Public Expenditure Policy and Poverty Reduction: Has the World Bank Got it Right?

Abstract

Summaries This article discusses the impact of public expenditure policy on poverty reduction, focusing on the interaction between poverty assessments (PAs) and public expenditure reviews (PERs). Most PAs have analysed poverty in terms of the constraints that prevent the poor from participating in labour intensive growth, with little appreciation of sociological and political factors involved. Most PERs have concentrated on three issues: increasing the share of the education and health sectors within total public expenditure, the composition of spending within these sectors and the balance between staff and non?staff costs. However, increased budgetary allocations to the social sectors often do not get translated into reality because of poor management and monitoring of public expenditure. In addition, the use of cash budgeting to eliminate fiscal deficits in line with IMF conditionality works against World Bank conditionality aimed at increasing spending in priority social sectors. Greater integration of PAs and PERs should be promoted by estimating the net impact of government expenditure and taxation/user charges on the poor. A central aim should be to facilitate a process of dialogue and consensus building around public expenditure decisions.