Budget FY21: How to ensure we get value for money

The budget for FY2020-21 has been announced and the commentary has begun. Experts and various stakeholders are commenting on various aspects of the budget, such as changes in tax rates, expenditure allocations, the realism of the revenue targets and the adequacy of allocation to various sectors and activities.

An important question, however, is implementation.  And, implementation is not just about spending money. It is also about getting results. How do we ensure we get value for money?

Consider the 23 percent increase in the allocation to the health sector in this year's budget. This is a substantial increase for a sector where historically the agencies involved have had a hard time spending the money allocated to them,

How do we ensure that the very substantial increase in allocation this year leads to good results and is not wasted?

The risk of the latter happening is real. We have already seen news reports of artificially inflated procurement prices for purchases in the health sector. Imagine what may happen when suddenly there is a huge increase in allocations and the agencies involved are under pressure to show that they are spending the money. In such a situation, how do we ensure that the expenditures lead to the results we desire?

For this, we need a good monitoring system.

As a cynic once said, a politician needs to be good at making promises and very good at explaining why the promises could not be kept.  Ministers often get away with broken promises because their commitments are expressed in vague and rhetorical terms.

Accountability thus requires a system for converting vague, general promises to precise indicators that can be monitored. What are the specific actions that will need to be taken, and in what sequence? A good monitoring system helps unbundle the general objectives into specific monitorable actions.     

Monitoring project implementation is not easy. Even more difficult is evaluating project impact. Nonetheless, it is worthwhile to develop monitorable indicators because the exercise itself could help clarify thinking on how projects may be designed.

This means monitoring is not a thing you leave for the future. You think about monitoring right at the beginning when you design a project or a program.

Organizations who regularly use performance indicators have found it useful to distinguish between four types of indicators: input, output, outcome and impact indicators. An example will clarify the relevance of each indicator and the distinction between them.

Let us begin by asking the all-important question: why do we argue for an increase in expenditures in the social sectors, such as health, education or social protection? It is not the expenditures per se that is important but what we hope to achieve through these expenditures.

This brings us to a critical but oft-neglected dimension of any government program or project; i.e. its objectives. Why are we doing what we are doing? Clarifying the objectives of a project is so critical to identifying monitorable indicators that half the task is done once the project or program goals have been properly spelt out.

Let us consider the example of public expenditures on health and education. The objective here is not spending the money per se but something else, such as improved access to health services, education, and ensuring better quality of such services.

It is necessary to ensure that this additional money in health sector is efficiently spent. The photo shows a 10-year-old cancer patient waiting with her mother on the pavement adjacent to Dhaka Medical College as the authority in charge delays her an admission. Photo: Mumit M

Why do we want these?

Firstly, because these are worthwhile by themselves. A well-educated and healthy population is itself an indicator of development.

Secondly, because human development, in turn, facilitates other dimensions of development. In order to achieve our goal of wider access to, and better quality of social services, we may need to build more hospitals, clinics or schools, provide them with better doctors and paramedics or teachers and equip them with the necessary supplies. And these, in turn, may require greater allocations in the budget.

Although we did not put it in those terms, the above paragraph provides a real-life example of the input-output-outcome-impact indicators framework I mention above.

Increased budgetary allocations to education or health are like inputs. They are intended to produce some outputs, such as more hospitals and hospital beds, more schools, better doctors and other medical professionals, more qualified teachers or greater supply of the necessary equipment, books, medicines etc.

However, achieving these outputs is not the end-objective. We want these outputs because we believe that these will lead to better access to social services and improve the quality of these services. These are the outcomes we expect from the increased budgetary spending on education and health. And we want all these because we expect these to have an impact on development.

The distinction between output, outcome and impact is important. Failure to comprehend this could be the cause of much confusion in the design and evaluation of many projects. Real world experience tells us that such confusions are common.

In real-life projects, the inputs may not necessarily lead to the outputs, the outputs to the outcome and so on. Thus, the mere allocation of additional money in the budget may not lead to more schools and hospital beds, more books and medicines, and better teachers and doctors. Money may be spent inefficiently, for instance, siphoned off by corrupt contractors and government officials.

When the inputs do not lead to the desired outputs, you have a deficiency in project implementation, which is different from poor project design.

But even when the money is well-spent, we may not see the desired outcome. We may build more schools, and provide them with better teachers and good supplies only to find that all these made little difference to the population.

This may suggest that it is not the availability of schools, but some other factors which are the real hurdles to people's access to education.

Similarly, we may have more hospital beds, but large chunks of the population may be deprived of the benefits because they cannot afford to pay.

If common people's access to these services is indeed our goal, then these factors should be addressed in addition to, or instead of, building more schools or hospitals. This is an issue of project design. A project may be efficiently implemented, and the project outputs realized. But if the design is deficient, the desired outcomes would elude us. The output of a project is thus not the same as its outcome.

To conclude, proper accountability requires that we convert ministerial promises to precise monitorable indicators. But it also means that we clearly distinguish between the input, output, outcome and impact indicators.

If we do so, we will be better at evaluating government projects and programs. We will be less impressed, for example, with mere increases in budgetary allocations to a particular sector. 

We will rather emphasise this additional money is efficiently spent. More importantly, we will ensure whether it really makes any difference to our developmental goals.

A government will no longer score well just by showing that it has spent more money irrespective of the impact on growth or welfare. This, in turn, will force governments to think more carefully about the objectives of any government program or project.

In this article, I have largely used one example of government programs, i.e., budgetary expenditures on education and health, to illustrate my arguments. However, much of what I had to say applies to other programs or projects such as highway project, a bridge, a financial sector reform program, a fund set aside in the budget for sick industries, or a think-tank funded by public money.

The bottom-line is clear. Until we develop a culture of insisting on precisely monitorable indicators, we will not be able to ensure accountability on the part of anyone who uses public resources. And we will not get value for money from our budgetary allocations.

Akhtar Mahmood, recently retired from the World Bank Group. He was a co-author of the World Bank Group's Private Sector Development Strategy in 2002