PREM Notes
176 items available
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This note series is intended to summarize good practices and key policy findings on poverty reduction and economic management (PREM) topics.
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Publication
Performance-Informed Budgeting in the U.S. National Government : An Evolutionary Approach and a Work in Progress
(World Bank, Washington, DC, 2012-07)The United States, at the national level of government, has been trying to identify stronger links between performance and funding for at least 50 years. The most recent two presidents had fundamentally different approaches to performance-based reforms. The administration of George W. Bush embraced a top-down, comprehensive approach to performance, embodied by the President's Management Agenda and the Program Assessment Rating Tool (PART). The Obama administration has delegated more of the agenda to the agencies and has abandoned the PART in favor of a more in-depth, targeted approach to evaluation. Continuing challenges in the United States include creating incentives for focusing on the long term rather than the short term, making expanded use of performance information for budget decision making, and simultaneously focusing on performance improvement and reducing unsustainable budget deficits. -
Publication
The Fiscal Management of Natural Resource Revenues in a Developing Country Setting (or How to Design a Fiscal Rule If You Are Not Norway)
(World Bank, Washington, DC, 2012-04)The exhaustibility and volatility of natural resource revenues pose well-known economic challenges, of which those facing oil producers are the most prominent. If oil revenues represent an important share of export earnings and of government revenues, then they can be part of overheating during booms and costly adjustments during downturns, making fiscal policy exacerbate volatility. At the same time, considerations of intergenerational equity suggest that fiscal policy should also preserve part of current oil revenues for future generations. To address both of these challenges, resource-rich countries commonly establish commodity funds, into which part of their resource-linked revenues are deposited and invested in income-generating assets (usually offshore financial assets). A key question in designing such funds is what share of current revenues should be spent and what share saved. Based on recent advisory services offered to the Ministry of Economy and Trade in Kazakhstan, this note summarizes one possible approach, aiming to provide rule-based anchors for sustainable fiscal policy in an oil-producing country. This approach applies traditional permanent-income and debt sustainability frameworks, but adapts the resulting recommendations to the institutional context of the country. Rule-based fiscal frameworks offer strong benefits to countries that are generating significant government revenue from extractive industries. As commitment devices, these frameworks can reinforce fiscally responsible economic management, contain volatility, and preserve fiscal savings for future generations. -
Publication
New Open Economy Industrial Policy : Making Choices without Picking Winners
(World Bank, Washington, DC, 2011-09)This note starts from the premise that policy makers invariably make mistakes, both intentional and unintentional. That requires shifting the focus from one-time choice of winners (sectors, industries, firms, and other organizations) to the process of error detection and error correction of the choices (with corresponding attention to governance). This note shifts the debate on government activism in support of globally competitive industries from a choice of picking/dropping winners to a process of step-by-step transformation of private and public sectors. In such a process, new industrial policy creates its own context for efficient design and implementation in two ways. First, by shifting the focus of analysis and institutional design from private sector to a new public sector capable of providing customized and flexible public goods and enabling private agents to compete globally. The key concept here is heterogeneity (discretionary differences) of institutions: it is almost always possible to find some that are working. The issue is using the ones that work to improve those that don't. This hypothesis assumes that there are nearly always opportunities for development in a given economy, and that some actors, private and public, begin to take advantage of them. -
Publication
M&E Systems and the Budget
(World Bank, Washington, DC, 2010-10)Monitoring and evaluation (M&E) are means to multiple ends. Measuring government activities, constructing and tracking performance indicators across sectors and over time, evaluating programs, these activities can be carried out and tied together with different objectives in mind. It will certainly be possible to use M&E purely as a way to improve transparency and accountability, by making more information on the workings and results of government programs available to the public. One can also focus M&E on managerial purposes, to reward performance inside ministries and agencies. But surely a crucial element of running an effective public sector will be missing if M&E were not used to inform the spending of public money. This briefing note will introduce the main issues surrounding M&E as a tool for budgeting, a system usually referred to as performance budgeting, to help policy makers make strategic decisions about their M&E systems by outlining different design choices and their respective advantages and pitfalls. -
Publication
Defining the Type of M&E System : Clients, Intended Uses, and Actual Utilization
(World Bank, Washington, DC, 2010-09)This is the second note in a monthly series on government monitoring and evaluation (M&E) systems led by the PREM Poverty Reduction and Equity Group under the guidance of Jaime Saavedra, Gladys Lopez-Acevedo, and Keith Mackay, with contributions from several World Bank colleagues. The main purpose of this series is to synthesize existing knowledge about M&E systems and to document new knowledge on M&E systems that may not yet be well understood. The series targets World Bank, donor staff who is working to support client governments in strengthening their M&E systems, as well as government officials interested in learning about the uses and benefits of M&E and in adopting a more systematic approach toward M&E in their governments. -
Publication
Natural Resources and Development Strategy after the Crisis
