Back Matter

Back Matter

Jack Diamond, and Barry Potter
Published Date:
July 1999
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The budget as approved by the legislature for a line item of spending. The budget law gives the executive branch the authority to incur obligations, which become due during the budget year up to a specified amount for specified purposes within a financial period (usually one fiscal year).

Below-the-line items

These are below the line drawn to establish the deficit between revenues and expenditures; correspondingly, above-the-line items comprise expenditures and revenues. Below-the-line items thus normally relate to the financing of the deficits.

Budget provision

The amount of appropriation proposed or approved for a line item or for a higher aggregate set of line items, such as a subprogram, program, sector, etc.


The placement of a purchase order or signing of a contract or other agreement for the provision of goods or services.

Contingency reserve

A small portion of the total budget that is set aside for expenditures on unexpected needs or emergencies, not appropriated in other budget lines.


Any spending program where expenditure is open-ended (usually transfer/grant payments) and where recipients must be paid or given transfers/grants, if they meet certain criteria. Some common examples are found in social security programs, unemployment programs, and poverty programs.

Extrabudgetary funds

Accounts held by government bodies but not included in the governmental budget; expenditures from such accounts are often financed by earmarked revenues or user fees and charges.

Organic budget law

A law specifying the schedule and procedures by which the budget should be prepared, approved, executed, accounted for, and final accounts submitted for approval.


Actual revenues and outlays on expenditures.

Payment order

Authorization for payment against a bill or invoice made by officials of line ministries, the ministry of finance, and others.

Planning reserve

A small portion of total planned budget expenditure that is (notionally) set aside by the ministry of finance before the budget is formulated, and then allocated to budget line items by the cabinet according to perceived policy priorities on individual sectors, programs, etc.

Provisional appropriation

Legislation that permits an expenditure to get under way before the actual budget appropriation, without any further authorization procedures. This is most commonly used at the start of the fiscal year (e.g., when the legislature has not yet finalized the budget).

Quasi-fiscal operations

Activities of the central bank (or possibly other state-owned financial or nonfinancial enterprises) that are in nature similar to fiscal actions pursued by the government. Although undertaken at the direction of the government, they are usually financed by the banks or state enterprises but not included in the government’s budget. Examples include credit to commodity boards (or other entities) at below-market interest rates, and central bank expenditures on the bailout of failing banks.


Usually, the process of checking payment orders issued by a government agency against actual payments according to bank statements; (reconciliation can also apply to other stages of the expenditure process, such as commitments made and payment orders issued).

Special accounts

Accounts recording transactions of an “exceptional” character that are made outside the normal procedures for expenditure approval and recording; many refer to temporary accounts (such as advances), or to transactions whose authority is questionable or to the accounts of formal extrabudgetary funds or “below-the-line” accounts.

Special funds

Usually similar to extrabudgetary funds, but sometimes refer to funds financed by earmarked revenues/user charges that are within the government’s budget.

Supplementary appropriation

Legislation passed during the budget year to provide for expenditures additional to the original budget.

Suspense accounts

A type of special temporary account used to record balances, or correct mistakes in amounts, that have not yet been “posted” to the relevant line item. Such transactions often include payments of adjustable advances, until the final amount chargeable is known.


Once a bill for goods or services has been received, the relevant line ministry/spending agency must confirm that the bill is correct and that the goods or services have in fact been received. At this point, the bill becomes a liability of the public sector; in accrual accounting terms, an expenditure is recognized even though the bill has not yet been paid.


The process of transferring expenditure provision from one line item to another during the budget year. To prevent misuse of funds, spending agencies must normally go through administrative procedures to obtain permission to make such a transfer.


A release of all, or more commonly a part, of the total annual appropriation on a quarterly or monthly basis that allows a line ministry or spending agency to review commitments.

Revenue and financing issues are clearly also of concern to fiscal economists, but they are not considered in detail in this publication.

Ke-young Chu and Richard Hemming, eds., Public Expenditure Handbook: A Guide to Public Policy Issues in Developing Countries (Washington: International Monetary Fund, 1991).

Fiscal Affairs Department (Expenditure Policy Division), Unproductive Public Expenditures: A Pragmatic Approach to Policy Analysis, IMF Pamphlet Series, No. 48 (Washington: International Monetary Fund, 1995).

Prepared by Karim Nashashibi and Claire Liuksila, (Washington: International Monetary Fund, 1993).

George 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).

See IMF, Code of Good Practices on Fiscal Transparency available at

Definitions of GGFO and central governments may be found in the IMF’s Government Financial Statistics (GFS) manual.

