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

Strengthening Public Expenditure Management in Africa 413
have to meet, and obliviousness of the red tape and transaction costs
imposed on the local public administration. The previous recommendations
of priority reforms and their sequencing, stemming from the international
experience in developing countries, are partly grounded on the imperative
to consider local institutional and administrative realities.
What Is Capacity?
Capacity building is among the most misused and least understood terms in
the economic development literature and is too often narrowly constructed
as simply training. 12 Undertaken in isolation, however, training has been a
recipe for waste of resources on a vast scale. A clarification is needed.
To begin with, capacity is inherently relative—mainly in terms of the complexity
of the tasks the system is asked to perform. Regrettably, experience over
the past 50 years shows a troublesome supply-driven dynamic at work,
whereby external technical assistance and international consultants have often
pushed complex new budgeting practices onto a reasonably well-functioning
system and thus created capacity constraints where none may have existed. In
turn, these “capacity limitations”are then used to justify the need for continuing
assistance. The perverse outcome is that the creation of local capacity is
preempted by the expatriate assistance, rather than facilitated by it. For this
reason, the IMF recommends an agreement with the government on an exit
strategy for external technical assistance (Diamond and others 2006: 12). 13
Although institutional innovation and progress must stretch local capacity to
some extent, they cannot get too far ahead of it, on penalty of failure. Also, as
and when budgetary innovations do require additional capacity, assistance to
help build it must be a core ingredient of the innovation design itself.
The components of an entity’s capacity go well beyond employee skills
and include the institutions—that is, the rules and incentives (both formal
and informal) governing the behavior of individuals in that entity; the
organization that enforces or implements those rules (institutions and
organizations are often confused, and often with confusing results); the
information needed within and without the organization; and finally, the
stock and quality of resources in the organization, including human capital.
Thus, capacity building should comprise activities to support, in sequence,
the following:
Institutional development. Improvements in the mandate, incentives, and
the other basic rules of the game will translate into a decrease in transaction
costs. In African countries, where habits of interministerial cooperation
are not well rooted, a top institutional development priority is to establish