- Laura Wallace
- Published Date:
- January 1999
Quality and Composition of Government Spending
Moses Asaga began the discussion by detailing Ghana’s efforts to reform the budgetary system. The budget process is no longer a wish list of projects by ministries; projects must be justified and then prioritized—with the highest priority going to education, health, and infrastructure. Moreover, with a multiparty democracy, the entire process, from provisional estimates through the appropriation bill, is closely scrutinized.
Ibrahima Makanguilé of Mali suggested that Luca Barbone had left out one key factor behind the large discrepancies between budgetary outcomes and what was budgeted: as African countries became more democratic, social pressures also rose. With the education budget, for example, policymakers needed to make adjustments practically every month to respond to student demands. The education budget as a whole was huge, but if 30–40 percent was allocated to scholarships, then there was a problem.
Peter Freeman of the U.K. Department of International Development pointed to a promising development: aid was changing from a separate series of project inputs to a program of financial support directly related to the budget and sectoral priorities. This would, in turn, require changes in the way the IMF operated—some of which were suggested by the external ESAF evaluation. Freeman also noted that the budget issues that Sanjeev Gupta of the IMF had raised in his comments on Barbone’s presentation had traditionally been the responsibility of the World Bank. Now the Bank and the IMF would have to carve out anew how the development agenda should be shared, as the IMF’s role shifted to focus more on poverty reduction.
John Roberts of the European Commission noted that donors were now more willing to think of assistance in the form of general budget support rather than project support. They were unsure, however, what criteria should be applied, especially toward judging intrasectoral efficiency. Development indicators were one possibility, but broad indicators—such as those in health—might reflect a whole range of factors not controlled by the health sector budget. The answer might lie in recipient countries specifying narrow process improvements and objectives over a short time period.
Jan Willem Gunning of the University of Oxford, in response to Hirohisa Kohama’s question on what form of aid would help promote ownership—a key goal of Japan’s overseas development assistance—expressed skepticism that aid could be used as a carrot to alter policies. But that did not mean that donors should just sit back. The answer was to be selective. If a particular African government satisfied the criteria that Japan thought were important, then it should finance those governments. But it should do so on the basis of a broad assessment, not detailed micromanagement, and do it over the long term, not three-month monitoring. Did that mean donors should just ignore the plight of the poor living in a country that happened to be ruled by a bad government? No, there was still a case for aid, but not government-to-government aid.
Turning to Yukio Yoshimura’s question as to what donors could do to improve political processes in Africa, Gunning said he was afraid that very little could be done. Yes, there were some counterexamples where donors had become angry enough to effect change. It was only temporary, however, and could not be sustained. In the end, it was not the donors’ role. Perhaps an unhelpful message, he said, but an implication of ownership, nonetheless. “You cannot change political processes in sovereign countries, and trying to do so creates a mess.”
In response to another question by Kohama on what was the optimal mix of private and public sources for infrastructure investment, Takuma Hatano of the Export-Import Bank of Japan drew on his experience in Asia. In the case of the power sector, typically transmission lines were financed by official overseas development assistance, and the power generation projects by the private sector. This made sense because the Asian private infrastructure projects tended to be part of an effort to privatize the sector as a whole. In the end, the national grid would be owned by the public sector (or managed by a public institution) and power generation and distribution would be in the hands of private investors.
Luca Barbone of the World Bank ended the discussion by noting that the movement away from project finance toward budgetary finance was promising, but it would necessitate a change in the culture of donors, as well as the World Bank.