1. Innovations in Social Budget Work Bringing the Public Back into Public Finance Ronald U. Mendoza and Gabriel Vergara Policy Forum on Child Friendly Budgets for 2010 and Beyond: Toward Global Economic Recovery with a Human Face Jointly Organized by the United Nations Childrens Fund (UNICEF) and Fordham University, New York City 18 February 2010 1

2. 2 Outline of Presentation Why work upstream? Why focus on social budgeting? How does UNICEF help ensure stronger social budgets? What is the impact?

3. 3 One rationale behind upstream policy work is to try and address over-arching policy strategies and leverage more resources for children… Upstream policy work Broader Development Strategy Small projects and programs are ultimately undermined if broader policies and development strategies do not prioritize children… A key area of work focuses on the budget and public finance policy…

4. 4 SOCIAL POLICY AND ECONOMIC ANALYSIS UNIT (DPP-SPEA) Assumptions of Public Finance Theory vs. Reality ASSUMPTIONSREALITYIMPACT ON PUBLIC FINANCE Source: Adapted from Tanzi (2006). Central decisionmakingFragmented political power and control Uncoordinated bureaucracy Government agents prioritize public interest Corruption / CaptureReduced efficiency of public spending Full informationImperfect information / ideological bias possible Reduced efficiency of public spending and possible inequitable outcomes Long-term view and stability in policymaking environment Business cycles / aggregate shocks Lack of fiscal space to mount countercyclical policies

5. 5 Evidence of inefficiency in public spending Expenditure tracking in Uganda revealed that only 24 percent of the capitation grant from the central government actually reached schools in 1996. Expenditure tracking in Peru showed that in 2002 merely 29 percent of resources for its Vaso de Leche (Glass of milk) program reached the intended beneficiaries. Expenditure tracking in Rwanda in the late 1990s revealed a leakage of about 25 percent for the transfer from the central government to the regional health offices. Empirical analysis of over 90 developing countries by Rajkumar and Swaroop (2008) revealed evidence that the positive link between health spending and child health outcomes is strong only in countries with better governance.

6. 6 Evidence of inequity in budget allocations Benefit incidence studies commonly find evidence that public spending/programs are not necessarily pro-poor and often the main benefit incidence is on non-poor households (e.g. Coudouel, Dani and Paternostro, 2006; Rozada and Menendez, 2002; Gomez-Lobo and Contreras, 2003). Ravallion (2000) examined Argentinas budgets during economic upturns and downturns and found that not only did social spending decline the most during downturns -- that part of social spending that was most pro- poor suffered the highest cuts.

7. 7 Evidence of pro-cyclical public spending/budgets During the Asian crisis, the 1998 Thai public health and education budgets declined by 9 and 6 percent respectively. Indonesian public health expenditures fell by 7 percent during the first year of the Asian crisis, and another 12 percent the year after. Government health spending per capita in US dollar terms declined during the Argentine debt crisis from $399 in 1999 to $121 in 2002. During the Mexican Tequila crisis, the 4.9% fall in GDP per capita between 1994 and 1996 was mirrored by a 23.7% fall in targeted spending per poor person. During the present current crisis, Bosnia, Bulgaria, Lithuania, Mozambique, Nicaragua and Zambia are among the countries experiencing/anticipating cuts in some social sector allocations (UNICEF Crisis Recovery Database).

8. 8 PUBLIC FINANCE BRANCH COMMON AREAS OF SOCIAL BUDGET WORK INTERIM INDICATORS OF SUCCESS Efficiency Observatories and monitoring initiatives Scorecards and reports Expenditure tracking Capacity building workshops for governments Less leakage and more effective channelling of resources Stronger synergies in central- and local-government investments Capacity building workshops and other initiatives to strengthen citizen engagement Equity Reforms that ensure more transparent and accountable budgeting processes Stronger and more equitable investments Inclusion of marginalized groups in policy discussions and analyses Research and advocacy for child programs and policies Stabilization Research and advocacy for countercyclical social spending, investments and financial instruments Research and advocacy on child-sensitive social protection Development and financing of social protection systems Governments increasing social budgets as a response to crises/aggregate shocks

