Wage Spending Flexibility in Low-Income Countries

Abstract

A fundamental characteristic of performance budgeting is the shift from input control toward accountability for results. There are many types of performance budgeting with much variation in their complexity and ambition (see Chapter 1). All, however, carry with them a presumption that those in charge of policy implementation at the disaggregated micro level—primarily, managers of government departments and agencies—are held to account for what they are achieving rather than for remaining within prescribed input limits. The basic idea is that such managers understand better than decision-makers at the central level how to organize their inputs to achieve specific objectives. In contrast, centralized control of budgets at the line-item level is believed to stifle innovation at the micro level, move incentives toward spending rather than economy, and dilute the focus on policy objectives (Roberts, 2003).

1. We gratefully acknowledge invaluable comments from Marc Robinson and participants at the Seminar on Performance Budgeting held at IMF Headquarters (Washington, DC), December 5–7, 2005. All remaining errors, of course, are ours.