In this publication, separate ministries or departments of state charged with the delivery of public services are referred to as “line ministries” (to distinguish them from the ministry of finance). Spending agencies are smaller units that deliver public services, either reporting to a line ministry or directly to the ministry of finance.

The term “off-budget” is used differentiy from “extrabudgetary” throughout this publication. An “off-budget” transaction is one conducted by a spending agency or line ministry whose transactions should be within the budget. An extrabudgetary fund (typically set up by law and executed to rules) conducts transactions that are, by definition, outside the budget.

See also IMF, Code of Good Practices on Fiscal Transparency.

Usually these data are not available from the ministry of finance, or if they are, only with a considerable time lag.

This may not be on a consistent definitional base with the annual budget.

The simplest categories of expenditure are recurrent wages and salaries; recurrent grants and transfers; recurrent debt payments; recurrent other goods and services; and capital expenditures.

But bonus payments can also make them more variable from month to month.

At the budget execution stage, however, those preparing the budget should also be aware of the degree of executive power to limit spending below or to increase spending above appropriations (see Section 4). This power can be an important determinant of the degree of flexibility for fiscal adjustment.

Refers to the provision that the budget deficit must not exceed investment or capital expenditure, that is, borrowing only for capital spending.

”Development” budgets often include both capital and current spending on projects, mainly, but not exclusively, financed externally.

Outputs are typically physical measures of production: for example, hospital patients treated and miles of roads built. Outcomes refer to measures of policy impact: for example, fewer road accidents after reductions in speed limits.

Larger reserves can be justified in very specific circumstances. An example would be a plan to liquidate payment arrears, whose aggregate size is not yet clear.

See Barry H. Potter, “Dedicated Road Funds: A Preliminary View on a World Bank Initiative,” IMF Paper on Policy Analysis and Assessment 97/7 (Washington: International Monetary Fund, 1997), for a related discussion on earmarking revenue for dedicated road funds.

The primary objective for the introduction of carryover is to prevent the typical end-of-the-year rush to spend unused funds. In some Nordic countries and Australia, however, the carryover can be positive or negative: overspending by an agency in one fiscal year leads to a deduction from its available funds in the next.

It should be understood that, from the government accounts perspective, the transaction is completed at stage (4) above—completion of payment order.

There may, of course, still be disputes between the government and individual suppliers on specific bills received.

These may or may not be subordinated to the ministry of finance.

Typically, supplementaries are not needed for excess spending on a line item, where the resources are found by transferring monies from another line item in the same program.

For a description of such systems, see A. Hashim and W. Allan, Information Systems for Government Fiscal Management, World Bank Sector Studies Series (Washington: World Bank, 1999).

Arrears thus do not include unpaid bills received for goods verified but still within the usual grace period.

Jack Diamond and Christian Schiller, “Government Arrears in Fiscal Adjustment Programs,” in How to Measure the Fiscal Deficit, edited by Mario I. Blejer and Adrienne Cheasty (Washington: International Monetary Fund, 1993).

A number of former centrally-planned and francophone African countries have indulged in the netting out of tax and expenditure arrears as a “one-off” (but all too often repeated) exercise. As noted, such offsetting is to be avoided in general, as it creates an incentive not to pay tax bills and prolongs unrealistic budgeting. However, the accumulation of arrears can sometimes be so large that such netting out is a necessary first step to reduce the size of the outstanding stock, whose residual must be handled by the options discussed above.

It is sometimes necessary to exclude amounts held in trust funds where the government is the trustee, not owner, of the monies.

This does not prevent some countries from building up debt arrears; for example, on domestic debt held by a country’s own central bank.

See for example, IMF, Good Governance: The IMF’s Role (Washington, 1997).

See also George Kopits and Jon Craig, Transparency in Fiscal Operations, Occasional Paper No. 158 (Washington: International Monetary Fund, 1998) and “Code of Good Practices on Fiscal Transparency: Declaration of Principles,” IMF Survey, April 27, 1998, pp. 122-24.

G.A. Mackenzie, David W.H. Orsmond, and Philip R. Gerson, The Composition of Fiscal Adjustment and Growth: Lessons from Fiscal Reforms in Eight Economies, IMF Occasional Paper No. 149 (Washington: International Monetary Fund, 1997).

Except where state expenditures are very large, the macroeconomic focus on financial management is on the central government level. State and local governments, however, have the same incentives to manage their finances efficiently by following the same cash planning and management practices recommended here (see B. Potter in T. Ter-Minassian, Fiscal Federalism in Theory and Practice (Washington: International Monetary Fund, 1997).

For example, under a currency board arrangement.

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