The word ?budget? is derived from budjet, a Middle English word for the king?s bag containing the money necessary for public expenditure. Budgets have evolved in two directions. At first, Parliaments fought to take control of the budget and make governments accountable for the use of resources.

In democratic societies, for instance, approval of the budget (the ?power of the purse?) is the main form of legislative control over the executive. The budget authorizes the executive to spend and collect revenues. In later years, the scope of government activities expanded a lot, and the role of the budget became more complex. Today, government expenditure is aimed at various objectives, like economic development, social goals and redistribution of wealth. Sound fiscal policies are needed to achieve macroeconomic stability.

To be an effective instrument of economic policy, the budget should be as comprehensive as possible. During budget preparation, trade-offs and prioritisation among programs must be made to ensure that the budget fits government policies and priorities. The most cost-effective variants are selected and macroeconomic programming is undertaken with special regard to operational efficiency. Resources are allocated in conformity with both policies and fiscal targets.

A medium term expenditure framework, according to the World Bank, is ?a whole-of-government strategic policy and expenditure framework within which ministers and line ministries are provided with greater responsibility for resource allocation decisions and resource use?. Its feasibility is greater when future circumstances are more predictable, and this occurs when the economy is larger and more developed. Ironically, it is in developing countries that the need for multi-year perspective is greater, because resource allocation for development requires rapid changes. Medium Term Expenditure Framework (MTEF) also involves policy analysis and includes mechanisms for measuring performance.

The preparation process is a powerful tool for coherence. The budget is both an instrument of economic and financial management and an implicit policy statement, as it sets relative levels of spending for different programs and activities. Of course decision making is complex and involves different actors in and outside government.

Consultations strengthen legislative scrutiny of government strategy and the budget. Government usually tries to get feedback on policies from the civil society. In most countries, the budget is a combination of a top-down approach, with the Ministry of Finance giving guidelines or communicating instructions to spending ministries, and a bottom-up approach, with spending ministries presenting requests for budget allocation to the ministry of finance.

There is always an element of bargaining in any budget, as choices must be made among conflicting interests. An ?apolitical? budget process is an oxymoron. However, when bargaining drives the process, the only predictable result is inefficient resource allocation. In such cases, choices are bound to be made more on the political power of the different actors rather than on facts, integrity or results.

Generally, preparing macroeconomic projections directly involves agencies responsible for macroeconomic issues, such as the Ministry of Finance, the Central Bank, the Statistical office, etc. The enactment of the budget is not merely a formal exercise carried out to comply with the Constitution. The legislature is usually the appropriate locus of overall financial accountability. Since the role of the legislature is to approve future actions rather than rubber-stamp decisions already taken, the budget is presented to the legislature in a timely manner, normally between two to four months before the start of the fiscal year, to allow budgetary debates to be completed before its start.

However, it is possible for the budget to be presented after the start of the financial year, due to unavoidable delays, for example, a change in Cabinet composition, or pending negotiations with International Financial Institutions. In some countries, delay is institutionalized, for example, Nepal, where the budget is presented a few days before the fiscal year starts.

Successful budget execution depends on a lot of factors, such as unexpected changes in the economic environment, the implementation capacities of agencies and of course the favorable reception of the general public.

<B>Mohammed HAMUTH</B>