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Article
Publication date: 25 March 2022

Komla D. Dzigbede, Rahul Pathak and Sombo Muzata

Over the years, public sector reforms in emerging economies have focused on improving national budget systems and financial management practices to promote sustainable…

Abstract

Purpose

Over the years, public sector reforms in emerging economies have focused on improving national budget systems and financial management practices to promote sustainable development. In the context of the COVID-19 crisis, this article examines whether the strength or effectiveness of national budget systems and related financial management practices moderates the impact of fiscal policy measures on economic recovery and resilience.

Design/methodology/approach

The article uses bivariate correlations and difference-in-difference analyses to examine the relationship between budget system effectiveness, government stimulus measures and forecasts of economic recovery and resilience. The analysis uses data from the Public Expenditure and Financial Accountability (PEFA) program, International Monetary Fund (IMF) and World Bank.

Findings

The article finds that estimates of economic recovery and resilience are higher in countries with more reliable budget processes and more transparent public finances. Also, the strength or effectiveness of the budget system before the pandemic appears to moderate the impact of government stimulus measures on economic recovery and resilience over a medium-term forecast horizon.

Research limitations/implications

This is a prospective analysis based on economic forecasts from the IMF, which are subject to change in the coming years. In addition, the analysis uses subjective budget system indicators, which present measurement challenges that often influence this area of research. Better comparative data in the future, for example, large administrative datasets, will enable researchers to explore these issues with less estimation bias.

Practical implications

The findings are relevant for policymakers and budget officials in developing countries in Africa who are engaged in plans to improve national budget systems and enhance resilience to crises, such as the COVID-19-induced economic crisis. The findings also have implications for developing countries beyond Africa with similar economic and fiscal conditions.

Social implications

The findings have implications for economic and budgetary planning for the social sector as well as the efficient delivery of public services in developing countries. Public managers have a critical role to play in adapting national budget systems and financial management reforms within complex and evolving economic circumstances even after the coronavirus pandemic.

Originality/value

The authors use novel and latest data on country responses to the COVID-19 pandemic as well as medium-term economic forecasts to examine the relationship between national budget systems and post-pandemic economic recovery and resilience in the African context. Previous research has only addressed these issues in the context of industrialized countries, and a limited number of empirical studies examine these relationships. The findings also have significant value for policymakers outside Africa who are facing similar challenges related to the coronavirus pandemic.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1096-3367

Keywords

Content available
Article
Publication date: 2 November 2020

Komla D. Dzigbede and Rahul Pathak

This article examines the fiscal challenges the coronavirus pandemic poses in African countries, using Ghana as a case study and summarizes the country's immediate…

3370

Abstract

Purpose

This article examines the fiscal challenges the coronavirus pandemic poses in African countries, using Ghana as a case study and summarizes the country's immediate monetary and fiscal responses to the pandemic. The article also discusses the potential impacts of coronavirus-related shocks on the Ghana economy and policy options the national government may pursue to counteract the pandemic's adverse long-term effects.

Design/methodology/approach

The article uses daily and monthly economic indicators to assess the immediate impact of the pandemic on Ghana's economy. The article also uses latest data from the Ghana Living Standards Survey (GLSS) to simulate potential shocks to the economy related to the coronavirus crisis and examines the outcomes from a potential government response that expands spending on an existing direct social assistance program.

Findings

The authors find that the coronavirus pandemic is associated with a significant increase in Ghana's poverty measures over time, and an expansion in government spending under an existing cash transfer program would partly offset the economic shocks related to the crisis and improve outcomes for poverty and inequality. The authors also argue that other well-targeted expenditure and revenue policies will support long-term economic resilience.

Research limitations/implications

The research suggests that a temporary expansion of the existing program of direct cash payments to poor households may be an effective social protection policy, as are well-targeted revenue and spending policies that support economic recovery and long-term fiscal sustainability.

Practical implications

The findings imply that while the pandemic might cause severe shocks in the economy, well-targeted spending and revenue policies that are anchored in sound macroeconomic management can promote economic resilience and long-term fiscal sustainability.

Social implications

Public managers must ensure that national policy responses to the coronavirus pandemic consider socio-economic indicators, such as poverty and income inequality.

Originality/value

The authors present research that uses novel household-level data and an evidence-based microsimulation framework to articulate potential public policy strategies that can guide national responses to, and recovery from, the coronavirus pandemic.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 32 no. 5
Type: Research Article
ISSN: 1096-3367

Keywords

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