Public Sector Governance and Accountability Series: Budgeting and ...

236 Salvatore Schiavo-Campo
confine the politics to the start, when the key policy decisions are made, and
to the end of the process, when coherent technical proposals have been prepared
and are then submitted to the political leadership for its consideration
and disposition. In the middle, no political interference should occur, precisely
to allow the administration to prepare a budget consistent with the policy
choices. Paradoxically, such political interference in the midst of the
budget preparation process would weaken the political relevance of the
budget, not improve it.
Three Prerequisites for Budget Preparation
Three major conditions are needed for the desired outcome of a budget that
is both technically sound and faithful to political directions: taking a mediumterm
perspective, making early decisions, and setting a hard constraint.
The Need for a Medium-Term Perspective
To be an effective instrument of financial management, the government
budget must in the first place be credible. To be credible, the expenditure
program must be affordable. Therefore, budget preparation must take as its
starting point a good estimate of revenue—although the revenue estimate
may change before the budget is finalized in order to produce a consistent
revenue-expenditure package. Thus, fiscal marksmanship—that is, the accuracy
of revenue forecasts as manifested in closeness of actual revenues to
those estimated—is the linchpin of the budget preparation system.
To meet the government’s objectives, the budgeting system must provide
a strong link between government policies and the allocation of resources
through the budget. (Chapter 2 listed the characteristics of good policy decisions.)
Because most of these policies cannot be implemented in the short
term, the process of preparing the annual budget should take place within a
fiscal perspective several years into the future. 1 The future is inherently
uncertain, and the more so the longer the future period considered: the
general tradeoff is between policy relevance and certainty. At one extreme,
budgeting for just next month would suffer the least uncertainty but also
would be almost irrelevant as an instrument of policy. At the other extreme,
budgeting for a period of 10 or more years would provide a broad context
but carry much greater uncertainty as well. 2 In practice, multiyear means
medium term—that is, a perspective covering no more than four years
beyond the budget year. In Africa, given the more fluid situation of developing
countries, a perspective covering two years beyond the coming