Opening Budgets: Nudging from the north and pushing by the people

Recently, we’ve been talking a lot about transparency – transparency in the payments governments receive from oil, gas and mining companies, transparency in company ownership, and transparency of aid flows through the International Aid Transparency Initiative (IATI) and open data in general. But there is an important part of the global financial framework that we haven’t talked about lately: budgets.

Budget transparency is one of those things we take for granted, especially in countries like the US, UK and others where our budgets (albeit hundreds of pages long) are pored over, analyzed and repackaged to show citizens what it is our governments are paying for with our taxes. Unfortunately, that’s not even close to normal around the world.

The International Budget Partnership’s annual Open Budget Index finds that only 23 percent of countries provide enough information for citizens to analyze and understand the budget. And that’s just wrong.

Promoting more transparent budgets in developing countries is a challenge. It needs a joint effort from governments that provide aid such as the US, the UK, France and Germany, the World Bank, and both citizens and governments in developing countries, to demand that their governments are more open about their spending decisions.

Governments that provide aid have often tried to encourage greater budget transparency by setting conditions (more specifically – standards that countries need to meet as well as establishing incentives for them to improve their performance against those standards) in order for countries to qualify for aid. Sometimes this can work. Often times it doesn’t.

If it is done well, conditions and incentives can encourage governments to adopt better standards of governance or fiscal transparency and provide support for civil society to demand greater transparency. A new paper by ONE and the International Budget Partnership explores how aid donors can skillfully attach conditions and incentives to their aid to promote budget transparency. It sets out 4 key principles:

Principle 1 –  In order to avoid the pitfalls of the past, conditions should be transparent. They should be adapted to the context of the recipient country, and based on dialogue with domestic stakeholders.

Principle 2 – Where conditions include minimum standards of transparency, these should be flexibly applied so that countries don’t get left behind, and so that governments are encouraged to commit to and achieve sustainable transparency improvements over time.

Principle 3 – There should be positive incentives to encourage and reward greater transparency, such as the provision of an increasing share of aid through government systems, as well as technical assistance and financial support to increase capacity.

Principle 4 – Finally, conditions should also be linked to donor commitments to improve the transparency of their aid flows, such as through IATI, so that information can in turn be captured in the recipient countries’ budget processes and reports.

The use of conditions and incentives by donors, and the efforts of country governments to be more transparent, should be complementary. By applying these principles donors can encourage and support sustainable progress towards greater budget transparency.

Read ONE and the International Budget Partnership’s paper here

However, no matter how smartly donors use their aid to encourage budget transparency in developing countries, the real action needs to be at country level. This is where BTAP comes in – BTAP’s 130 members have now mobilized for its first global campaign, called “Make Budgets Public NOW!” aimed at opening the budgets in countries with the most opaque budgets. We hope you’ll follow BTAP and its work in keeping the pressure on governments around the world to make budgets public now! We definitely will.