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

The Budget and Its Coverage 57
represents. Whatever revenues and expenditures are included in the budget,
it is important to review them and present them together. Government policy
objectives can be achieved through tax policy, through public expenditure
policy, or through a combination of the two. Therefore, direct comparisons
are needed of the costs and benefits of alternative revenue and expenditure
packages. Moreover, a sound program of public expenditure requires as a
starting point a realistic estimate of revenue. This is because the choices
among different expenditure proposals, choices that are at the center of the
budgeting process, cannot be made without a clear idea of how much money
is likely to be available. An expenditure program that does not conform to a
realistic limit on resources available is a wish list, not a program, and the
budget that contains it is only a bulky paper document. That being said, this
chapter focuses on the expenditure side.
The Annuality of the Budget
Obviously, the legislature’s approval to collect revenue and spend it cannot
be given on a weekly or monthly basis, or for an indefinite period of time. In
almost all countries, the budget covers 12 months and both the government’s
revenue-collecting authority and its spending authorization expire at
the end of the fiscal year. (This fiscal, or financial, year is usually but not
always the calendar year.) The annuality rule is justified both by the need for
legislative control of the executive and—especially in developing countries—by
fluid economic circumstances, which would make budgeting for
two or more years totally impractical. The annual nature of the budget is
often confused with the multiyear periodicity of the medium-term expenditure
frameworks (MTEFs) used in many countries to frame the annual
budget process. It is important to keep in mind the distinction between the
legislative authorization to spend, which covers only one fiscal year, and the
multiyear forecasts and intentions of the MTEF. There is no such thing as a
multiyear budget anywhere in the developing world.
Some Definitions
To understand the following discussion, it is important to understand the
meanings of budget and government.
The budget
The word “budget” comes from budjet, a Middle English word for the king’s
purse. The meaning of the term has, of course, changed since the days when a