CEEG Seminar Series: Decomposing Budget Credibility

On Wednesday, 13 March 2024, Ricardo Santos, Research Fellow at United Nations University World Institute for Development Economics Research (UNU-WIDER) and Resident Advisor at Inclusive growth in Mozambique(IGM) programme will present an upcoming paper entitled 'Decomposing Budget Credibility' (WIDER Working Paper 2024/11).

The seminar is part of the CEEG Seminar Series, organized under the Inclusive growth in Mozambique (IGM) programme. The seminars offer a forum to share and discuss ongoing research on topics related to the work of the IGM programme and to foster a culture of research at the faculty, and at UEM in general.

The seminars take place at the Faculty of Economics of the University of Eduardo Mondlane (UEM). It is a public event open to everyone. Register here for the online component. The presentation will be given in Portuguese.

About the study
In this paper, an expansion of the PEFA (Public Expenditure and Financial Accountability) government response accuracy indicator was constructed, and its decomposition was tested, applying it to the Government Budgets and State General Accounts of Mozambique between 2014 and 2020. A special focus was given to public expenditure in social sectors: Education, Health, Social Protection and Public Works.

The authors found that the overall indicator of budget reliability hides significant differences in the budget credibility of different sectors, with social sectors contributing more to budget credibility than their weight in overall public expenditure. They also found a strong suggestion that the budgeting and execution of public investment, and even more so, of externally financed public investment, is a weakening factor of budget credibility in Mozambique, with an added suggestion that resources originally budgeted for investment were possibly used to fund current expenditures. Finally, there is no strong evidence that mid-fiscal-year budget adjustments contribute to higher budget reliability.

The paper's results suggest that the decomposition proposed by the authors adds valuable information which can support budget oversight and guide in-depth analyses of budget discrepancies.