Public Budgeting and Financial Management in Sub-Saharan Africa: A Critical Survey

Article excerpt

Subramaniam Ramakrishnan*

ABSTRACT. The survey of Sub-Saharan countries shows that after nearly two decades of stagnation, growth is reviving and is likely to receive additional momentum with the pursuit and judicious implementation of further fiscal adjustment efforts. The impact of economic stagnation on the financial management systems is evident in that they continue to be under severe strain despite a series of efforts aimed at their improvement. Lack of accountability and chronically ineffective control of expenditures are two of the major problem areas that need to be addressed. Among other areas that need to be addressed on a priority basis are the revamping of budgetary processes, including the development of a macroeconomic framework and forging more enduring links between planning and budgeting and improved management of foreign aid.

INTRODUCTION

Improvements in budgeting and financial management policies, practices and institutions have now become a critical area for reform in most countries in Sub-Saharan Africa. On the economic scene there are now signs that after more than two decades of stagnation and decline in living standards, growth processes are gaining momentum in a number of countries. There is also enough evidence of a transition to better macroeconomic policies in a number of countries, particularly in regard to trade and exchange regimes; countries that have implemented forwardlooking structural adjustment policies are also beginning to witness higher rates of economic growth.

However, the full potential of the outward-looking policies and the more stable macroeconomic environment is to yet to be realized, even in the reforming countries. Achieving more rapid economic growth and substantial improvements in the living standards of a majority of the population requires much greater attention by the governments in improving their overall fiscal performance and public sector financial management. Government financial management continues to be a major constraint in many countries due to years of neglect, lack of accountability and institutional capacity for planning and management of the national budgets. It is also becoming apparent that sustained improvements in budgeting and financial management and in the allocation of resources are more difficult to achieve compared to the policy reforms already implemented.

This article surveys some of the major problems in this regard and identifies a set of key issues, attention to which might assist a number of governments in improving financial management in the public sector. First, it reviews briefly the recent trends in the economic situation in Sub-Saharan Africa and highlights the importance of fiscal reforms for the success of other reform and liberalization measures that have been implemented in a number of countries. Second, some of the major features of the fiscal systems in Sub-Saharan Africa are discussed. Third, the article reviews some of the major constraints in achieving better fiscal performance and improvements in financial management. These include a general lack of accountability, a weak and unstable revenue base, lack of effective control of expenditures and the critical debt situation. Finally, policy issues that will require attention for improving fiscal management will be discussed and suggestions regarding some directions for change will be presented.

CHANGING ECONOMIC SITUATION

During 1970-80, the average annual rate of growth of the Gross Domestic Product (GDP) was 3.8 percent in Sub-Saharan Africa, compared to 6.9 percent for East Asia and Pacific and 3.5 percent for South Asia. However, during 1980-93, GDP grew by only 1.6 percent a year on an average in Sub-Saharan Africa, compared 7.8 percent in East Asia and Pacific and 5.2 percent for South Asia. Gross domestic savings declined from 18 percent of GDP in 1970 to 15 percent in 1993 in Sub-Saharan Africa, whereas in East Asia it increased from 28 percent to 35 percent and in South Asia from 15 percent to 21 percent during the same period (World Bank, 1995a). …