Budgeting

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TASK: Types of budgets in developing countries and the challenges facing budgets in those countries

Introduction
National development planning continues to be a dominant policy instrument in many low-income and emerging market economies. Similarly, public investment plans (PIPs), which were in vogue in the 1970s, then fell from grace as theories of economic development based on capital accumulation lost influence, are now fashionable once more. What explains these developments? Why is planning deemed useful and relevant for developing countries, but has become outmoded in more advanced countries In addition, wide-ranging discussions of government policies, with varying degrees of openness, take place either before general elections (in countries with single party governments) or immediately after elections (as part of the process of forming a coalition government). Comprehensive reviews of expenditure policies, including systematic analysis of their impact and performance, are also carried out at regular intervals in Australia, Canada, the Netherlands, New Zealand, the United Kingdom and other advanced countries. A few countries (for example, New Zealand, Norway and the U.K.) have developed sophisticated tools for managing capital assets. These approaches are deemed more flexible and effective than traditional five-year development plans. Such elaborate approaches to policy-making are not yet possible in developing countries, most of which do not have comprehensive MTEFs, mechanisms for collective decision-making through cabinet, or comprehensive spending reviews in place. Nor do these countries have sufficient capacity to undertake this kind of analysis. It is likely to take many years for such an evolution to occur. In the meantime, how should developing countries be advised to move forward? It would be argued that there are two key issues on the planning/budgeting relationship which need to be clearly distinguished. First, how prominent a role should planning play in a developing country, especially one with substantial reserves of natural resources? Second, what steps should a country take to integrate its planning/budgeting functions and processes, and what are the appropriate institutional arrangements (for example, unified planning and finance, or separate agencies)?

PRINCIPLES OF BUDGETING
There are certain fundamental principles that accompany the budgeting process. This is because of its importance in the overall development of a country. These principles aimed at making the entire process transparent and participatory. They include: •Comprehensiveness: Budget should be able to contain all financial estimates that government intends to work with. There is need to ensure that no other funds or extra budgetary expenditure is entertained. •Clarity: The documents called budget should be very clear for the people to understand and be able to make input. •Regularity: Regularity should be maintained in the budget process. It means to present budget at a time suitable to tally with the beginning of every fiscal year and also to last for a specified period. •Publicity: Budget should be given an open publicity. The reason is that it affects the lives of the people and how their wealth is distributed and expend. •Exclusiveness: Budgeting should be seen as an exclusive financial process and nothing else. •Accuracy: There is need to ensure that the revenue and expenditure in a budget is correctly estimated. In essence, the estimates should be close enough to reality. •Adequacy: Budget estimates should represent the needs of the government and the citizens. Budget also should be able to identify altogether the aspirations and problems of the government and the economy.

Types of budgets in developing countries

A. Balanced Budget ↓
Balanced budget is a situation, in which estimated revenue of the government during the year is equal to its anticipated expenditure. Governments...
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