Decentralization and Municipal Budgeting in Four Balkan States

By Guess, George M. | Journal of Public Budgeting, Accounting & Financial Management, Fall 2001 | Go to article overview

Decentralization and Municipal Budgeting in Four Balkan States


Guess, George M., Journal of Public Budgeting, Accounting & Financial Management


ABSTRACT. This paper attempts to link common features of the Balkan political culture to mechanisms of administrative structure and policy. Centralization is a major feature of the four Balkan countries examined here: Albania, Bulgaria, Macedonia and Serbia. It consists of three components: (1) revenue centralization, (2) state media control, and (3) assignments of insufficient or conflicting authority to manage programs. Variation in these three components by country affects the level of centralization which in turn determines the likelihood of attaining GFOA's four purpose of budgeting. Focusing technical assistance and training on GFOAs four purposes of budgeting facilitates movement of budget systems beyond operations guides to the broader and deeper roles of financial planning, public communications, and policy analysis. In this fashion, incremental changes in administrative systems can lead to positive changes in the political culture that will improve democracy and governance.

INTRODUCTION

The breakdown of the old order in the Balkans in the 1980s was due largely to the incapacity of local institutions to respond to multiple crises. The hidebound and rigid institutional structures of the state could not reallocate economic resources or political power rapidly and effectively to diffuse the crises. Instead, economic deterioration aggravated the political climate and contributed to worsened inter-ethnic relations in the former Yugoslavia, Albania, and Bulgaria. Reprivatization of state industries, political pluralism and media autonomy from the state were widely called for as solutions (Ramet 1996:35). But the forces of democracy were weak in this region. In Montenegro as elsewhere, while the government leadership changed, the old nomenklatura that actually made resource choices, did not (Smith 1998a). Since these policy alternatives to the existing paralysis could operate only in the medium term, the recommendations were ignored by the nomenklatura of each state. Nevertheless, gradually since the late 1980s, each of the Balkan countries have responded to their quite serious economic, political and ethnic crises differently and with different degrees of success.

While in the West a major vehicle for responding to crises of state legitimacy is to revise fiscal policy, in the socialist Balkans, public budgeting and finance was an underdeveloped tool of planning ministries. Budgets were accounting and control statements for plans that despite being politically-driven were largely hidden from the public. The use of budgets as vehicles to analyze economic and service performance problems, or to solicit public perception of problems, was not taken seriously by old line policymakers. There was little interest in allocation of resources through transparent budgets according to technical standards on which citizens could make inputs. This was a major failure of socialist state responsibility in that the budget process was the one place where performance information should have been available and used to redirect policies. In order for it to play that role, the budget has to shift from an accounting mechanism to that of a management and policy tool. This requires not only a new budget format and structures but budget offices that view the budget process in management and policy terms as well.

Since the early 1990s, there has been a considerable amount of work to improve both central and municipal budgeting and finance systems in transitional economies. The work has been performed by outside experts working for: IMF, World Bank, USAID, EC Phare, the British Know-- How Fund, UNDP, and locals utilizing overseas experiences with different systems. While there was little coordination of effort in public budgeting, it is clear that efforts were made to use the budget as tools to achieve: (1) financial planning, (2) communications with the public, (3) operations improvements, and (4) analysis for public policy objectives. …

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