The Covid-19 Pandemic Laid Bare Nigeria’s Budget Challenges

The Covid-19 Pandemic Laid Bare Nigeria’s Budget Challenges

 

His Excellency Muhammadu Buhari presenting the 2021 budget to the National Assembly. Wikimedia Commons
His Excellency Muhammadu Buhari presenting the 2021 budget to the National Assembly. Wikimedia Commons

 

By Abel Akeni, Vahyala Kwaga, and Iniobong Usen, BudgIT, Nigeria

 

Every year, anticipation accompanies the Federal Government’s annual budget presentation to Nigeria’s National Assembly. The budget outlines the government’s promises and spending plans to improve citizens’ quality of life. There is much to be done. With a Human Development Index score of 0.539 in 2019, Nigeria is positioned in the low human development category, ranking 161 out of 189 countries. According to Nigeria’s National Development Plan (2021-2025), universal health coverage is only 5%, life expectancy is 53.4 years, about 10.5m children do not attend school, and 61% of Nigerians do not have access to basic sanitation services. In addition, an estimated 88.4m people live in extreme poverty.

 

In the 2021 budget, proposed as the country began to recover from economic shocks related to the COVID-19 pandemic, the Federal Government promised to invest N13.6trn in the “Budget of Economic Recovery”. This built on the N10.8trn investment promised in 2020 in the “Budget of Economic Resilience”, which included a N500bn spending plan for COVID-19 interventions.

 

The budget preparation and presentation is an annual ritual required by Nigeria’s constitution. However, to what extent do the appropriated funds positively impact the life of the average Nigerian? Have the successive annual budgets improved service delivery in critical social sectors like health, education, and WASH (water, sanitation, and hygiene)?

 

It isn’t all gloomy. The Nigerian government has made attempts in recent times to improve transparency and accountability of public resources. At the federal level, it launched a Financial Transparency Policy to improve governance and equip citizens with tools to track federal government expenditure and report financial wrongdoing. At the subnational level, it launched the States Fiscal Transparency Accountability and Sustainability Program for Results. Despite these laudable initiatives, conspicuous challenges remain.

 

For example, what happened to the N56.6bn budgetary allocations for the government’s famous “Jobs and Food for All” program launched in 2020? What about the N75bn Survival Fund for micro, small, and medium-scale enterprises launched in the same year to help entrepreneurs survive the COVID-19 crisis?

 

Nigeria federal budget breakdown

Source: BudgIT, 2022

 

Many Nigerians assume that the funds allocated in the annual budget will be spent; but this is not necessarily true. There is often a sizable gap between what the government’s annual budget promises on paper and the actual funds made available for spending; larger gaps mean weaker credibility and reliability of the budget.

 

Figure 1: Five-year budget expenditure trend

Figure 1: Five-year budget expenditure trend Nigeria

Source: BudgIT, 2022

 

The public discussion about government budgets in Nigeria focuses on corruption, for example the risks of embezzlement of public funds by civil and public servants, unscrupulous contractors, and other vested interests. These are valid concerns, and yet, weak budget credibility can also undermine service delivery. Underspending or overestimating budgets starves critical projects of much-needed funds, resulting in abandoned public projects, poor service delivery, and inadequate social infrastructure.

 

Why does a budget credibility chasm exist in Nigeria? When these challenges persist year after year, does this risk turning the annual budget into an empty promise on paper? Some of the reasons for why we see continued weak credibility can be found in what happens between the time the budget is approved, and funds are made available for project implementation. Prior to starting any project, the implementing ministries, departments, and agencies (MDAs) make requests for cash to be released in line with the budget approval. After approving the “cash release” for each project, the government provides funds in cash or an authority to incur expenditure (AIE) to embark on the project. Once an implementing agency has either the cash or AIE for a project, this starts the procurement process and, eventually, results in “utilization” or actual disbursed cash. Administrative, political, and technical bottlenecks during the stages of cash release and utilization can reduce the amount of funding that projects receive and, ultimately, lead to service delivery failures.

