1. CEPAL, Santiago, 1 Febrero 2007 1 CEPAL XIX SEMINARIO REGIONAL DE POLÍTICA FISCAL Santiago de Chile, 2007 PERFORMANCE BUDGETING Marc Robinson Fiscal Affairs Department, IMF

2. CEPAL, Santiago, 1 Febrero 2007 2 Resurgence of Perf. Budgeting l Program budgeting systems –E.g. France, Canada –Many developing and transition countries l “Advanced” models –Target-setting, “grading” of programs; formula funding, “purchaser-provider” l Expenditure efficiency goals l Relevance to aggregate fiscal outcomes l FAD work –What works, when, and for what countries?

3. CEPAL, Santiago, 1 Febrero 2007 3 Widespread Unrealism l In many of countries we advise l About implementation time –2-3 years in total? –Much more time taken in advanced countries l Introduction despite –Poor spending discipline –Lack of political interest in expenditure efficiency l Often with advanced features

4. CEPAL, Santiago, 1 Febrero 2007 4 Target Setting? l UK PSA system: a success story –Linked to budget process l Requirements: –Political commitment –Well-developed performance measurement –Understand resources/results relationship l Elsewhere usually fails because –Targets arbitrary or completely unrealistic –Unrelated to resourcing –Little real commitment to them l Lesson: most countries should not do it

5. CEPAL, Santiago, 1 Febrero 2007 5 Best form of PB for most countries l Program budgeting –Emphasis on prioritization –Budget classification by objective –Clarity of intervention logic –Performance information l Coupled with Budget Process Reform –Classification & PIs not enough l Explicit prioritization processes: –UK Spending Review process –Australian Expenditure Review Committee –Chilean evaluation-driven process

6. CEPAL, Santiago, 1 Febrero 2007 6 Planning & Prioritization l National Plans as the right tool? –Widespread view, including in Latin America –Wrong, and not practice in advanced nations l What’s wrong with planning? –Too many “priorities” –No indication of low priorities/ cuts »Politically unrealistic to expect –Unrelated to resources available –Paperwork exercises l Ignores lessons of central planning failure –Planning too complex

7. CEPAL, Santiago, 1 Febrero 2007 7 Good Prioritization Processes l Don’t try to plan everything –Gradually improve allocation of budget –Through continuous spending review –As part of budget process l Political leaders closely involved –Manner depends on political system –Some political systems make very difficult l Finance ministry role –Not by a separate agency –Powerful finance ministry important –Skills, capacity of finance ministry