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Why should Governments Aim for “Budget Credibility”?


February 24, 2016

I’ve always thought “budget credibility” sounded a bit like code for something else.  It’s been changed to “budget reliability” in the latest incarnation of the Public Expenditure and Financial Accountability Framework. Maybe that’s because “credibility” sounded too judgemental. The goal for any budget plan is that it’s based on good information and, outside of “black swan” events, the budget is executed based on that plan.

Effective multiple-year planning, in or the “medium term”, is considered a good practice in Public Financial Management. Yet, it’s our experience improvements in budget preparation are later-stage reforms. This ought to be of particular concern to governments attempting important public investments in infrastructure, education or health. It does a country no good to have half-built bridges or hospitals without doctors, or schools without textbooks.

To be fair, the notion of performance budgeting and multiple-year analysis is a recent phenomenon among OECD countries. Almost all governments complete some kind of macroeconomic analysis to determine a “spending envelop.” Few governments complete that process in ministries, departments and agencies.

Improving budget planning for sustainable economic growth is one of the topics to be covered during the 10th annual FreeBalance International Steering Committee conference from March 7-10. Key areas for discussion include:

  • Integration of all planning mechanisms like salary planning and debt management into the planning process
  • Use of “what if” scenarios to anticipate the financial reaction to “black swan” events
  • Government human capacity building to enable more effective analysis and planning, including capability maturity models
  • Automation of significant parts of the planning process to focus managers and ministers on what’s most important
  • Methods of articulating mandates, objectives and performance criteria that can be used across all government tiers and for civil service human resources management
  • More effective dashboards and reporting to facilitate decision-making
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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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