Managing Public Expenditures to Make Services Work for Poor People Discussion with Public Expenditure Thematic Group Shanta Devarajan, Shekhar Shah WDR

Managing Public Expenditures to Make Services Work for

Poor People

Discussion with Public Expenditure Thematic Group

Shanta Devarajan, Shekhar Shah

WDR 2004

October 31, 2002

Objectives1. Discuss WDR framework 2. Explore questions relating to public

expenditure management and service delivery

3. Invite inputs from TG on experiences of PE work & budget formulation, implementation, monitoring that suggest what does & does not work to improve services and outcomes for poor people

Services are failing poor people:MDGs—Global Aggregates

Eradicate poverty and hunger

People living on less than $1 a day

23 .4

29

14 .5

0

10

20

30

1990 1998 2015

Eradicate Poverty & Hunger Achieve Universal primary education

Net primary enrollment

8 4

8 1

1 0 0

8 0

8 5

9 0

9 5

1 0 0

1 9 9 0 1 9 9 9 2 0 1 5

Universal Primary Education

Growth is not enough

Poverty Headcount % living on less than

$1/day

Primary EducationEnrollment

%

Infant Mortalityper 1000

Target

2015 Growth alone

Target2015

Growth alone

Target2015

Growthalone

EAST ASIA

14 3 100 100 14 33

ECA 1 1 100 100 9 22

LAC 8 7 100 100 14 30

MENA 1 1 100 92 20 46

SA 22 18 100 87 29 70

AFRICA 24 40 100 64 33 87

Source: Global Economic Prospects 2001, p.42 base case; Devarajan (2002)

Dominican Republic

Sudan

Belarus

Ukraine

Venezuela, RB

Azerbaijan

Ethiopia

Guatemala

Hungary

Bulgaria

Kuw ait

Zambia

Trinidad and Tobago

MexicoPeru

China

Lao PDRRomania

Burkina Faso

Malaw i

Czech RepublicSlovak RepublicParaguay

Uganda

Macedonia, FYRBotsw ana

Chad

Iran

Zimbabw e

Senegal

El Salvador Poland

Costa Rica

Togo

Chile

India

Congo, Rep.

Albania

Turkey

Kenya

NepalPhilippines

Korea, Rep.

Thailand

Mozambique

Mali

Argentina

Nicaragua

Guinea

JamaicaMauritius

Mauritania

Gambia, The

Malaysia

Oman

Eritrea

Brazil

Benin

-100

-80

-60

-40

-20

0

20

40

60

80

-160 -120 -80 -40 0 40 80 120 160

Public spending on education per student(Percent deviation from expenditure predicted by GDP per capita)

Pri

ma

ry c

om

ple

tio

n r

ate

(Pe

rce

nt

de

via

tio

n f

rom

ra

te p

red

icte

d b

y G

DP

pe

r c

ap

ita

)

Increasing public spending is not enough

Regression line:Coefficient: -0.055T-statistic: 0.755

Source: WDR 2004 Team

Similar changes in public spending can be associated with

vastly different changes in outcomes…

Primary completion rate

10

20

30

40

50

60

1980s 1990 1990s 1999

Ethiopia

Malawi

Public spending on primary education per child

0

2

4

6

8

10

1980s 1990 1990s 1999

Ethiopia

Malawi


…And vastly different changes in spending can be associated with

similar changes in outcomes

Primary completion rate

50

60

70

80

90

100

1980s 1990 1990s 1999

Venezuela

Thailand

Public spending on primary education per child

50

100

150

200

250

300

350

1980s 1990 1990s 1999

Venezuela

Thailand


Why are services failing for poor people?

• Governments spend on the wrong goods and people

Benefit Incidence of Public Spending

Health Education

Country/ year Poorest 20% of population

Richest 20% of population

Poorest 20% of population

Richest 20% of population

Cote d’Ivoire (1995) 11 32 13 35 Ghana (1992) 12 33 16 21 Guinea (1994) 4 48 5 44 Kenya (1992) 14 24 17 21 Madagascar (1993) 12 30 8 41 South Africa (1994) 16 17 14 35 Tanzania (1992/93) 17 29 14 37


Why are services failing forpoor people?


• Resources fail to reach the service provider (Uganda tracking study)

• Weak incentives for effective service delivery

Examples of ineffective service delivery

• Bangladesh: Absenteeism rates for doctors in primary health care centers: 79%.

• Zimbabwe: 13% of respondents gave as a reason for not delivering babies in public facilities that “nurses hit mothers during delivery”.

• Guinea: 70% of government drugs disappeared.• Costa Rica: absenteeism rate is 30% in public

health facilities.

Why are services failing forpoor people?


• Resources fail to reach the service provider (Uganda tracking study)

• Weak incentives for effective service delivery

• Demand-side constraints

Accelerating progress: Whatis the problem?

• Economic growth not enough• More public spending not enough - Why?