 

Budget data from 2021 for six sectors affected by the COVID-19 pandemic (see figure 2 below) shows that halfway through the year, the government was already falling behind on cash release and utilization.

 

Figure 2: Q2 2021 capital budget implementation, as a percentage of total capital budget allocation for 2021

Q2 2021 capital budget implementation, as a percentage of total capital budget allocation for 2021 Nigeria

Source: Page 39, Q2 2021 Budget Implementation Report

 

A well-researched cause for low cash releases to MDAs is that the government does not collect enough revenue each year to finance planned expenditures. Revenue targets are regularly missed because of over-ambitious and unrealistic revenue projections. Low revenues lead to low cash releases, undermining project and program implementation. As with previous years, the Federal Government is projecting to raise N10.7trn in revenues in 2022, despite never collecting more than N6trn in years past.

 

Figure 3: Five-year budget revenue trend

Five-year budget revenue trend Nigeria

Source: BudgIT, 2022

 

Even when funds are available, government agencies, including subnational governments, still cannot fully implement their budgets. For example, despite exceeding its 2020 revenue target by 0.07%, Anambra State underspent its budget to the tune of N4.64bn (4% of the budget) in the same year. Less is known about the causes of these bottlenecks at the federal and sub-national levels, and more work needs to be done to identify and address the causes of these deviations.

 

One step the Federal Government can take is to improve budget data availability and explain the low utilization of released public funds. Disaggregated information on the spending from the N500bn COVID-19 Intervention Fund is neither available on the Budget Office’s website nor in reports from the Office of the Accountant General or Open Treasury websites. Furthermore, the Open Treasury portal, which houses data on government expenditures, has experienced persistent downtime since November 2020 to date.

 

Audit institutions can also investigate and report on budget credibility issues. However, the COVID-19 Audit Report, promised as a condition for the $3.4bn loan from the IMF, has not been made public. An interim report on COVID-19 expenditure presented to the National Assembly in January 2021 has not been made public. Available information suggests that N288bn, representing 57.6% of the N500bn COVID-19 Intervention fund, was released.

 

To ensure value for money, the government needs to enforce existing laws on fiscal responsibility and discipline. Likewise, accountability actors, including citizens, civil society, and the media must continue to demand improved transparency and accountability from the government on the deployment of scarce public resources.

Government budgets responding to crisis: what we can learn from the Ebola emergency

Government budgets responding to crisis: what we can learn from the Ebola emergency

As governments continue to implement COVID-19 response and recovery programs, many civil society groups are asking how the crisis will impact governments’ ability to spend money effectively and deliver essential services. For civil society groups that are following the COVID-19 money trail, there are critical questions about budget credibility, or whether governments will actually spend the money allocated in their budget during their fiscal year.

The unpredictable impact of the COVID-19 crisis on government revenues and expenditures could create understandable reasons why governments may deviate from their planned or adjusted budgets in the coming months and years. At the same time, a lack of budget credibility can increase the risk that shifts in spending priorities may also result in cuts to essential funding for non-emergency services that people need—such as for education and routine health services.

One way of identifying potential risks for budget implementation in the current context is to look at the impact of previous health emergencies, such as the Ebola crisis that impacted several West African countries in 2014 and 2015. Reviewing lessons from two of the most impacted countries—Sierra Leone and Liberia—can help understand how government budgets change in response to a crisis and how these changes can impact budget credibility. Drawing on available budget documents and PEFA assessments that cover the Ebola crisis years, here are three key lessons about what we see—or do not see—in terms of government budget credibility during that crisis.

1. Transparency is needed to understand budget credibility during a health emergency.

During the Ebola emergency, governments were making critical decisions about where to spend and where to cut. But what were those decisions and how did they impact government services?

