Dedicated Road Funds: A Preliminary View on a World Bank Initiative
IMF Policy Discussion Papers, June 1, 1997
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- Dedicated Road Funds: A Preliminary View on a World Bank Initiative
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Bibliographic details
- Authors: Barry H Potter
- Published: June 1, 1997
- Series: IMF Policy Discussion Papers
- DOI: https://doi.org/10.5089/9781451971378.003
Executive summary and main conclusion
- Historically, Road Funds have been criticized as:
- inconsistent with effective expenditure control,
- distorting the allocation of public sector resources,
- incompatible with efficient management of government resources.
- The paper assesses a more benevolent view of “second generation” dedicated Road Funds that have emerged in recent years.
- Main conclusion: where a Road Fund pursues a genuine purchasing agency approach, in principle it can be an efficient means of delivering road maintenance and, perhaps, road capital expenditures.
- However, a formidable list of institutional and financial requirements must be satisfied for a dedicated Road Fund to be appropriate.
- These conditions are more likely to be satisfied in developed economies with efficient budgetary systems already in place.
- In many developing countries, reforming overall budget institutions, procedures and practices may be the better solution.
- The critical unresolved question: how often will the right conditions for an efficient Road Fund arise?
Institutional and financial requirements (analysis)
- A Road Fund must operate as a genuine purchasing agency to be efficient.
- Institutional requirements implied by the analysis:
- effective budgetary systems,
- appropriate governance and oversight arrangements,
- alignment with public financial management objectives.
- Financial requirements implied by the analysis:
- secure and predictable funding streams,
- mechanisms to avoid distortion of public sector resource allocation,
- compatibility with efficient government resource management.
Applicability across country contexts (assessment)
- Developed economies:
- More likely to satisfy the institutional and financial requirements for an efficient Road Fund.
- Road Funds may be an appropriate institutional arrangement where budgetary systems are already efficient.
- Developing countries:
- Frequently lack the necessary institutional and financial preconditions.
- Reforms to overall budget institutions, procedures, and practices may be preferable to establishing a dedicated Road Fund.
- Conditional policy implication:
- If the required institutional and financial conditions can be met in a developing country, a Road Fund may still be appropriate; frequency of such cases remains uncertain.
Policy implications and recommendations
- Prioritize assessing whether a proposed Road Fund can function as a genuine purchasing agency before implementation.
- Where budgetary systems are weak, emphasize broader public financial management reform over creating a dedicated Road Fund.
- Ensure mechanisms that prevent distortion of public sector resource allocation if a Road Fund is established.
- In considering Road Funds, policymakers should weigh:
- the list of institutional and financial requirements against country capacity,
- the comparative benefits of budgetary reform versus creating a dedicated fund.
Content in this bundle
- Dedicated Road Funds: A Preliminary View on a World Bank Initiative - PPAA/97/07