It has become a part of the conventional wisdom of development policy that poverty reduction is one of the main development objectives. What are the key factors influencing the struggle to re-orient public expenditure towards the interests of the poor? This working paper from the Overseas Development Institute synthesises the key findings from case studies in five countries (Ghana, Malawi, Mozambique, Tanzania and Uganda), each of which examined how public expenditure management has been linked to poverty reduction policy goals.
Each of the case study countries experienced major transformations over the course of the 1990s. At the beginning of the 1990s, public expenditure in each of the five countries could be characterised as both regressive and inefficient, with government providing services of poor quality to a small proportion of the population, and the non-poor benefiting disproportionately. Budget systems at the beginning of the 1990s were essentially incremental in nature, based on across-the-board increases in budget allocations, plus investments in new activities largely driven by donor project aid. Governments were involved in more activities than they could adequately operate, maintain and manage.
Poverty reduction is impossible without reforming the whole system of public finances. Efficient and effective public expenditure management is an essential precondition for government to be able to do anything significant for poverty reduction. Other conclusions from the study are that:
- Reasonable progress in reducing poverty requires a political leadership committed to this as a goal
- Many of the problems of ineffective budget management that undermine the ability to re-orient spending towards the poor, stem from political reluctance to recognise the need for tough choices and for budget discipline
- The commitment to poverty reduction in all the case study countries is fragile
- The Poverty Reduction Strategy Paper (PRSP) process helps to reinforce the position of reformers wishing to enhance and preserve allocations important to the poor
- The sharing of information and a pro-active approach to participation helps to improve the effectiveness of poverty policies
- A good analysis of poverty issues positively influences poverty policies.
There is a pressing need to fundamentally change the pattern of public expenditure and the process by which this is determined, and to combine this with reforms which would improve the effectiveness of government spending in the sphere of poverty reduction. The policy implications from the paper are that:
- The government has to integrate budgeting and planning functions in order to prioritise public expenditure needs
- The government must ensure that actual expenditures reflect budget priorities
- The government must improve the system of public administration including the management of scarce human resources, control of corruption, and the development of responsible administrative structures
- Civil society organisations have to participate in decision-making and become so embedded that they become difficult to remove.