These questions should be answered in government budget documents that provide an official account of how public resources were raised, allocated and spent, along with explanations of changes and deviations in the budget during the year. Unfortunately, good practices on budget transparency were not in place for the countries impacted by the Ebola crisis. The Open Budget Survey (OBS) assessment covering this period in Liberia and Sierra Leone found that both countries’ transparency scores declined as compared to the previous assessment. Moreover, critical budget execution documents were not published online or were published late. In Liberia, the government was producing these documents but released them only years later, far too late to be of use to civil society organizations (CSOs) that were monitoring the government response.

Availability of budget execution documents assessed in OBS 2017

Even published budget documents had significant gaps in information, such that they did not allow comparisons between actual spending and budgeted allocations. For example, Sierra Leone’s In-Year Reports, the monthly Statement of Fiscal Operations, showed expenditures by overall sectors (functional classification) and type of spending (economic classification), neither of which is comparable to the initial budget, which is approved by each ministry (administrative classification).

One area with stronger accountability during the Ebola crisis was the rapid auditing of emergency spending. The supreme audit institutions (SAIs) in both Sierra Leone and Liberia conducted and published rigorous audits of emergency funds, which uncovered waste and mismanagement of spending during the crisis and led to governments addressing some of the problems identified. In contrast, regular audits of government spending did not fully investigate impact of the crisis. Neither of the audit reports for government financial statements in Sierra Leone or Liberia explained changes made to budgets, in part because the SAIs did not receive this information from the government. In Liberia’s case, the regular audit report for 2014/2015 was also delayed in publication, undermining transparency for the rest of government spending – released only four years later.

2. Credibility is an ongoing issue during a crisis.

As governments responded to the Ebola health emergency, they adjusted their budgets in similar ways to what we see in recent months in response to COVID-19, prioritizing the emergency response and economic stimulus efforts. Even with these revised priorities, budget implementation practices followed similar trends as in earlier years.

Budget execution data for the years of the Ebola crisis can be found in in the PEFA reports for Sierra Leone (2018) and Liberia (2016). PEFA assessments examine budget credibility in terms of aggregate expenditures and the composition of the budget (spending by ministries) from the central government: in Liberia, this included on-budget donor expenditures, while in Sierra Leone donor expenditure data was not available.

The PEFA report shows that the government in Liberia struggled with accurate revenue forecasts before the crisis that led to underspending, but budget credibility trends varied by sector. In spite of more pronounced underspending in the health ministry when compared to education or defense, the overall execution rate in Liberia actually improved during this period.

For Sierra Leone, the PEFA report shows that overspending was the norm before the crisis, and this continued to a lesser degree during the Ebola response years. Like Liberia, deviations varied by sector – for example, despite overspending in health and defense sectors in Sierra Leone, the budget for the education ministry was underspent.

At a more detailed level, budget variances can become extreme. For example, official data indicates that an administrative unit known as “Miscellaneous Services,” which includes contingency expenditures, was significantly overspent during the crisis, but no explanations were provided to explain why this happened or how the money was spent.

Sierra Leone PEFA: Actual spending in key sector ministries as a share of the initial approved budget

Liberia PEFA: Actual spending in key sector ministries as a share of the initial approved budget

Thus, on an aggregate level, the Ebola crisis for Sierra Leone and Liberia resulted in slight improvements in budget execution rates, rather than increased fluctuations, as might be expected.

However, these aggregate values can mask large shifts within budgets that potentially can undermine credibility. For example, In Sierra Leone, official data indicates that an administrative unit known as “Miscellaneous Services,” which includes contingency expenditures, was significantly overspent during the crisis, but no explanations were provided to explain why this happened or how the money was spent.

Contingency expenditure in Sierra Leone (in millions, PEFA)

In the same time period, Sierra Leone also increased their accumulation of payment arrears from one percent of expenditures before the crisis to 17 percent of expenditures in 2016. These arrears, which are obligations where the government is late or delayed on payment, are often not reported in budgets and can potentially hide overspending practices. Such changes make it hard to track in government reports where the money goes and how it is being used and can mask credibility problems in the overall budget or specific programs.

