The Challenge of Reforming Budgetary Institutions in Developing Countries
IMF Working Papers, May 1, 2009
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- The Challenge of Reforming Budgetary Institutions in Developing Countries
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Bibliographic details
- Authors: Richard I Allen
- Published: May 1, 2009
- Series: IMF Working Papers
Summary findings
- The development of sound budgetary institutions in countries such as France, the U.K. and the U.S. has taken a very long time?200 years or more?and is still evolving.
- Douglass North's prediction, supported by available data, is that institutional reform is also likely to be very slow in developing countries since the budget is especially prone to rent-seeking influences.
- Complex, multiannual PFM reform strategies have been strongly promoted by the donor community; the paper critiques this fashionable emphasis.
- The paper advocates a simpler approach grounded on Schick's principle of "getting the basics right."
- The paper identifies several areas where further research would be fruitful.
Subject areas and keywords
- Subject: Budget planning and preparation, Expenditure, Fiscal accounting and reporting, Medium-term budget frameworks, Public financial management (PFM)
- Keywords: budget, country, government, Platform approach, reform program, WP
Policy implications and recommendations
- Prioritize a simpler, fundamentals-first reform strategy ("getting the basics right") over complex, multiannual PFM reform programs favored by donors.
- Recognize that institutional reform of budgetary systems is likely to be slow in developing countries due to rent-seeking pressures on the budget.
- Design reforms that account for long time horizons observed in historical development of budgetary institutions in advanced economies.
Areas for further research (as identified)
- Empirical investigation into the pace of institutional reform in developing countries relative to historical cases.
- Analysis of mechanisms through which rent-seeking affects budgetary institution reform.
- Evaluation of the effectiveness of complex, multiannual PFM reform strategies versus simpler, basics-first approaches.
Source: IMF Working Paper — "The Challenge of Reforming Budgetary Institutions in Developing Countries", Richard I Allen, Working Paper No. 2009/096, May 1, 2009.