Planning and Budgeting in Developing Countries
Planning and Budgeting in Developing Countries – “Shrinking the P”
Posted by Richard Allen[1] In most advanced western countries, the use of a national development plan as the primary tool of policy-making died out two generations ago, as it largely did in countries of the former Soviet Union in the early 1990s. However, national development planning continues to be a dominant policy instrument in many low-income and emerging market economies. Similarly, public investment plans (PIPs), which were in vogue in the 1970s, then fell from grace as theories of economic development based on capital accumulation lost influence, are now fashionable once more. What explains these developments? Why is planning deemed useful and relevant for developing countries, but has become outmoded in more advanced countries?
It should be clarified that the planning functions and instruments have not truly disappeared in advanced countries; rather, they have been replaced by other processes and instruments of policy that are judged superior in terms of their flexibility and usefulness. In particular, in the last fifty years, developed countries have developed a broad-based approach to policy analysis and review that is based upon a medium-term expenditure framework (MTEF), program budgets, and performance evaluations. These tools are combined with regular discussion by ministers, often through the cabinet mechanism, of priorities for defense, education and health, social security, agriculture, and other key sector policies and programs.
In addition, wide-ranging discussions of government policies, with varying degrees of openness, take place either before general elections (in countries with single party governments) or immediately after elections (as part of the process of forming a coalition government). Comprehensive reviews of expenditure policies, including systematic analysis of their impact and performance, are also carried out at regular intervals in Australia, Canada, the
Posted by Richard Allen[1] In most advanced western countries, the use of a national development plan as the primary tool of policy-making died out two generations ago, as it largely did in countries of the former Soviet Union in the early 1990s. However, national development planning continues to be a dominant policy instrument in many low-income and emerging market economies. Similarly, public investment plans (PIPs), which were in vogue in the 1970s, then fell from grace as theories of economic development based on capital accumulation lost influence, are now fashionable once more. What explains these developments? Why is planning deemed useful and relevant for developing countries, but has become outmoded in more advanced countries?
It should be clarified that the planning functions and instruments have not truly disappeared in advanced countries; rather, they have been replaced by other processes and instruments of policy that are judged superior in terms of their flexibility and usefulness. In particular, in the last fifty years, developed countries have developed a broad-based approach to policy analysis and review that is based upon a medium-term expenditure framework (MTEF), program budgets, and performance evaluations. These tools are combined with regular discussion by ministers, often through the cabinet mechanism, of priorities for defense, education and health, social security, agriculture, and other key sector policies and programs.
In addition, wide-ranging discussions of government policies, with varying degrees of openness, take place either before general elections (in countries with single party governments) or immediately after elections (as part of the process of forming a coalition government). Comprehensive reviews of expenditure policies, including systematic analysis of their impact and performance, are also carried out at regular intervals in Australia, Canada, the