Ten easy steps to development! Then why is it so hard to do so?

1. Adopt an effective policy matrix in which to prioritise the allocation of finite resources.

Such prioritization is best guided through a broadly based participatory process of program identification and selection, a full appreciation of the resource envelope within which prioritization choices must be made, and by the effective monitoring of measurable outcome indicators. For most developing countries the focus is on economic growth and poverty reduction incorporating strategies for meeting the Millennium Development Goals agreed with the UN General Assembly. This widely adopted approach may be largely reflective of the requirements for participation in the IMF’s Poverty Reduction and Growth Facility (PRGF) program. However, as countries have progressed there has been a corresponding evolution of country strategies to reflect more private sector promotion, infrastructure development and economic growth. However, in a number of countries there are only limited considerations made on realistic sector resource constraints to facilitate meaningful budgetary processes in respect of public investments. Some argue that without significant fiscal space, it is near impossible to establish a meaningful policy matrix. Often, in the case of developing countries the monitoring of budgetary outputs and outcomes is weak or non–existent. Given these observations, it should not be surprising that there is little coordination between sector plans, and that the investment programs serves as much a laundry list as it does a rational theme for meeting development objectives within a clear consistent national development framework.

2. Implement an effective budget planning and preparation process which has a strong bottom-up dimension, participation from a broad variety of stakeholders and is fully cognizant of the relationships between budgetary resource allocations and outcomes. A budgetary process that fully reflects forward linked recurrent charges to investment and that is diligent about ascertaining debt sustainability.

This in turn implies the adoption of a functionally based multi-year fiscal framework that properly incorporates the national development objectives. Further it requires the corresponding coordination of Government Ministries, Departments and Agencies and their effective participation in the budget preparation process. The implementation of the budget requires the approval of the legislature. Such approval should only come after vigorous debate to assure that fiscal policy is sound and that the budget is consistent with policy objectives.

3. Develop effective and fully functioning institutions that are well capable of addressing policy, regulation as well as execution across all sectors reflected in the budget and key to meeting service delivery requirements, and across all districts of the country.

The absence of effective or appropriate institutions can lead to informal institutional arrangements to fill in the gaps. Such informal institutional arrangements can lead to abuse through patronage and corruption.

4. Effect an effective and comprehensive public finance management legal and regulatory framework that holds public officials accountable; one that has the clarity to guide the practice of public finance management in an unambiguous way; promotes transparency; and has the basis to establish auditable standards against which sub-optimal practice can be readily defined and offences sanctioned.

Such a legal and regulatory framework must meet these objectives as well as be flexible to properly accommodate reform efforts. This is achieved through a proper hierarchy of constitution, laws and decrees, regulations, manuals and circulars with a clearly defined chain of corresponding officers empowered to issue such regulatory instruments.

5. Introduce distinct political administration structures with clear assignments of roles and responsibilities between national and local institutions for service delivery and infrastructure development.

This must be backed by clear and transparent arrangements for the collection of revenues by the local communities, a transparent vertical and horizontal allocation of funds and transfers from the Central Government to the local communities and the accurate and timely tracking of such flows.

In many developing countries local authorities remain weak as institutions and there is still little clarity in the distinction of the roles and responsibilities of the assemblies from the local executive Authorities. In many developing countries traditional councils present another level of sub national government which introduces another challenge to transparent resource allocations and clear roles and responsibilities and singular lines of accountability.

6. Ensure sound budget execution process that operates within the context of a clear and consistent legal and regulatory framework that ensures budget implementation in the context of transparency and accountability.

The budget execution process requires effective revenue administration, debt management, cash management, predictable and timely budget releases, effective budgetary control, functioning establishment and commitment controls, sound expenditure management, regular and timely reconciliation and in-year expenditure reporting. It requires comprehensive documentation recording and record management and public access to budget estimates, budgetary and financial reports. The budget execution process occurs across the financial administration network which in many developing countries remains weak.

7. Operate a sound procurement system that is fair, economically efficient, transparent and accountable and is properly linked to the budget through the appropriate use of procurement plans and commitment control systems to ensure a procurement programme that properly reflects the budgetary intent; and achieves value for money.

8. Introduce effective internal controls, checks and balances that ensure that regulations and procedures are implemented in practice; that fiduciary risks are identified and effectively managed and regular internal audit reporting is disseminated to the accounting officer and the supreme audit institution. There must be timely and complete follow up on internal audit findings.

9. Introduce regular, timely and accurate financial reporting, premised on effective reconciliation procedures that provide an effective basis for management decisions and guidance.

This requires the implementation of universal accounting standards as well as a chart of accounts that is fully consistent with the budget classification. Financial reporting and management is greatly enhanced by automating recording, control and reporting of accounting and financial transactions.

10. Emphasize strong independent audit fully competent to operate and with adequate resources to achieve full audit coverage and be effective and effective parliamentary oversight.

This requires a supreme audit institution that provides regular and timely audit reports and is diligent about tracking follow up on the audit findings. Parliamentary oversight is a crucial element of assuring budgetary implementation consistent with the fiscal policy and compliant with the appropriations act.

These ten steps to development are easy to summarise in a couple of pages, but in practice each of the steps is fraught with many challenges and difficulties. What are some of the challenges to implementing these steps in developing countries? Let us talk about these challenges. These challenges and their solutions are explored in greater depth in idilmat’s courses (http://www.idilmat.com/Programmes/Default.aspx)