3 Budget Transparency Fairy Tales: Afghanistan, Liberia and Mongolia

Oct 21, 2010

The Open Budget Survey 2010 identifies 3 unlikely budget transparency Cindarellas in Afghanistan, Liberia and Mongolia. While the stroke of midnight may still reverse their fragile gains, these 3 poor countries have shown how rapidly budget transparency can be improved.

In this post we present some extracts from the 2010 OBS report that describe their budget transparency reforms as well as the drivers of these reforms. In all three cases donors played an important role. This is a welcome development because the OBS shows that aid dependent countries are generally less transparent than other countries.

Afghanistan’s Finance Ministry’s first steps

Afghanistan’s OBI score increased from 8 in the 2008 Survey to 21 in 2010, a jump of 13 points. This improvement is a result of the government’s decision to publish key budget documents, such as the Mid-Year Review and the Audit Report. Although these are very positive developments, the government’s continued failure to publish the most important budget document, the Executive’s Budget Proposal, ensures that the country’s OBI score remains low.

What inspired these changes?

The improvements in in Afghanistan can be attributed to the increased technical capacity of staff within the Ministry of Finance, as well as to the assistance the country receives from international advisors and experts funded by international development agencies. The OBI 2008 found that the Afghan government produced many of the key budget documents but was not publishing them. After the results were published, the local OBI researcher held discussions with the Ministry of Finance to explain the OBI’s budget transparency criteria and encouraged the government to publish the budget data that they were already producing. These discussions may have contributed, at least in part, to the government’s decision to publish some reports that were not published earlier.

Since 2002 several donors have worked closely with the Ministry of Finance and provided technical assistance to help the government manage donor funds more effectively and in a more transparent manner. For instance, the government used the World Bank’s support to install and operate the Afghanistan Financial Management Information System. The Ministry of Finance has been using this financial management system on an ongoing basis to manage the core operating budget of the government and produce detailed monthly reports on the execution of the budget (which are made available online).  In addition to its efforts to enhance the transparency of the government-funded budget, the Ministry of Finance is also making substantial efforts to enhance the transparency of the donor-funded external development budget (which comprises a significant share of public sector spending), through a development assistance database and an annual donor financial review.

While these improvements to the public finance management system have been ongoingfor a number of few years, the result of these efforts in the form of timely, comprehensive, and accessible budget reports has become visible more recently. Further, at a donor conference in Kabul in July 2010, the international community committed itself to channeling up to 50 percent of its assistance through the Afghan government budget if they begin to meet certain conditions, including improving transparency mechanisms and reducing corruption during budget execution.

Liberia’s new broom

Liberia’s OBI increased from 3 in the 2008 Survey to 40 in 2010, a remarkable jump of 37 points. The improvements also came about because the government started publishing  Executive’s Budget Proposal, In-Year Reports, the Mid-Year Review, and the Audit Report.

What inspired these changes?

The improvements in Liberia’s OBI score were driven by a strong, deliberate reform effort after the formation of a new government in 2006 that led to major transitions, including within the Ministry of Finance. First, in 2007 the government began to implement reforms in its public finance management systems, prompted in part by the its desire to join the Heavily Indebted Poor Countries Initiative and benefit from debt cancellation. Liberia also wishes to attract more direct budgetary support from donors.

Second, the legislature in Liberia has been active in supporting budget transparency. In 2008 the Liberian legislature enacted a Public Finance Management (PFM) Law that clarifies the budget system to be followed by the government. The legislature also approved a law that limits the amount of funds the executive can transfer from one administrative unit to  another at its own discretion; large transfers from one administrative unit to another now require prior authorization from the legislature.

Third, the Liberian Supreme Audit Institution (SAI) has been exceptionally active in promoting budget transparency and accountability. The SAI has begun to publish its Audit Reports, as well as press releases on the Audit Reports, on the same day it submits these reports to the legislature. The SAI has also begun to distribute copies of its Audit Reports to civil society organizations and make them available in schools and public libraries. The SAI holds open forums in various provinces and invites communities to ask questions and provide suggestions. The SAI has established a hotline that people can call, and many of the SAI’s audits are undertaken in response to recommendations from the public. The passage of the PFM law and the establishment of the principle that budget documents should be published are very positive signs for the future of open budgets in Liberia. Liberia’s desire to attract direct budgetary support also is a clear incentive to maintain these achievements and make further progress. However, the precise direction and pace of future reforms will depend in part on the outcome of elections scheduled for 2011 and the commitment of the new administration to continued reforms.

Mongolia bold but fragile reforms

Mongolia’s score on the OBI doubled from 18 in the 2006 Survey to 36 in 2008 and further increased by 24 points to 60 in the 2010 Survey. The remarkable improvement in Mongolia’s OBI score is primarily due to the fact that the government began to publish budget documents that had previously not been available to the public, including the Executive’s Budget Proposal in 2007 and the reintroduction of public Year-End Reports in 2008. Moreover, between the 2008 and 2010 Surveys, the Executive’s Budget Proposal was expanded from a 50-page document to a 300-page document, thus providing more comprehensive information on revenues and expenditures. Additionally, the Mongolian SAI recently began making its Audit Reports available to the public on its new website.

What inspired these changes?

These improvements are attributable to a combination of technical changes instituted by the government, the commitment of individual public officials, including the Minister of Finance and head of the Budget Department, and pressure exerted by donors and civil society. Budget reforms implemented since the mid-2000s have received technical or financial support from international partners, notably the World Bank, the IMF, and the Asian Development Bank. For example, the World Bank is implementing a governance assessment program at the Ministry of Finance, which has helped create fiscal information databases.

Some of the advances in budget transparency made by the Mongolian government have arguably been “easy wins,” such as the publication of the Executive Budget Proposal, which was produced only for internal use prior to 2007, when the government began posting it on a government website. But given the erratic dissemination of such budget documents as the Year End Report and Audit Report, which were made available in 2004 but not again until 2008, there is cause for concern about the sustainability of Mongolia’s achievements in budget transparency. This is heightened by the lack of legal requirements in the 2002 Public Sector Management and Finance Law, which requires disclosure of budget information to Parliament and other government bodies but does not specifically require dissemination to the public. Nor has Mongolia passed a Freedom of Information law despite intense domestic and international pressure since the early 2000s. Passage of the proposed Integrated Budget bill, part of recent IMF conditions attached to aid, promises to redress the lack of legal requirements for public dissemination, as well as the absence of channels for public participation in the budget process.

Demands for greater access to information by citizens and civil society groups have played a critical role in enhancing transparency in Mongolia’s mining sector, which has become the main contributor to economic growth and an important source for government revenue. Despite the noted improvements in the level of transparency, Mongolian CSOs remain particularly concerned about the continuing lack of transparency in government procurement practices.

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