Ethical Dimensions of Public Expenditure Management

Jul 24, 2011

Ethical Dimensions of Public Expenditure Management

This paper introduces and explains Public Expenditure Management (PEM). Using examples from various countries and time periods, the paper shows how unethical budget practices can create policy distortions, reduce accountability, and promote fiscal instability. The lack of formalized laws or protocols on how to formulate a budget is cited as a cause for unethical behavior in PEM. The paper details three good practices of PEM: 1) stewardship of resources, ensuring an accurate evaluation of current finances and their future sustainability; 2) operational adequacy – assessing whether the PEM will deal with current and future tasks of the government; 3) decision-making approaches – estimates should be clear in their intent and in the intended beneficiaries. Using these good practices as a guide, the paper suggests four solutions: 1) rules and fiscal responsibility legislation; 2) identification of risks; 3) transparency and accountability; 4) infrastructure development.

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