3. Altered systems for emergency spending make it harder to track budget credibility.

The need for a rapid response in the Ebola crisis led governments to use different public financial management arrangements during their response. In both countries, the PEFA reports document shifts that governments made in their budgets during the emergency response, but with varying degrees of accountability and transparency. In the case of Liberia, these shifts were discussed with the legislature before being implemented and were not large enough to warrant a formal supplemental budget. In Sierra Leone, overspending was large enough to require a supplemental budget from the legislature, but after 2014 no supplemental budgets were submitted or approved.

In addition to revising public spending, governments were also setting up extra-budgetary funds to manage emergency spending. Extra-budgetary funds promised rapid delivery of services that could circumvent the slower machinery of government systems, including normal oversight practices. In many cases, new extra-budgetary funds were created due to the demand of donors. However, such funds also obscure the total amount of public resources directed to the crisis. By the end of the crisis, only 23 percent of donor financing was disbursed directly to all affected countries public finance systems, with the majority channeled either in extra-budgetary funds or implemented directly through development partners. Off-budget donor funding also has the additional challenge that government auditors in Sierra Leone and Liberia either did not have the mandate or access to donor accounts to audit where and how donor funding was spent.

How should lessons from the Ebola emergency inform the COVID-19 response?

As governments begin implementing their COVID-19 response efforts, often using similar tactics to those used during the Ebola response, we should watch out for similar pitfalls. These include:

  • Lesson 1: Transparency can regress. Lack of transparency makes it very challenging for CSOs and other stakeholders to conduct timely analysis of emergency spending practices and thereby seek remedial actions from the government during the period of the crisis. CSOs and other stakeholders must insist that governments prioritize transparency and the timely publication of data—transparency and accountability build the trust that is needed to combat the virus.
  • Lesson 2: Governments tend to use new instruments and PFM arrangements during a crisis. These include supplemental budgets, extra-budgetary funds, contingency reserves or funds and increases in expenditure arrears. Civil society should track these changes and monitor potential risks in these new systems. A special series of notes on COVID-19 from the IMF is a good resource for learning about how PFM systems are changing and what good practices should be adopted.
  • Lesson 3: Prioritized audits of emergency spending measures can come at the cost of routine audits of government spending. Auditors should formulate audit plans that ensure that all public funds are assessed. Routine audits of government financial statements—which will still account for most government spending—should look at spending deviations during the crisis. Additional support and funding to SAIs will allow them to take on this expanded mandate. CSOs and other stakeholders that are demanding that SAIs conduct expedited audits should also insist that regular audits continue, especially for programs at risk of mismanagement.
  • Lesson 4: Trends in deviations can continue during times of crises. Importantly, these trends hold true not just for aggregate budgets but also for the budgets of individual ministries and sectors. CSOs can use evidence of previous spending patterns to push back against unjustified claims made by government that budget deviations are only due to the crisis.
Overpromising and underperforming budgets during COVID-19: possible solutions

Overpromising and underperforming budgets during COVID-19: possible solutions

This blog was originally posted on the IMF’s Public Financial Management Blog.

Large discrepancies between what a government budgets for and what it actually spends, and between the revenue it forecasts and the revenue it ultimately collects, can be unsettling and potentially dangerous – especially during a global crisis. Clues on how to address this widespread phenomenon were presented in our recent study, “Exploring the determinants of budget credibility.” This report examined national government budget data in 94 countries from detailed reports issued by the Public Expenditure and Financial Accountability (PEFA) program.

Notable findings

  1. When revenue collections are lower than projected, governments tend to ‘underspend’ – or spend less than the allocations in the approved budget. While this result might be expected and obvious, the underspending is typically unevenly distributed among different sectors and can have harsh consequences on people’s lives, especially for those who rely on public services.
  2. Governments that are more transparent have higher levels of budget credibility. Our study points to the primacy of transparency for improving budget credibility. It also identifies other important factors—such as clear rules for amending budgets, strong procurement systems, and good accounting practices—that enable more real-time control over how public resources are being expended.

