Increasing budgetary constraints in many countries, and a recognition that unproductive expenditures contribute to macroeconomic instability, have made it necessary to reassess the composition of public expenditures. Evaluation criteria need to incorporate the scope of public sector activities, overall revenue constraints, the effects of public expenditures on sustainable growth, and poverty reduction and distributional concerns.
This paper briefly reviews some of the theoretical underpinnings of this approach, which permits the assessment of trade-offs--both within and across sectors--and highlights the major data requirements to make the approach operational. A survey of the existing cross-country data sets for selected African countries reveals a dearth of household data that would permit an evaluation of the effects of policies on the poor and also of appropriate functional classifications of major expenditure items at various levels of government. There is also a summary of the types of relevant data that might be available from various international agencies.
More effective policymaking would thus require improvements in methods as well as in the related information base. The role of the major international agencies in supporting the improvements in policymaking is highlighted.