“How a ‘Citizens’ Guide to the Budget’ can strengthen fiscal transparency and
increase public participation”

Jon Shields

International Monetary Fund

 
ICGFM Conference Florida May 18, 2011
Outline
 

• What is special about a CGB?

• The context for a CGB: Fiscal transparency

• Distinguishing characteristics of a CGB:

Information content
Style, format and quality
Dissemination
What is a CGB?

About 30 countries in recent years have produced at

least one CGB, of varying contents and quality.

Typically:

• Self-contained document written in clear and non-

technical language.
• Published by the Finance Ministry.
• Produced at same time as budget is presented to
legislature.
• Explains budget proposals and economic context.
Why do governments publish CGBs?

• Ensure budget message is understood; broaden

informed electorate.

• Explain countries’ economic problems.

• Enhance accountability.

• Counter hostile assessments.

• Increase buy-in for unpopular policies.

What do CGBs add?

• Accessibility.

• Snapshot of fiscal position and

decisions.

• Supplement to technical information

required for legislatures.

• Insight into specific economic,

spending or revenue decisions.
Timing of a CGB: the annual budget cycle

• Critical point is when budget is presented to

legislature.
• Allows public to participate in budget debate.
• Also - follow-up if budget is greatly amended.
• Also - outturns should be monitored and
compared.
• Other citizen’s guides can cover :

 Pre-Budget framework
 Final Budget
 Outturns/end-of-year financial statements
Context for a CGB – fiscal transparency

A CGB is one instrument to help assure fiscal transparency, viz.:

Being open to the public about the structure and functions of

government, fiscal policy intentions, and public sector accounts and
projections (Kopits and Craig).

Public right to know.

Promotes accountability; market discipline; lower corruption; good institutions; time-

consistent behavior and sustainable policy; macro and micro efficiency; trust;
fairness.
 
Fosters better governance, internal decision-making, reform in public financial
management, public expenditure, tax administration, and tax policy, macro-fiscal.

Strengthens access to international financial markets.

IMF Code of Good Practices in Fiscal Transparency – Four Pillars

1. Clarity of roles and responsibilities: Structure and functions of

government, responsibilities within government, relations
between government and the rest of the economy

2. Open budget processes: Budget preparation, execution, and

monitoring; timetable for legislature; realism of estimates and
medium-term framework; fiscal sustainability.

3. Public availability of information: Specification of the coverage,

detail, and timing of fiscal information to be provided to the
public.

4. Assurance of integrity: Quality of fiscal data, internal oversight,

and external scrutiny.
FT Code: (1) Clarity of Roles and
Responsibilities:
1.1 Scope of government. The government sector should be
distinguished from the rest of the public sector and from the
rest of the economy, and policy and management roles
within the public sector should be clear and publicly
disclosed.

Show all ramifications of central government; QFAs,

EBFs, local government relations

1.2 Framework for fiscal management. There should be a

clear and open legal, regulatory, and administrative
framework for fiscal management.
 
FT Code: (2) Open Budget Preparation, Execution, Monitoring and
Reporting

2.1 Predictable and technically sound budget

preparation. Budget preparation should follow an
established timetable and be guided by well-defined
macroeconomic and fiscal policy objectives.

Realistic annual budget set in comprehensive

economic policy framework, with measures and
sensitivities assessed.

2.2 Clear procedures. There should be clear

procedures for budget execution, monitoring, and
reporting.
FT Code: (3) Public Availability of Information

3.1 Comprehensive information. The public should be provided

with comprehensive information on past, current, and projected
fiscal activity and on major fiscal risks.

Full disclosure, as for legislature, coverage, comparability,

significance, long-term outlook.

3.2 Relevance. Fiscal information should be presented in a way that

facilitates policy analysis and promotes accountability.

Citizens’ Guide, minimum aggregate data requirements, results

3.3. Timeliness. A commitment should be made to the timely

publication of fiscal information.
FT Code: (4) Assurances of Integrity

4.1 Quality. Fiscal data should meet

accepted data quality standards.

4.2 Oversight. Fiscal activities should be

subject to effective internal oversight and
safeguards.

4.3 Auditing. Fiscal information should be

externally scrutinized.
A Citizens’ Guide – Overall Contents

• Common core of information on the budget

proposals and economic context.

