The Role of Budget Institutions in Promoting Optimal Public Finance in Africa

Mercredi | 2020-10-15
B103 – 12h00

Tobignaré YABRE

Abstract :This paper proposes a critical survey on the role of budget institutions in promoting optimal fiscal policy based onspecific experiences of African countries. The paper shows that the observed path of fiscal policy in Africa departsfrom the normative prescription of the optimal fiscal policy theory but finds consistent explanations in the politicaleconomy literature. We argue that relevant budget institutions are needed to promote optimal fiscal policy.Institutional reforms can be done at the budget formulation level by imposing fiscal rules that limit thegovernment’s power to run discretionary fiscal policy. These rules must be enforceable and flexible so that itallows smooth spending over the cycle. Moreover, because the risk to circumvent the rules is high in countrieswith poor track records, a well-designed fiscal rule may be accompanied by appropriate monitoring andenforcement mechanisms. At the budget procedure level, literature showed that hierarchical institutions that makea Prime Minister strong can reduce war of attrition than collegial institutions. Additionally, political rent may bereduced by delegating policymaking to an autonomous bureaucracy whose entry is conditioned by competitivenessand responsibility.