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

266 Salvatore Schiavo-Campo
noted, the budget preparation process needs to be organized along strict
rules so that the budget can be prepared in a timely manner while avoiding
excessive pressure from particular interests and lobbies. Participation, like
accountability, is a relative, not absolute, concept.
Preparing expenditure ceilings
In the preparation of sectoral expenditure ceilings, the following elements
must be taken into account:
The macroeconomic objectives and fiscal targets
The results of the review of ongoing programs for the sector
The impact of ongoing expenditure programs on the next budget and
their degree of rigidity (notably expenditures related to continuing commitments,
such as entitlements)
The government’s strategy concerning possible shifts in the intersectoral
distribution of expenditure and the amount of resources that
could be allocated to new policies as well as service demand projections,
where appropriate.
Preparing these initial ceilings is largely an incremental-decremental
exercise. Budgets are never prepared from scratch. Debt servicing; multiyear
commitments for investment, pensions, and other entitlements; rigidities in
civil service regulations; and the simple reality that government cannot stop
at once all funding for its schools, health centers, or the army limit possible
annual shifts to perhaps 5 to 10 percent of total expenditures. In theory, this
percentage could be higher in developing countries than in industrial countries
(where the share of entitlements is higher). But in practice, because of
earlier overcommitments, the room to maneuver is often even lower in
developing countries. If one excludes emergency or crisis situations, the government
should, when preparing the budget, focus on new policies, savings
on questionable programs, and means of increasing the efficiency of other
ongoing programs. Clearly, any significant policy shift requires a perspective
longer than one year and some advance programming, in whatever form
that is appropriate and feasible in the specific country.
Efficiency dividends
In recent years, Australia demanded from each spending unit efficiency
dividends—that is, required savings in their ongoing activities (about
1.5 percent annually). On the surface, this practice may look like the typical