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The Strategy of Budget System Reform in Emerging Countries

Author: JACK DIAMOND
Published in PFM, Vol. 2 No. 3

This paper examines the process of budget system reform implied by
moving from traditional centralized input-oriented systems to more modern
devolved performance-based systems. Based on the experience of recent
attempts at this reform in emerging countries, the required sequencing of
steps in this process is stressed. The strategy outlined involves a three-prong
approach, requiring measures to increase the flexibility in the agency
operating environment, provide more certain resourcing for spending
agencies, and exert pressure on agencies to improve their performance. The
paper stresses firstly, the need to progress on all three fronts
simultaneously, and secondly, to base these reforms on a firm platform of
agency management skills. The need to attain some basic public
expenditure management thresholds in the area of restructuring the budget
and its classification, improving the accounting system, developing a
financial management information system, and strengthening internal
financial management skills, is highlighted.

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