– Governments often spend on wrong services & people– Resources fail to reach service providers due to corruption– Weak incentives for delivery, monitoring, accountability– Households can’t or don’t utilize services (parents pull

children, particularly girls, out of school; problems of access)

• So, what is needed?

Development outcomes: the hope

Benefi

ts

Gover

nment

Primary education

Countries with well-designed policies are supposed to leverage their own & external resources to produce human development outcomes…

Clie

nts

Government

Providers

Loc

al G

ovt

Benefi

ts

…but, there are many weak links in implementation, and much needs to come together to make services work & produce desirable outcomes

Leakage of Funds

PoliciesInstitutional incentives

Primary education

Inappropriate spending (e.g. high teacher salaries; Insufficient supply of textbooks

Public financingImplementation capacityInformation & transparencyInstitutional incentives

Low-quality instructionCapacity & incentivesCurriculum & technologyMonitoring & evaluation

Lack of demandAbility to payIntra-household behaviorCommunity norms

Development outcomes: the reality

Policy-makers

Clients

Providers

Contract relationships Service

relationships

Voice Relationships

Making services work forpoor people

Providers

ClientsPolicy-makers

Contract relationship Service

relationship

Voice relationship

Unbundling the service chain-1

Policymaker-provider:Contracting NGOs in Cambodia

• Contracting out (CO): NGO can hire and fire, transfer staff, set wages, procure drugs, etc.

• Contracting in (CI): NGO manages district, cannot hire and fire (but can transfer staff), $0.25 per capita budget supplement

• Control/Comparison (CC): Services run by government

12 districts randomly assigned to CC, CI or CO

% Utilization of facilities by poor people sick in last month

0

5

10

15

20

25

30

35

Control CI CO

BaselineFollow-up

Providers



relationship

Voice relationship


Client-Provider:EDUCO Program in El Salvador

• Ministry of Education contracts with parent associations to deliver primary education in rural areas

• Parents’ associations– Hire and fire contract teachers– Visit schools on regular basis

EDUCO: % impact of 1 more class visit by ACE on test scores

0

5

10

15

20

25

30

Math Language

Providers



relationship

Voice relationship


Girls’ education in Bangladesh: FSSAP

• Female Sec. Sch. Assist. Project criteria:– Attendance in school– Passing grade– Unmarried

• Girls receive scholarship deposited directly into to account in their name

• School to receive support based on number of girls

Providers



relationship

Voice relationship


Donors

Emerging Messages

• Incentives, Choice, Accountability• No single solution for every service, every country

– Public, private, NGO provision of services all possible

– “Matrix” of characteristics & approaches

– Most neglected actor: the client

• Complementarity between improved service delivery & increased financing

• Need to understand political economy • Aid modalities affect service delivery

Public Expenditures and Service Delivery in the WDR

• Set within WDR approach of unbundling service delivery chain

• Discussed as primary cross-sectoral issue for improving service delivery

• Entry point for broader public sector reform• Civil service, decentralization, M&E, regulation,

anticorruption

• Scope for integration: priorities within government, across sectors, among donors, and over time

Public Spending & Service Delivery

• Well-functioning PE systems vital for health, education, water & sanitation services

• Budget allocations should reflect determinants of health and education outcomes

• However, PEM systems fall short of this ideal: – Often not backed up by good policymaking– Do not allocate adequate resources – Lack outcome orientation– Suffer from conflicting political & bureaucratic

interests– Tradeoffs between sectors and over time not made– Integration across government missing

Cross-cutting PE Reforms for better service delivery

• Raise results-orientation of public expenditure programs: performance budgeting

• Update, regulate, and harmonize public procurement

• Update legal & regulatory framework for financial management

• Improve accounting and audit systems at central and local levels

• Implement regular expenditure tracking surveys• Delineate clear responsibilities for M&E, establish

clear service standards

A Large Agenda: PE work and Poverty Reduction

PE Analysis

PE Management

Fiscal Sustainability

AllocativeEfficiency

IncidenceAnalysis

Poverty Reduction

BudgetFormulation

Budget Execution

Procurement

Fiscal risk

Reporting & oversight

Quality of

PolicyProcess

PRSPPRSC

Trackingsurveys

ServiceDel.survey

Civil Service Reform DecentralizationRelated items

Source: Rajaram, PREM Learning Week, June 2002

Questions for discussion• Ways of cutting into and assisting

countries manage this large, growing agenda when capacities are low (e.g. HIPC)

• Enhancing service orientation of budgets• Integrating across PRSPs, sectors, donors• Experience with MTEFs

– Poverty impacts– Integration of social sectors

• Enhancing monitoring and evaluation • Role of participatory budget analysis

Objectives Today1. Discuss WDR framework 2. Explore questions relating to public

expenditure management and service delivery

3. Invite inputs coordinated through TG• Country-specific material for boxes• Background notes on key questions in PE for

making services work for poor people• Stories of success and failure

Documents

Managing Public Expenditures to Make Services Work for Poor People Discussion with Public Expenditure Thematic Group Shanta Devarajan, Shekhar Shah WDR