(World Bank, Washington, DC, 2010-01)Recent events have rekindled interest in the role of primary commodities in development. Was the boom in commodity prices from around 2003 through 2008 just a cyclical event, or does it suggests that prices have entered on a period of secular strength, driven by factors such as demand in big, fast growing developing countries like China? It is notable that, while commodity prices fell sharply from their peak in 2008 with the onset of the global recession, they generally remained much higher than previous recession lows, often as high as in 2005-07, a period of robust world growth. Furthermore, prices have also rebounded smartly over the course of 2009. If a period of sustained commodity strength is imminent, what are the implications for development policies? Development economists have long debated the problems associated with the traditionally high specialization in production and export of primary commodities of most developing countries. Many argue that dependence on primary commodities has proved to be a poisoned chalice or curse for development, which, given this view, necessarily entails structural change and rapid industrialization. Others, however, suggest that sustained high commodity prices could reduce the relevance of an industrialization-focused development strategy for commodity-dependent, low-income countries (LICs). In this note authors briefly review four questions: how dependent are developing countries on primary commodity exports? What is the outlook for primary commodity prices? Is there a natural resource "curse" (or blessing)? What policies can help poor countries best manage commodity resources for long-run development? -
Publication
Implementing Public Expenditure Tracking Surveys for Results : Lessons from a Decade of Global Experience
(World Bank, Washington, DC, 2009-11)Public Expenditure Tracking Surveys (PETS) can serve as a powerful tool to inform prevailing public financial management (PFM) practices and the extent to which government budgets link to execution and desired service delivery objectives and beneficiaries. Since the first PETS in Uganda in 1996, tracking exercises have now been conducted in over two dozen other countries, often as part of core analytical and advisory work related to PFM. This note synthesizes the findings and lessons from a number of recent PETS stocktaking exercises and indicates their potential benefits for enriching PFM and sectoral policy dialogues in a variety of country settings. Key findings include: (i) PETS have proven to be useful as part of a broader policy strategy aimed at improving service delivery results; (ii) PETS has become a brand name for very different instruments, but at its core there is a survey methodology that requires skilled technical expertise and a solid knowledge of budget execution processes; (iii) policy impact in a variety of PETS experiences could be further strengthened by stronger country ownership and effective follow-up; and (iv) the Bank could enhance PETS results through strategic partnering, and greater emphasis on dissemination and communication strategies aimed at involving actors who can foster actions on the ground. -
Publication
Fiscal Policy for Growth
(World Bank, Washington, DC, 2009-04)While the term 'fiscal space' is new, the issue is quite old. Fiscal space refers to availability of budgetary resources for a specific purpose, typically growth-enhancing investment uses, without jeopardizing the sustainability of the government's financial position, or the stability of the economy. The recent interest in fiscal space originated as a reaction to International Monetary Fund (IMF), supported fiscal-adjustment programs that by focusing too narrowly on fiscal-deficit targets often ignored the quality of the underlying adjustment. Affected countries meanwhile advocated for fiscal space for investments in physical and human infrastructure crucial for economic growth. The IMF independent evaluation office, in their study on fiscal Adjustment in IMF supported programs acknowledged this problem, observing that 'much of the fiscal adjustment achieved is through measures that do not assure long-term sustainability and flexibility of fiscal systems to future shocks'. In effect, the improvement of the fiscal balance in the context of IMF-supported programs too often relied heavily in cuts in public investment that improve today's government cash flow at the expense of future economic growth. -
Publication
Thinking about Aid Predictability
(World Bank, Washington, DC, 2008-09)Researchers are giving more attention to aid predictability. In part, this is because of increases in the number of aid agencies and aid dollars and the growing complexity of the aid community. A growing body of research is examining key questions: Is aid unpredictable? What causes unpredictability? What can be done about it? This note draws from a selection of recent literature to bring some clarity to the basic story emerging. The authors start by presenting evidence from the literature on various problems with aid flows. Then authors discuss how researchers use terms like volatility and unpredictability when discussing aid predictability; the suggest that these concepts can be sharpened by introducing two new concepts: expectations and reliability. These new concepts are particularly useful in conceptualizing the problems of unpredictable flows in government budget processes. This approach allows a basic analysis of how timing and different types of aid affect predictability, and the implications for policy making. -
Publication
Pro-Poor Public Spending Reform : Uganda's Virtual Poverty Fund
(World Bank, Washington, DC, 2006-03)The Poverty Action Fund (PAF) was introduced in Uganda in 1998 to reorient government expenditures towards implementing its Poverty Education Action Plan (PEAP) as well as to account for Heavily Indebted Poor Country (HIPC) resource use. This paper notes the successes of the PAR, the negative aspects, and the key lessons learned. Successes include: reorienting budget allocations towards pro-poor service delivery and demonstrating the additionality of debt relief; mobilizing donor resources and harmonizing conditions; and improved budget predictability, transparency, and accountability. The negative aspects include: unbalanced budget allocations, biased budget implementation, partial monitoring and evaluation, and no exit strategy. The key lessons were: To be effective, a Virtual Poverty Fund (VPF) should be simple and limited to the identification of Poverty Reduction Strategy Paper (PRSP) priority expenditures in the budget classification system; a VPF should be introduced in a way that supports rather than replaces the implementation of such comprehensive improvements in budget preparation and implementation; and a VPF does not bypass the need to have a PRSP and an effective budget process that identify priority pro-poor expenditures to be included in the VPF as part of a broader policy framework for growth and poverty reduction.