9. 9 Social Budget Work by Civil Society Groups in the Budget Cycle Budget preparation and formulation Budget allocation and sector analyses Costing (e.g. Marginal Budgeting for Bottlenecks) Gender sensitive budget analysis Engaging/supporting the planning and budget preparation process Examples: ISODECs Public Agenda, IDASAs Budget Briefs, Mauritania MBB, CCGDs Womens Enterprise Development Fund, UNICEF WCARs structural analyses Approval by legislature Advocacy/partnership with the Legislature (Parliament) on budget analysis, including capacity building Examples: IBPs Citizens Guide, UNIFEMs gender budget training manual, IDASAs budget process guides Execution and tracking Public Expenditure Tracking Survey (PETS) Expenditure Analysis Examples: Uganda PETS, MUHURI theater, Uganda Debt Network and the Poverty Action Fund Monitoring Committees Performance evaluation Impact assessments / analyses of expenditure in relation to social indicators Examples: IDASAs budget briefs, TGNPs budget reviews, CSCQBEs Education Budget Monitoring Study, Source: Deles, Mendoza and Vergara (2009).

10. 10 UNICEF Work in the Budget Cycle Budget preparation and formulation Budget allocation and sector analyses Costing (e.g. Marginal Budgeting for Bottlenecks) Gender sensitive budget analysis Engaging/supporting the planning and budget preparation process Examples: Azerbaijan, Brazil, China, Ecuador, Egypt, Ghana, Honduras, India, Indonesia, Jamaica, Kazakhstan, Kenya, Lao PDR, Madagascar, Mauritania, Mongolia, Morocco, Mozambique, Nepal, Pakistan, Philippines, Republic of Congo Approval by legislature Advocacy/partnership with the Legislature (Parliament) on budget analysis, including capacity building Examples: Azerbaijan, China, India, Lao PDR Execution and tracking Public Expenditure Tracking Survey (PETS) Expenditure Analysis Examples: South Africa, Madagascar Performance evaluation Impact assessments / analyses of expenditure in relation to social indicators Examples: Azerbaijan, Bolivia, China, Paraguay, Philippines, Uganda Source: Gore (2009).

11. 11 What is the impact of UNICEFs social budget work? Marginal Budgeting for Bottlenecks (MBB) Costing tool used by UNICEF and its partners in over 50 countries. MMB analysis helped support a 40 percent increase in Mauritanias health budget. Mali MBB analysis used to justify increased investments to help prevent maternal and child mortality. Budget Monitoring and Social Policy Observatories Collaborative efforts to monitor and disseminate information on budgets. Observatory of Fiscal Policy contributed to a quadrupling of the social budget of Ecuador since 1999. UNDP-UNICEF-UNFPA joint project to help monitor social expenditures helped double national allocations in Paraguay.

12. 12 Impact of Social Budget Work: Case of Uganda Grants to Students in Uganda (US$ per student), 1990-1999 Source: Kaufmann (2009).

13. 13 Selected References Conceição, Pedro and Ronald U. Mendoza. 2009. Anatomy of the Global Food Crisis. Third World Quarterly 30(6):1159-1182. Conceição, Pedro, Namsuk Kim, Ronald U. Mendoza and Yanchun Zhang. 2009. Human development in crisis: Insights from the literature, emerging accounts from the field, and the correlates of growth accelerations and decelerations. UNICEF-UNDP Working paper. New York. Deles, Paola, Ronald U. Mendoza and Gabriel Vergara. 2009. Social budgeting initiatives and innovations: Insights using a public finance lens. Working paper. New York. Gore, Radhika. 2009. A Review of UNICEFs Social Budgeting Initiatives. Working paper. New York. Hu, Bingjie and Ronald U. Mendoza. 2009. UNICEFs Social Budgeting Work: An Investment that Pays Dividends. Working paper. New York. Kaufmann, Daniel. 2009. On child rights, development and governance: Some evidence-based reflections. Presentation at UNICEF Conference, Is Governance Good Enough for Children Honoring 20 Years since the Convention on the Rights of the Child, New York, October 27, 2009. Mendoza, Ronald U. 2009. Aggregate shocks, poor households and children: Transmission channels and policy responses. Global Social Policy 9(1):55-78. Tanzi, Vito. 2006. Fiscal policy: When theory collides with reality. Center for European Policy Studies 246.