Managing Public Expenditures to Make Services Work for Poor People

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Managing Public Expenditures to Make Services
Work for Poor People

• Discussion with Public Expenditure Thematic Group
• Shanta Devarajan, Shekhar Shah
• WDR 2004
• October 31, 2002

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Objectives

1. Discuss WDR framework
2. Explore questions relating to public expenditure
   management and service delivery
3. Invite inputs from TG on experiences of PE work
   budget formulation, implementation, monitoring
   that suggest what does does not work to improve
   services and outcomes for poor people

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Services are failing poor peopleMDGsGlobal
Aggregates
Eradicate Poverty Hunger
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Growth is not enough
 
 Source Global Economic Prospects 2001, p.42
base case Devarajan (2002)
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Increasing public spending is not enough
Regression line Coefficient -0.055 T-statistic
0.755
Source WDR 2004 Team
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Similar changes in public spending can be
associated with vastly different changes in
outcomes
Source WDR 2004 Team
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And vastly different changes in spending can be
associated with similar changes in outcomes
Source WDR 2004 Team
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Why are services failing for poor people?

• Governments spend on the wrong goods and people

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Benefit Incidence of Public Spending
Source WDR 2004 Team
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Why are services failing forpoor people?

• Governments spend on the wrong goods and people

• Resources fail to reach the service provider
  (Uganda tracking study)

• Weak incentives for effective service delivery

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Examples of ineffective service delivery

• Bangladesh Absenteeism rates for doctors in
  primary health care centers 79.
• Zimbabwe 13 of respondents gave as a reason for
  not delivering babies in public facilities that
  nurses hit mothers during delivery.
• Guinea 70 of government drugs disappeared.
• Costa Rica absenteeism rate is 30 in public
  health facilities.

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Why are services failing forpoor people?

• Governments spend on the wrong goods and people
• Resources fail to reach the service provider
  (Uganda tracking study)
• Weak incentives for effective service delivery
• Demand-side constraints

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Accelerating progress Whatis the problem?

• Economic growth not enough
• More public spending not enough - Why?
• Governments often spend on wrong services
  people
• Resources fail to reach service providers due to
  corruption
• Weak incentives for delivery, monitoring,
  accountability
• Households cant or dont utilize services
  (parents pull children, particularly girls, out
  of school problems of access)
• So, what is needed?

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Development outcomes the hope
Countries with well-designed policies are
supposed to leverage their own external
resources to produce human development outcomes
Benefits
Government
Primary education
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Development outcomes the reality
but, there are many weak links in
implementation, and much needs to come together
to make services work produce desirable outcomes
Government
Leakage of Funds
Policies Institutional incentives
Local Govt
Inappropriate spending (e.g. high teacher
salaries Insufficient supply of textbooks
Providers
Public financing Implementation
capacity Information transparency Institutional
incentives
Low-quality instruction
Clients
Capacity incentives Curriculum
technology Monitoring evaluation
Primary education
Lack of demand
Benefits
Ability to pay Intra-household behavior Community
norms
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Making services work for poor people
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Unbundling the service chain-1
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Policymaker-providerContracting NGOs in Cambodia

• Contracting out (CO) NGO can hire and fire,
  transfer staff, set wages, procure drugs, etc.
• Contracting in (CI) NGO manages district,
  cannot hire and fire (but can transfer staff),
  0.25 per capita budget supplement
• Control/Comparison (CC) Services run by
  government
• 12 districts randomly assigned to CC, CI or CO

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Utilization of facilities by poor people sick
in last month
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Unbundling the service chain-2
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Client-ProviderEDUCO Program in El Salvador

• Ministry of Education contracts with parent
  associations to deliver primary education in
  rural areas
• Parents associations
• Hire and fire contract teachers
• Visit schools on regular basis

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EDUCO impact of 1 more class visit by ACE on
test scores
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Unbundling the service chain-3
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Girls education in Bangladesh FSSAP

• Female Sec. Sch. Assist. Project criteria
• Attendance in school
• Passing grade
• Unmarried
• Girls receive scholarship deposited directly into
  to account in their name
• School to receive support based on number of girls

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Unbundling the service chain-4
Donors
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Emerging Messages

• Incentives, Choice, Accountability
• No single solution for every service, every
  country
• Public, private, NGO provision of services all
  possible
• Matrix of characteristics approaches
• Most neglected actor the client
• Complementarity between improved service delivery
  increased financing
• Need to understand political economy
• Aid modalities affect service delivery

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Public Expenditures and Service Delivery in the
WDR

• Set within WDR approach of unbundling service
  delivery chain
• Discussed as primary cross-sectoral issue for
  improving service delivery
• Entry point for broader public sector reform
• Civil service, decentralization, ME, regulation,
  anticorruption
• Scope for integration priorities within
  government, across sectors, among donors, and
  over time

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Public Spending Service Delivery

• Well-functioning PE systems vital for health,
  education, water sanitation services
• Budget allocations should reflect determinants of
  health and education outcomes
• However, PEM systems fall short of this ideal
• Often not backed up by good policymaking
• Do not allocate adequate resources
• Lack outcome orientation
• Suffer from conflicting political bureaucratic
  interests
• Tradeoffs between sectors and over time not made
• Integration across government missing

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Cross-cutting PE Reforms for better service
delivery

• Raise results-orientation of public expenditure
  programs performance budgeting
• Update, regulate, and harmonize public
  procurement
• Update legal regulatory framework for financial
  management
• Improve accounting and audit systems at central
  and local levels
• Implement regular expenditure tracking surveys
• Delineate clear responsibilities for ME,
  establish clear service standards

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A Large Agenda PE work and Poverty Reduction
Quality of Policy Process PRSP PRSC
PE Analysis
Fiscal Sustainability
Allocative Efficiency
Incidence Analysis
Poverty Reduction
Fiscal risk
Service Del.survey
Tracking surveys
PE Management
Budget Formulation
Budget Execution
Reporting oversight
Procurement
Civil Service Reform
Decentralization
Related items
Source Rajaram, PREM Learning Week, June 2002
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Questions for discussion

• Ways of cutting into and assisting countries
  manage this large, growing agenda when
  capacities are low (e.g. HIPC)
• Enhancing service orientation of budgets
• Integrating across PRSPs, sectors, donors
• Experience with MTEFs
• Poverty impacts
• Integration of social sectors
• Enhancing monitoring and evaluation
• Role of participatory budget analysis

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Objectives Today

• Discuss WDR framework
• Explore questions relating to public expenditure
  management and service delivery
• Invite inputs coordinated through TG
• Country-specific material for boxes
• Background notes on key questions in PE for
  making services work for poor people
• Stories of success and failure