Underspending in government budgets was a problem even before COVID-19

hairul_nizam | Shutterstock

In an earlier multi-country study of budget credibility conducted prior to the pandemic, we found that levels of annual underspending in government budgets averaged nearly 10% across 35 countries. For perspective, this proportion of the budget amounts to more than the health and education budgets in many countries. And in low-income countries, nearly one out of every seven budgeted dollars was left unspent.

A more detailed report on immunization programs across 22 countries revealed a shocking 30% underspend of budgets for the purchase of vaccines over several years even as governments declared vaccine shortages on 96 occasions.

On the flip side, and not surprisingly, we also found ‘overspending’ to be an issue on some items and in some countries. Recently, we published a blog article that describes how police budgets across 19 countries were overspent, and by large margins in countries such as Uganda and Mexico.

What does this mean for budgeting during COVID-19?

Many governments have responded to the COVID-19 pandemic by committing to do whatever it takes to support their people and economies. But as they rush to commit large sums toward relief and recovery, the pressure for unrealistic revenue forecasts has increased—setting up a scenario in which governments are likely to overpromise and then underperform.

Understandably, the pandemic makes it very challenging for governments to accurately forecast economic growth, which impedes their ability to establish reliable revenue targets. In January 2020 (before COVID-19 became a household name), the IMF projected a global growth rate for 2020 of more than 3%. By April, the IMF was projecting a decline of 3%. And, last month, the IMF revised down its projection again to a decline of 5%. In many countries, growth projections have fluctuated even more drastically.

It could be catastrophic if governments continue the behavior identified in our new report and reduce their spending as they lower their revenue projections – especially for essential services, such as health, education, and social safety nets. At a time when the public is more reliant than ever on the provision of essential services, we think governments should make every effort to fully spend their budgets for these services.

Key takeaways for governments and civil society organizations

Governments: At this time, citizens need to be reassured that the policies announced to alleviate the pandemic’s suffering will, in fact, be implemented. It is expected that governments will have to revise their revenue projections and may even have to modify spending targets, but now more than ever, transparency is essential. Accordingly, governments could consider giving priority to the following steps:

  • Disclose all changes to budgets in response to the pandemic, including how COVID-19-related policies will be translated into budget allocations, assumptions for revenue projections, and sources of financing.
  • Release regular updates on the implementation of COVID-related measures in the budget, changes in the forecasts of revenue and spending, a comparison of spending projections and outcomes, and the reasons for any deviations.
  • Commit for audit all spending incurred during the pandemic, ideally more than once during the fiscal year, so that auditors can closely examine budget credibility issues and report publicly with their findings.

Civil society organizations (CSOs): CSOs should not assume that large budget allocations for essential services represent “victories.” They should follow the budget cycle and track government spending patterns during the year—particularly in 2020, when governments are confronting unprecedented challenges. And they should be vigilant when governments cut spending below the levels planned in the budget, raising the alarm when such cuts are unjustified.

Sub-national budget credibility: Kenya’s experience

Sub-national budget credibility: Kenya’s experience

Kenya’s Big Bang Decentralization

In 2013, Kenya began an ambitious experiment in devolution, decentralizing considerable power to 47 newly created counties which would take over responsibility for key services like health care. As is often the case, this devolution was premised on the notion that it would bring services closer to the people, and lead to improved access and a fairer distribution of services. Accordingly, counties were given the authority to formulate their own budgets, independent of national government.

While it is too early to assess the success of these reforms, for the theory of devolution to hold, counties must clearly access and spend funds on services. This is not a sufficient condition for improvements in access or quality, but it is a necessary one.

