrowing, and

expenditure.

May be supplemented by a Citizens Manual

on Budget Process.


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A Citizens Guide What the futureholds: the economic and fiscal outlook

Prospects for the economy (economic

context, resource availability)

At least for budget year

Preferably for medium-term

Medium-term projections of the fiscal

aggregates (revenues, spending, the

deficit)

Use simple tables and charts.


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A Citizens Guide How much of the

governments activities does the budget

cover? Explain different types of accounts or funds, and

what agencies are inside or outside the budget.

Include information on the governments extra-budgetary activities, and their impact on

consolidated government accounts.

Summarize and explain quasi-fiscal activities.

Show transfers between different levels of

government and any formulae used.


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A Citizens Guide What thegovernment intends to spend

Where possible:

by function (or sector),

by administrative agency,

by economic category (e.g. wages andsalaries, interest, capital expenditures).

Where applicable:

by major programme.

Provide references and links to more detailedspending information.


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A Citizens Guide Where the moneywill come from

Breakdown of the main revenue sources,

separately identifying domestic revenues (by

tax) and external grants.

Intended financing sources in the event of aprojected deficit (use of domestic assets,

domestic markets, international markets, or

concessional assistance)

Any implications for economic stability or fiscal

sustainability.


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A Citizens Guide Do the numbers addup?

Demonstrate realism of the budgeted levels ofrevenues, expenditures and the fiscal balanceby comparing with recent trends

Evaluate expected out-turn for the current year

in comparison to its forecast in the previousbudget.

List key fiscal risks:

Impacts of deviations in key economic variables fromprojections

Other specific fiscal risks (e.g. loan guarantees beingcalled)

Explain how government will meet unexpected spendingneeds


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A Citizens Guide Proposed budgetmeasures

Explain why new measures are being

introduced.

Assess expected impact of new measures onrevenues and spending, and how they will

contribute to the governments priorities.

Discuss potential impact on take-home pay fordifferent income levels, income support and

service provision.


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A Citizens Guide How the budget willhelp the government meet its objectives

Describe the governments medium-term economicand social objectives.

Identify Millennium Development Goals, whererelevant.

Explain role of fiscal policy strategy and anynumerical targets.

Show contribution of budget to fiscal strategy andbroader objectives.

Explore sustainability of the public finances andpublic debt.

Describe service delivery objectives and social impactsof spending programmes, including availableinformation on performance and evaluations.


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Suggested chapter outline of a citizens

guide to the budget

Introduction: Place of the annual budget in public financelegislation; description of the coverage of the budget and the budgetprocess, including opportunities for public participation.

The Economic Outlook and Government Objectives:Macroeconomic forecasts, assumptions and sensitivity analysis;national development strategy; medium-term fiscal policy objectives.

The Governments Accounts and Budget Prospects: Aggregaterevenues, expenditures, and the fiscal balance over medium-term;broad allocation of spending and sources of revenue, comparativefigures for previous year; public debt, fiscal risks, and thesustainability of current policies and trends.

New Measures: Summary of the main budget initiatives; estimates

of their fiscal effect and impacts on key policy groups; contributionsto meeting the governments stated policy objectives.

Improving Delivery of Services: A brief indication of what thegovernment is doing to improve service delivery


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A Citizens Guide Style and Format

Stand-alone document

Ideally, produced by Ministry of Finance

Treat as technical document - avoid politicaloverlay

More than a budget speech

More than an executive summary

Limit jargon

Use laymans terms

Highlight simple and attractive charts anddiagrams

Keep short but provide lots of links


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A Citizens Guide Content and Quality

Focus on substantive budget issues.

Avoid extraneous or irrelevant material.

Only include data that is accurate, reliable and

credible.

Explain uncertainties.


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A Citizens Guide Dissemination

Actively disseminate - arrange launches,seek NGO participation, publicize availability,generate media events, go to villages.

Make available in hard copy and electronicform.

Produce in alternative formats:

Video clips

Radio podcasts,

Posters

Pamphlets

Use multiple languages where relevant.


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Thank you

[email protected]

Main reference:

Producing a Citizens Guide to the Budget: Why, What and How

by

Murray Petrie and Jon Shields

OECD Journal on Budgeting, Volume 2010/2

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