Ablo, Emmanuel, and Ritva Reinikka, 1998, “Do Budgets Really Matter? Evidence from Public Spending on Education and Health in Uganda,” Policy Research Working Paper No. 1926 (Washington: World Bank).
Ahmad, Ehtisham, and Nicholas H. Stern, 1987, “Tax Reform in India,” in The Theory of Taxation for Developing Countries, ed. by David Newbery and Nicholas H. Stern (Oxford: Oxford University Press).
Devarajan, Shantayanan, and Shaikh Hossain, 1998, “The Combined Incidence of Taxes and Public Expenditures in the Philippines,” World Development, Vol. 26 (June), pp. 963–77.
Feyzioglu, Tarhan, Vinaya Swaroop, and Min Zhu, 1998, “A Panel Data Analysis of the Fungibility of Foreign Aid,” World Bank Economic Review, Vol. 12, pp. 29–58.
Filmer, Deon, and Lant Pritchett, 1997, “Child Mortality and Public Spending on Health: How Much Does Money Matter?” Policy Research Working Paper No. 1864 (Washington: World Bank).
Flug, Karnit, Antonio Spilimbergo, and Erik Wachtenheim, 1998, “Investment in Education: Do Economic Volatility and Credit Constraints Matter?” Journal of Development Economics, Vol. 55 (April), pp. 465–81.
Gupta, Sanjeev, Marijn Verhoeven, and Erwin Tiongson, 1999, “Does Higher Government Spending Buy Better Results in Education and Health Care?” IMF Working Paper 99/21 (Washington: International Monetary IMF).
Gupta, Sanjeev, and Marijn Verhoeven, 2000, “The Efficiency of Government Expenditure: Experiences from Africa,” Journal of Policy Modeling, Vol. 22.
International Monetary Fund, 1999, “The Poverty Reduction and Growth Facility—Operational Issues,” SM/99/293, December 13, 1999.
International Monetary Fund, 2000, World Economic Outlook, May 2000: Asset Prices and the Business Cycle, World Economic and Financial Surveys (Washington).
Landau, Daniel, 1986, “Government and Economic Growth in the Less Developed Countries: An Empirical Study for 1960-1980,” Economic Development and Cultural Change, Vol. 35 (October), pp. 35–75.
Mingat, Alain, and Jee-Peng Tan, 1998, “The Mechanics of Progress in Education: Evidence from Cross-Country Data,” Policy Research Working Paper No. 2015 (Washington: World Bank).
The World Bank’s recently completed Strategy on Governance and Public Sector Reform stresses the critical importance of country ownership. See World Bank, 2000a.
See, for example, World Bank (2000a) and the following IMF Board papers: Poverty-Reduction Strategy Papers—Operational Issues (SM/99/290, 12/10/99); and The Poverty Reduction and Growth Facility—Operational Issues (SM/99/293, 12/13/99).
Institutional poverty funds refer here to revenues set aside in a separate account, with expenditures occurring outside country’s normal budget execution and reporting system, subject to different reporting and accountability standards, and frequently with dedicated local staff hired and paid outside normal civil service systems.
In practice, the provision of HIPC assistance can be expected to lead to increases in social spending, given the low level of such spending in HIPCs: public spending on education and health averaged 3.3 and 1.6 percent of GDP, respectively, in a sample of HIPCs during 1998, compared to 4.6 and 2.5 percent of GDP in a sample of non-HIPC PRGF-eligible countries (see IMF, 2000, Box 4.3). However, in principle, it is also possible that HIPC assistance could be used to pay down domestic debt or lower tax rates, if these were viewed as more cost-effective ways of reducing poverty over time (e.g., through their impact on economic growth or inflation). See, for example, Ahmad and Stern (1987), who point to the potentially large benefits of reducing distortionary taxes in developing countries.
Feyzioglu, Swaroop, and Zhu (1998) have shown that earmarked project aid to developing countries is largely fungible.
