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

60 Salvatore Schiavo-Campo
Principles of Expenditure Policy Choices and of
Budget Coverage
Because the budget, as noted, should be the mirror of society’s choices, the
expenditure management mechanism should include strong links between
the policies that are decided by government and the budget that is intended
to implement them.
The Policy-Budget Link
For the link between resource allocation and policies to be a strong one, the
policy choices themselves must first meet certain basic criteria. Decisionmaking
authority belongs to the political leadership of the country. With
that authority, however, comes the responsibility to make sound decisions.
The main criteria of good decision making (loosely related to the components
of good governance) are the following:
Discipline. Policies should be consistent, without internal contradictions.
Realism. Policies should be affordable and implementable.
Stability. Frequent policy reversals should be avoided: a clear vision and sense
of direction for the medium term are necessary for good policy making.
Openness and clarity.Although the deliberations leading to budgetary policy
decisions must usually be confidential, political accountability requires that
the criteria and processes of decision making be explicit and public.
Selectivity. In developing countries, the capacity to make good policy
decisions is perhaps the scarcest resource of all. Because the focus ought
to be on important issues, an appropriate administrative mechanism is
needed to filter out minor matters and prevent wasting political leaders’
time and attention.
Communication. A badly understood policy cannot be implemented and
is unlikely to be properly reflected in the budget.
Minimum Rules of Budget Presentation and Classification
To successfully link revenues and expenditure allocations to government
policies, the budget must follow a number of practical rules that apply to
every program financed in whole or in part by public resources, whether
managed within the budget or separately:
Estimates of revenue and expenditures should be shown in the budget in
gross terms. Netting out these estimates would give a misleading impression