As part of the International Budget Partnership’s (IBP) Addressing Budget Credibility (ABC) initiative, we undertook the first systematic assessment of sub-national budget credibility in Kenya, looking at the degree to which counties collect revenue and spend as budgeted. Our analysis is based on data from all 47 counties over a four-year period (2014-2018), drawn primarily from reports produced by Kenya’s Controller of Budget. We complemented this data with county budget implementation reports and audit information from the Office of the Auditor General.

Key Findings

Rates of recurrent versus development spending were quite different. While overall counties spent 80 percent of their approved budgets during the four-year period, they were able to spend, on average, 96 percent of their approved recurrent budgets, but only 61 percent of their approved development budgets. In 2017/18, development expenditure against budget fell to only 42 percent. On the other hand, recurrent budget execution has continuously improved, growing from 92 percent in 2014 to 99 percent in 2017.

Trends are very similar to those at the national level. In the same four-year period, the national government’s line ministries (MDAs) spent 82 percent of the approved budget. While recurrent expenditure absorption was reasonably high, just as at county level, development absorption was much lower (an average of 67 percent over the period). From this, we can conclude that there is nothing particularly remarkable about low credibility at county level, but also that decentralization has not (yet) led to any improvement in budget execution.

Challenges at the county level are especially notable in sectors with high development spending –roads, water, and agriculture – although health budgets are also consistently underspent, achieving only an average of 86 percent budget execution over the four-year period we investigate. This is driven mainly by low execution of the health sector development budget, which averaged less than 60 percent for the period.

Re-prioritization of spending occurs during budget execution and may undermine service delivery over time. The shares of expenditure on executive and legislative administration (i.e., operational costs) tends to rise relative to their share of the original budget, while the share for agriculture and water tends to fall. In other words, as the budget is implemented, those costs needed to run the executive but not linked to specific services take a larger share of spending than budgeted, while the share of the budget going to some key services like agriculture and water is less than what was originally budgeted.

Counties rely heavily on national transfers and receive them too late in the year to spend down before the books are closed. Less than half of the intergovernmental transfers are received by the middle of the year, and 65 percent or less by the end of the third quarter. This pattern was particularly severe in 2017. Receiving roughly 29 percent of total revenue in the last quarter is likely to undermine counties’ ability to spend.

Counties also exhibit poor budget formulation and management practices. Kenya’s counties over-budget for expenditure and are too optimistic about revenues. Furthermore, counties exhibit inappropriate usage of supplementary budgets. While these budgets should be used to make corrective adjustments that facilitate budget execution, we find that county-level supplementary budgets sometimes worsen budget credibility, rather than improve it.

Hope for improvement?

While the overall data do not show strong signs of improvement in budget credibility over time, roughly one in five counties did improve their budget performance over the period. These improving counties come from across Kenya and suggest that there is wide potential for addressing low credibility over time.

A starting point for measuring budget credibility is the Public Expenditure and Financial Accountability (PEFA) framework. In looking for signs of change in county performance, we started by using the PEFA scoring approach to measuring budget credibility. In this approach, a county that executes anything less than 85 percent of its budget earns the lowest grade of “D”.

Given generally low execution rates in Kenya, this scoring approach obscures the wide variation among poor performers and we therefore introduced a complementary approach. Our alternative ranks counties by quartiles across the full range of budget execution rates. Using this method, we identified nine counties that improved their performance by two quartiles over the period, more than double what we found looking at counties that improved by two PEFA grades (from say a D to a B). In other low credibility environments, such as Nigeria or Philippines, it is important to complement the PEFA approach with other measures.