For the 22 HIPCs that had reached the decision point by end-2000, government revenue averaged around 22 percent of GDP and government spending around 26 percent in 1999, while projected annual HIPC assistance (on a cash basis) was around 2 percent of GDP over the period 2001–05.
This is based on data supplied to IMF staff by country authorities.
In several cases, central banks have already set up mechanisms to do so (e.g., Guyana, Honduras, Mauritania, Tanzania, and Uganda).
For example, in Guinea-Bissau, poverty-reducing expenditure is projected to increase by over 4 percent of GDP from 1999 to 2002, even though debt service paid is expected to be higher after the HIPC decision point as a result of the regularization of relations with creditors. However, due to increased donor assistance, net inflows after HIPC are projected to double.
For example, Ablo and Reinikka (1998) discuss a survey of selected primary schools in Uganda that found initially that less than one-third of non-salary expenditures earmarked for primary schools actually reached the intended beneficiaries. This percentage has risen considerably as a result of changes in disbursement procedures adopted in response to the study.
Mechanisms to monitor the impact of social expenditures on poverty typically do not exist in HIPCs. Data on social indicators needed to assess broad poverty trends become available only with a lag of several years, and studies on the benefit incidence of social programs are available only for a limited number of countries and are carried out infrequently.
These findings are reported in several studies. See, for example, Filmer and Pritchett (1997), Flug, Spilimbergo, and Wachtenheim (1998), Landau (1986), Mingat and Tan (1992 and 1998), and Gupta, Verhoeven, and Tiongson (1999).
For example, a matching of the geographical distribution of expenditures with regional income distribution data (e.g., as derived from poverty maps) can provide a first-cut at the incidence of priority spending. See Devarajan and Hossain (1998).
The “before-after” approach should be adjusted for changes in spending patterns that can be foreseen with a large degree of certainty (e.g., due to interest payments on domestic debt already contracted and multiyear capital investment projects). For countries that qualified for HIPC assistance under the original framework (Bolivia, Burkina Faso, Mali, Mozambique, Uganda, Guyana, and Côte d’Ivoire) higher poverty-reducing spending may have already occurred, adding a further complication to assessing the change in the composition of public spending. In such cases, therefore, a point of comparison predating the original HIPC Initiative would have to be established.
However, this indirect way of managing and extracting the data may have an adverse impact on their timeliness and accuracy. In the worst case, the budget line items that include the poverty-related spending would need to be identified and tracked more broadly within the existing budget information system.
These relationships would be expected to be consistent with the overall fiscal framework.
The countries are: Benin, Bolivia, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, São Tomé and Principe, Senegal, Tanzania, Uganda, and Zambia.
The countries are Benin, Cameroon, The Gambia, Guyana, Guinea, Guinea-Bissau, Honduras, Madagascar, Malawi, Mauritania, Mozambique, Nicaragua, Niger, São Tomé and Principe, Tanzania, and Zambia.
It should be stressed again here that these are preliminary results, and they will be refined through discussions with country authorities. The countries are: Benin, Bolivia, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, São Tomé and Principe, Senegal, Tanzania, Uganda, and Zambia.
Capacity building in budget formulation has been a focus of both IMF and World Bank efforts in HIPCs and other countries in recent years.
Examples of this include the development of manual-based commitment control systems, in several cases .with technical assistance from the IMF.
For further discussion of lessons of experience in assisting countries with governance reforms, see World Bank 2000a.
As noted earlier, this strengthening could include improved budget classification; provision of more disaggregated expenditure outturn data by function in the social sectors to help identify spending that is pro-poor (for example, outlays for preventive health care); accelerated reporting of above-the-line (but unaudited) expenditure data; and new procedures for reconciling above- and below-the-line data.
The World Bank’s Public Expenditure Thematic Group numbers approximately 200, spread among the 6 regional vice-presidencies, PREM, DEC, WBI, and OED, although not all focus on public expenditure issues in their current work. Financial management experts in the Operational and Core Services network assist countries through CPARs and CFAAs.