Economists working on fiscal policy and fiscal management need a good understanding of how the expenditure side of the budget is planned, prepared, and executed.1 This publication is designed for those interested in the macroeconomic impact of such budget processes, rather than in the perhaps more familiar microeconomic perspective of expenditure policies.
The analysis provided and the guidelines offered on good practices in budget management are intended for economists reviewing the fiscal sector of the economy and judging the feasibility of fiscal policy actions. The material should also provide a helpful background to other advisors or officials working on budgetary matters in developing countries and economies in transition who do not have specialized macroeconomics training.
The guidelines cover what such individuals need to know to:
The structure of the guidelines is as follows:
At the outset, a fundamental distinction needs to be drawn between expenditure management and expenditure policies. Effective expenditure management is not feasible without clear and well-defined expenditure policies, whose costs are properly identified in the relevant budget appropriations (see glossary). Expenditure budgets, in the form of line item appropriations, represent the cost of agreed expenditure policies. No improvements to budget preparation or execution can compensate for inappropriate or misguided policies.
These guidelines do not cover expenditure policy issues. Extensive material has already been prepared by the Fiscal Affairs Department of the IMF on expenditure policy issues, notably the Public Expenditure Handbook,2 two pamphlets--Unproductive Public Expenditures3 and Guidelines for Fiscal Economists Participating in Fund Missions4--and Occasional Paper No. 160, Fiscal Reform in Low-Income Countries: Experience under IMF-supported Programs.5
The style of the guidelines is interrogative: to pose questions that a fiscal economist or general budget advisor might have about budget processes and procedures and then to offer answers, often differentiating between the different expenditure management systems in francophone, Commonwealth, Latin-American, and transition economy systems. First, however, by way of a basic introduction, Figure 1 illustrates a typical timetable for preparing an annual budget. Figure 2 identifies the very basic elements of a typical budget execution process, and Figure 3 describes the main steps in cash planning and cash management. A glossary is also included at the end of the book for those unfamiliar with some of the terms used.
1Revenue and financing issues are clearly also of concern to fiscal economists, but they are not considered in detail in this publication.
2Ke-young Chu and Richard Hemming, eds., Public Expenditure Handbook: A Guide to Public Policy Issues in Developing Countries (Washington: International Monetary Fund, 1991).
3Fiscal Affairs Department (Expenditure Policy Division), Unproductive Public Expenditures: A Pragmatic Approach to Policy Analysis, IMF Pamphlet Series, No. 48 (Washington: International Monetary Fund, 1995).
4Prepared by Karim Nashashibi and Claire Liuksila, (Washington: International Monetary Fund, 1993).
5George T. Abed and others, Fiscal Reform in Low-Income Countries: Experience under IMF-supported Programs, IMF Occasional Paper No. 160 (Washington: International Monetary Fund, 1993).