Table 1: Kenyan counties that showed improved budget performance from 2014-2018 under differing scoring approaches:  PEFA vs IBP

PEFA approachIBP approach
Elgeyo marakwetKiambu
KiambuKirinyaga
KirinyagaMakueni
MakueniEmbu
Kisumu
Kajiado
Marsabit
Tharaka Nithi
Uasin gishu

Toward greater transparency and credibility

Counties are not transparent about budget implementation.  In addition to our overall review of all 47 counties, we looked at eight in more detail. We tried to collect data on credibility from county budget documents and to seek out explanations for low credibility directly from county officers. This was challenging. Only one of the eight counties (Baringo) regularly produces a quarterly budget implementation report, and just over half publish the County Budget Review and Outlook Paper, which reviews annual performance.  Both these documents are legally mandated and should provide insight into the reasons for poor credibility.

We found that counties had trouble explaining their performance, although we did learn more about the causes of poor credibility: challenges with contractor capacity, at least partly related to the requirement to fill demographic quotas (for women, youth, local contractors, etc.); poorly designed public participation processes that yield infeasible projects due to lack of technical guidance to inform public views; and lack of or delay in approving policies to guide the use of special public funds (such as bursary or business development funds) where such funds cannot be spent without local legislation.

Conclusion

The low rate of overall budget execution is almost certainly driven in part by delayed release of funds to counties from their share of intergovernmental transfers. Nevertheless, this cannot be the whole story. In general, there is also a fairly high degree of volatility within counties over time, meaning that fixed characteristics of counties, such as their size or level of development, cannot explain the variation.

Are there factors which might vary from year to year and which could have more explanatory value? One possibility is that there are variations in legislative amendments over time, and that sectors where legislators amend the budget to add more projects tend to have lower credibility. This would be consistent with research from other contexts, such as Nigeria or Philippines.

A related hypothesis is that poorly constructed participatory processes could be the culprit. Where the public is not properly guided with technical support, they may insert unrealistic projects into the budget that then cannot be implemented, and these proposals might also vary from year to year.

Our data also hint at the fact that executives and legislatures tend to claw back some budgetary funds for their administrative budgets, or at least budgets controlled by them directly, and understanding what exactly happens to these funds and how and why they are moved is also an area for further investigation

Garbage In, Garbage Out: How performance information in budgets is failing us, and what we can do about it

Garbage In, Garbage Out: How performance information in budgets is failing us, and what we can do about it

When I was in Kenya in 2012, I remember a sense of excitement about the government’s plan to introduce program budgeting.  This is not the kind of thing that elicits heart flutters outside of the public finance community, but it can certainly quicken the pulse of some of our PFM colleagues.

To be honest, I was not sure that program budgeting was going to work in Kenya, but I thought that it would be a step toward achieving two things the country’s budget process badly needed.

First, it would force the government to explain itself.  A program budget implies at least a narrative around the budget that tries to justify the allocation of funds to specific areas.  It is hard for citizens (and even legislators) to engage in reasoned debates with government about a bunch of tables without a clear sense of what the government is trying to do with the money represented by the figures in those tables.

Secondly, it could prompt a more rigorous attempt to define “what the government is actually trying to do” in terms of concrete outputs.  Program budgeting demands at least some attempt to measure, with indicators and targets, what government is producing with the money it receives.  While imperfect, such performance information is also essential to any good conversation about budget priorities.

Although program budgeting in Kenya did amount to a step forward in both these ways, it was also riddled with inconsistencies.  Programs were constantly in flux, outputs and objectives were hard to understand or track, and performance indicators lacked baselines and seemed to change in random ways from one budget year to the next.  I left Kenya at the start of 2018, but these challenges continue, as documented in analysis carried out as part of our budget credibility initiative by the Institute of Public Finance (IPF-Kenya).

Program budgeting, and more broadly the inclusion of performance information in budgets, is not unique to Kenya.  Versions of these reforms have been tried around the globe, from the rich countries of the OECD, to a wide array of middle and lower-income countries in Latin America, Africa and Asia.  Recent estimates suggest as many as 80 percent of African countries are in some stage of program budgeting reform.

