The global context:

During the opening session of the conference Jim Shultz from the Democracy Center in Bolivia and Aurelio Vianna from the Institute of Socio-Economic Studies (INESC) in Brazil, spoke about the challenges of globalization to our work as budget activists. 

 
Aurelio Vianna and Jim Shultz gave speeches on globalization

Budget analysis usually takes place at national or sub-national level, but the external influences on the budgets of developing and transitional countries are such that economic globalization and the influence of multilateral institutions can not be ignored. When we are studying the budget we must understand the power relations at play at all levels.  The global context limits our governments’ capacity to respond to issues at national and sub-national levels, and, while it must not be allowed to paralyze internal debate and activity, it must be acknowledged and understood.

What influence have the IMF and World Bank?  
The budget process should be bottom-up and participatory.  It should be formulated on the basis of national priorities and needs as expressed by the people and then presented to the world.  However, under the influence of the International Financial Institutions the opposite is the case.  First a country assistance strategy is developed, from which the budget is derived.  

When our countries make agreements with the IMF for borrowing or rescheduling existing debts they are committed to structuring the economy to generate a primary surplus.  As the opportunity for painless, rapid economic growth is generally not available this translates as cuts in social spending and investment and an increase in debt service payments.  In Brazil 41% of total expenditure is on service of public debt.  

To the IMF the government of a country consists of the Ministry of Finance.  But agreements made at this level have an impact on all other departments and levels of government.  For example the requirement for primary surplus is passed on from national level government to the sub-national levels, who cannot create public debt while the national government is trying to create a surplus.  In effect, this means that the authority of sub-national bodies is undermined, as they did not make any agreements with the IMF but are still working to their constraints. 

The money that is borrowed in return for these agreements is not used for projects or development, it is used for adjustment.  This is money for the privatization of companies, to make and implement macro-economic policies.  The reprioritization of the budget means that loans need to be sought to fund social projects.  However, in a middle-income country like Brazil the answer to under-investment in social sectors should be in the reprioritization of the budget, not in loans.  

What can we do?  
The intersection of budget analysis and research on economic globalization provides a rich and important seam of work. 

• Research the impact of the policies and conditions of international donors on the public budget: we need to understand the extent to which the national budget is defined by external forces, through conditions on loans and structural adjustment policies.  We also need to monitor the use of funds from debt relief packages such as the HIPC initiative; 

  click here to read the Democracy Center article on privatization protests in Bolivia

• Research the implications of privatization: economic policy in most of our countries is driven by the neo-liberal model which advocates privatization of public services and enterprises.  This is adopted in part through pressure from international lenders and in part due to the perception that privatized = modern.  Civil society in Latin America is standing up against such privatizations and needs to develop skills and techniques to monitor the accessibility and quality of privatized services and the use of funds gained through their sale. 

• Work as an international network working on issues that are not confined to national borders:  we can share tools and techniques for the analysis described above, and can add value to each others work or take on truly international issues related to economic globalization and with implications for each of our countries. 

Jim noted that we need to balance our work with an understanding of the issues and a capacity for action.  These are the two wings of the bird, without both of which we cannot take flight.  

Questions and comments:  
After the speeches, a lively debate was generated with examples of the constraints of international policy in different countries, and of different reactions and responses to these constraints.

In West Bank/ Palestine the situation is complex, with a government which receives revenue piecemeal from donors in response to proposals based around donor criteria and interests.  This situation requires higher skills of economic understanding and intricate networking to establish the relationship between the budget, local needs and global interests.  Maha Abu-Dayyeh asked, “how can we build up the capacity of local institutions to do this before it is too late?”

In Kenya, the influence of international donors is felt, but in the context of government incompetence and disinterest it can sometimes be welcome as it offers the only accountability to be found.  If restrictions are not placed on the government they will continue to expand in order to absorb more loans, of which the population see no benefit.  Betty Maina, of the Institute of Economic Affairs, stated, “we are not too underdeveloped to have a balanced budget.” 

Alexander Sungurov comments on the globalization session.

Alexander Sungurov, from Strategy Centre, mentioned the experience of a community of NGOs working in Russia as a link between those in power and the community on issues of privatization.  Creating links between IFIs and civil society can enhance global responsibility.  

Discussion followed about opportunities to make the budget more responsive to people through increased participation in the budget process, and through internationally generated initiatives such as the PRSP process.  In India this focuses on a right to information campaign, while in Bangladesh civil society and researchers have been making positive interventions to make the budget more participatory and accountable to people.  Priorities need to be set by local people, based on a database accessible to them, but the local level must be strengthened before the international level can be tackled.

Poverty framework
for budget analysis