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

294 Daniel Tommasi
appropriations. In the 1990s and 2000s, several countries implemented cash
budget systems to ensure stability of the macroeconomic and fiscal systems,
but in many cases, this procedure led to increased arrears (see box 9.3).
The anglophone systems provide managers with more flexibility
in budget management, and the budget execution system is less cumbersome
than the francophone system. Decentralization of powers is appropriate,
BOX 9.3
Cash Budgeting
In the 1990s and early 2000s, several countries adopted cash budgeting
systems. Although the specifics of these arrangements differ from country to
country, they have two general characteristics:
First, monitoring of cash disbursements is the main expenditure control
mechanism rather than monitoring of commitments entered into by line
ministries.
Second, provisions exist for planned cash disbursements to be reviewed at
regular intervals to allow for swift fiscal policy adjustments in response to
unexpected shortfalls in tax revenue or donor finance.
When strictly implemented, cash budgeting is a very effective method
of eliminating a fiscal deficit and maintaining macroeconomic stability.
However, when budget releases are not predictable, public sector managers
cannot be held to account for the performance of their programs (Stasavage
and Moyo 1999). This shortcoming undermines the budget-policy link.
A review of Zambia’s experience during the past decade by Dinh, Adugna,
and Myers (2002) concludes that after some initial success in reducing hyperinflation,
the cash budget has largely failed to keep inflation at low levels,
has created a false sense of fiscal security, and has distracted policy makers
from addressing the fundamental issue of fiscal discipline. More important,
it has had a deeply pernicious effect on the quality of service delivery to
the poor. Features inherent in the cash budgeting system facilitated a substantial
redirection of resources away from the intended targets, such as
agencies and ministries that provide social and economic services. The cash
budget also eliminated the predictability of cash releases, making effective
planning by line ministries difficult.
Analyzing Uganda’s budget management, Williamson (2003: 8) noted, “Budget
discipline in Uganda has been relatively good . . . ; however disbursements
against budget can vary significantly between sectors and agencies within those
sectors. . . . Institutions that are neither within [the Poverty Action Fund] nor
politically powerful are exposed to greater resource cuts and irregular disbursements.”
Williamson (2003: 32) continues, “This undermines the ability of
and incentive for managers to plan for activities in advance, as they do not know
when or whether they will actually be able to carry the activities out.”
Source: Author’s compilation.