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Improving Governance Through Budget Transparency

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A secondary result of the fiscal crises now spooling out in the United States and Europe will be greater scrutiny of the efficacy of public expenditures. Nowhere is this likely to have greater impact than in foreign aid and development assistance, as countries demand greater accountability for each dollar or euro spent. At the same time, citizens in many countries receiving assistance are also pressuring their governments for accountability.

Critical to both of these developments is the focus on public budgets. Whatever elected leaders say, when the last votes are cast and counted the critical question is how governments actually manage their funds to address problems of poverty, provide essential services such as education and health care, and make public investments to secure their future. The flip side of the question is how and in whose interest countries raise funds to fulfill their commitments. Do they use revenues raised from oil, gas, mining and other natural resource extractions for high national priorities? Or are these funds siphoned off for private enrichment? Do they make prudent use of development assistance from abroad?

Historically the purview of accountants and numbers-crunchers, public officials in the past showed little interest in making budgets more accessible. Nonetheless, citizen groups around the world have increasingly demanded access to budget information.

In a report issued on January 5, the U.K. House of Commons' International Development Select Committee called for making aid to conflict ridden countries dependent on improved governance. The report highlighted the need to tie increased British aid to real commitments from recipients to greater transparency and accountability.

This is just the latest in a wave of government-led initiatives and people-led activism that is shifting the discussion about the openness and accountability of decisions that determine a country's social and economic trajectory. The Arab Spring, the Occupy protests, and calls like that in the House of Commons to use foreign aid to increase the openness of other governments all point to a seismic shift in the democracy and governance paradigm.

The commitments and aspirations of many of these groups were on display in November when representatives of 58 countries came together in Dar es Salaam, Tanzania to affirm the importance of opening budgets to public scrutiny. Their Declaration on Budget Transparency, Accountability and Participation holds that "participation in the decisions related to public budgets is a fundamental right... of all citizens." The Dar Declaration calls on all governments to recognize the rights of citizens to know their governments' spending and revenue-raising policies, and to have regular opportunities to comment on the priorities reflected in them.

But the Dar Declaration is not so much the start of a movement as a milestone. In the last 15 or 20 years, in country after country civil society groups have been organizing to hold their governments to account.

In India, the MKSS uses local knowledge and government budget commitments to take advantage of the country's 2005 Right to Information law. The organization's "social audit" enables villagers to verify official claims and hold government to account. Official budget reports may indicate that a school or a road was built, but local residents may have information, literally "before their eyes," that such projects were never undertaken.

Similarly, the Uganda Debt Network has trained local monitors to insure that inputs in construction and other projects, as promised in budget documents, are actually delivered.

In over 40 U.S. states, groups like the California Budget Project and the Center for Public Policy Priorities in Texas regularly scrutinize budget and tax policies for their impact on low- and moderate-income people.

Twenty years ago hardly any organizations focused on budget transparency as a key to improving democratic accountability and improving outcomes for poor. Now, over 200 groups in at least 119 countries engage in such work, according to the International Budget Partnership, a global research and advocacy organization that collaborates with budget groups around the world.

The interest of civic organizations in public budgeting at national and subnational levels has been matched in recent years by "top down" efforts of international organizations and foundations. Every two years, the IBP's Open Budget Index (OBI) evaluates countries' budget processes by engaging independent local researchers to assess whether their country makes timely and useful budget information available to the public and provides opportunities for participation. Over the three rounds of the OBI, a dozen or so countries have made real strides toward greater openness -- perhaps because their leaders now know that their budget practices are being scrutinized by leaders in other countries.

What about funds that don't always show up in budgets -- like those from natural resources? Revenue Watch, an international organization started in 2002 as a project of the Open Society Institute, seeks good governance by working with industry and civil society groups in countries rich in oil, gas and mineral reserves to ensure that funds from these resources are monitored and used productively.

For civic organizations and governments seeking to reform other governments, it seems that fiscal transparency's time has come. The open budget movement and the energy behind it promise to shift, if ever so slightly at first, the grounds on which the nations interact with their citizens and their civic organizations, and with each other.

Michael Lipsky, a former professor of political science at M.I.T., is a distinguished senior fellow at Demos, the American think tank based in New York.