• Relative emphasis of the topics, and the

level of detail, should reflect country
circumstances and capacity,particularly:
 pre-existing general level of understanding
 level and quality of media coverage
A Citizen’s Guide – Why the budget matters

•Explain role of budget in public financial

management (and requirements in constitution
or budget law).
•Describe the budget process, including the
roles of the executive branch, in preparing
the budget and of the legislature in authorising
government taxation, borrowing, and
expenditure.
•May be supplemented by a ‘Citizen’s Manual
on Budget Process.’
A Citizen’s Guide – What the future holds: the economic and fiscal outlook

• Prospects for the economy (economic

context, resource availability)
 At least for budget year
 Preferably for medium-term
• Medium-term projections of the fiscal
aggregates (revenues, spending, the deficit)
• Use simple tables and charts.
A Citizen’s Guide – How much of the government’s activities does the budget
cover?

• Explain different types of accounts or funds, and

what agencies are inside or outside the budget.

• Include information on the government’s extra-

budgetary activities, and their impact on
consolidated government accounts.

• Summarize and explain “quasi-fiscal activities”.

• Show transfers between different levels of

government and any formulae used.
A Citizen’s Guide – What the government intends to spend

Where possible:

• by function (or sector),

• by administrative agency,
• by economic category (e.g. wages and salaries,
interest, capital expenditures).

Where applicable:
• by major programme.

Provide references and links to more detailed spending

information.
A Citizen’s Guide – Where the money will come from

• Breakdown of the main revenue sources,

separately identifying domestic revenues (by tax)
and external grants.
• Intended financing sources in the event of a
projected deficit (use of domestic assets,
domestic markets, international markets, or
concessional assistance)
• Any implications for economic stability or fiscal
sustainability.
A Citizen’s Guide – Do the numbers add up?

• Demonstrate realism of the budgeted levels of

revenues, expenditures and the fiscal balance by
comparing with recent trends
• Evaluate expected out-turn for the current year in
comparison to its forecast in the previous budget.
• List key fiscal risks:
 Impacts of deviations in key economic variables from
projections
 Other specific fiscal risks (e.g. loan guarantees being called)
 Explain how government will meet unexpected spending
needs
A Citizen’s Guide – Proposed budget measures

• Explain why new measures are being

introduced.

• Assess expected impact of new measures on

revenues and spending, and how they will
contribute to the government’s priorities.

• Discuss potential impact on take-home pay for

different income levels, income support and
service provision.
A Citizen’s Guide – How the budget will help the government meet its objectives

• Describe the government’s medium-term economic and

social objectives.
• Identify Millennium Development Goals, where relevant.
• Explain role of fiscal policy strategy and any numerical
targets.
• Show contribution of budget to fiscal strategy and broader
objectives.
• Explore sustainability of the public finances and public
debt.
• Describe service delivery objectives and social impacts of
spending programmes, including available information on
performance and evaluations.
 
Suggested chapter outline of a citizens’ guide to the budget

Introduction: Place of the annual budget in public finance legislation;

description of the coverage of the budget and the budget process,
including opportunities for public participation.
The Economic Outlook and Government Objectives: Macroeconomic
forecasts, assumptions and sensitivity analysis; national development
strategy; medium-term fiscal policy objectives.
The Government’s Accounts and Budget Prospects: Aggregate
revenues, expenditures, and the fiscal balance over medium-term; broad
allocation of spending and sources of revenue, comparative figures for
previous year; public debt, fiscal risks, and the sustainability of current
policies and trends.
New Measures: Summary of the main budget initiatives; estimates of their
fiscal effect and impacts on key policy groups; contributions to meeting
the government’s stated policy objectives.
Improving Delivery of Services: A brief indication of what the
government is doing to improve service delivery
A Citizen’s Guide – Style and Format

• Stand-alone document
• Ideally, produced by Ministry of Finance
• Treat as technical document - avoid political
overlay
• More than a budget speech
• More than an executive summary
• Limit jargon
• Use layman’s terms
• Highlight simple and attractive charts and
diagrams
• Keep short but provide lots of links
A Citizen’s Guide – Content and Quality

• Focus on substantive budget issues.

• Avoid extraneous or irrelevant material.

• Only include data that is accurate, reliable and

credible.

• Explain uncertainties.
A Citizen’s Guide – Dissemination

•Actively disseminate - arrange launches, seek

NGO participation, publicize availability,
generate media events, go to villages.
•Make available in hard copy and electronic form.
•Produce in alternative formats:
Video clips
Radio podcasts,
Posters
Pamphlets

•Use multiple languages where relevant.

 Thank you
jshields@imf.org

Main reference:

‘Producing a Citizens’ Guide to the Budget: Why, What and How’

by
Murray Petrie and Jon Shields

OECD Journal on Budgeting, Volume 2010/2