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

402 Salvatore Schiavo-Campo
allocation process and for improved transparency and governance of
extrabudgetary funds that will continue to exist.
Develop special management arrangements for some expenditure
programs (for example, user chargers and service delivery agencies) that
can improve their operational efficiency without weakening expenditure
control and accountability to the legislature.
Strengthen line-item cash budgeting and expenditure control while
improving flexibility by (a) reducing an excessive number of line items, (b)
providing greater discretion for transfers between items, or (c) both.
Set up a classification of expenditure by activity and program, to allow the
definition of the right performance indicators at an appropriate level,
although without introducing formal program or performance budgeting
systems. This classification can and should be selective, by focusing on the
definition of programs of major economic and social significance, and
should complement—rather than replace—the line-item classification.
Examine the various possibilities of strengthening the performance
orientation of the budget system short of abandoning cash-based line-item
budgeting—for example, by identifying expenditure programs of key
economic or social interest and systematically reviewing results in the
context of annual budget discussions.
Multiyear expenditure frameworks
To strengthen the essential link between policy and the budget, and because the
discretionary expenditure margin on a year-to-year basis is typically very small,
the annual budget preparation should systematically be framed by a multiyear
perspective. This perspective requires, as basic priorities, the following:
A set of medium-term macroeconomic projections, even if at a highly aggregated
level, showing the interrelationships among the balance of payments,
the fiscal accounts, real sector developments, and the monetary accounts
Within the above, a medium-term fiscal framework consistent with fiscal
sustainability (that is, stabilizing the ratio of debt to gross domestic product
while providing adequate resources for priority economic and social
expenditures) and with realistic revenue forecasts
Aggregate expenditure estimates, based on realistic estimates by functional
category and broad economic costs of major programs.
Subsequently, the expenditure projections can be gradually replaced by
genuine multiyear expenditure programs consistent with the macroeconomic