In a paper prepared with the World Health Organization last year, we demonstrated a number of challenges facing countries that have tried to implement program budgeting with a focus on the health sector.  This work raises concerns about the quality and consistency of the performance information, and particularly performance indicators, that are included in government health budgets.  We highlighted this issue in our four country case studies from Brazil, Indonesia, Mexico and the Philippines.

But the more I have looked at the quality of performance information around the world, across different sectors and countries, the more depressed I become.  It is simply impossible in many countries to make any sense of the performance information in the budget, which regularly contradicts information in other sources, or cannot be linked to spending information due to inconsistencies in names, indicators, targets, baselines, and so on.

Our recent assessment of irrigation budgets in five countries confirmed these findings in Kenya and Brazil, but also in Albania, the Dominican Republic and Mozambique.  To take just one example from the Dominican Republic, a target for water flow varied across four different documents from 716.76 m3/s in the 2013-2017 sector agency’s strategic plan, to 207.75 m3/s in the original version of the national multi-year plan, to 277.25 m3/s in the sector agency’s accountability report, and 407.75 m3/s in the 2018 update to the national multi-year plan.  What is one to do with such numbers?

Partner work on budget credibility in some of the countries already mentioned, but also Argentina and Ukraine, found gaps in linking spending to performance data, even when both kinds of information were available.  We find that nonfinancial targets are met when budgets are not spent, that targets are not met when budgets are spent, and that at times targets are exceeded or underdelivered by very substantial margins even when spending is not radically different from the budget.  What should we make of all of this?  At a minimum, my sense is that performance data alone without narrative justification from government that explains why targets are met or not is simply not that useful.

I should clarify that not all countries that have performance information have program budgets; that is really beside the point.  All countries that include performance information in their budgets are supposedly including it to improve the discussion about budget priorities and implementation between executives, legislatures and the public.  There is no other reason to include such information in the budget, whatever form of budget it is.

Yes, performance information is also used for internal management purposes in government, but internal management demands a wider and somewhat different set of performance information that need not all be published.  Published information is public information, and that is who it is for.

So, what should we make of this?  Scores of countries introduce new information that holds the promise of shifting the budget conversation toward outputs and outcomes, better linking money to services – and most of it is incomprehensible, inconsistent, or totally useless.

One interpretation is that the introduction of performance information in budgets is driven by international technical assistance, and takes the form of “isomorphic mimicry”: the fancy name for copying other people so you look good, while imitating principally the form and not the function of seemingly successful innovations.  Whether this is so or not, there is no question that these reforms are almost entirely technical in nature, driven from the top by budget offices with little public input.  There is therefore a fundamental mismatch between the supply and the demand for reform, which leads to bells and whistles with no one to ring or blow them, a point I made about cutting edge public finance reforms in Kenya some years ago.

If we think about the performance information in the budget as primarily speaking to the public, then it should be the case that this information actually addresses public concerns.  Otherwise, there is unlikely to be all that much interest in it.  And if there is no interest in it, how does it serve the purpose of improving the conversation about the budget?  No one owns the indicators, no one is accountable for meeting the targets…and no one cares.

It follows that if performance information is going to make any difference, it should be selected and decided upon through a public process.  If what this performance information measures actually matters to the public, there is likely to be more ownership all around, including from legislative representatives who should be reviewing this data whenever they are deliberating about the budget, and from the media, that should be reporting on it.

Is seeking public input into the programs and performance indicators that government agencies use pie in the sky?  The Mexican government did not think so.  In 2016, the Mexican finance ministry led a government-wide public consultation on existing indicators. Citizens were encouraged to submit comments on the current performance framework. The government received over 200 submissions which informed discussions with agencies about revising their indicators.

If performance information in budgets is going to be more than a shiny gewgaw, we will need much more of this kind of citizen input around the world.  Otherwise, the practice of incorporation of such information into the budget will be viewed as a cynical ploy to appear transparent and accountable, while avoiding both.  And that will likely lead governments to trash the whole experiment.  Garbage in, garbage out, indeed.