Q. What is Budget Transparency? Scratching its genesis, discuss the benefits associated with budget transparency as well as the ways through which it can be promoted in functioning of a government?

Model Answer

Budgets are key documents since they lay out a government’s priorities in terms of policies and programs. Opening up budgets and democratizing the budget process gives citizens a say in policy formulation and resource allocation. Budget transparency refers to the extent and ease with which citizens can access information about and provide feedback on government revenues, allocations, and expenditures.

Increased transparency in budgeting made significant advances in the late 1980s and early 1990s. This was a period associated with unfavourable budget conditions in most countries – high annual deficits and increasing levels of debt. Governments needed to institute large fiscal consolidation programmes. These were often painful and getting the public’s understanding of the problems was necessary. The most effective manner for achieving that was simply to throw open the books to the public and explaining the problem to them in order for an understanding to emerge as to the best course of action to take. This time period also coincided with increased attention being paid to good governance in general which demanded openness about policy intentions, formulation and implementation – answer to all these was Budget Transparency.

Importance Of Budget Transparency

  • Less Corruption: First, budget transparency and oversight over how resources are allocated and spent are powerful disincentives for officials to misuse or misappropriate funds since their actions are more likely to be scrutinized. This leads to less corruption.
  • Efficient Use Of Resource: Budget transparency allows citizens to provide feedback on the quality and adequacy of services and infrastructure provided. This feedback, combined with reduced corruption, results in more efficient use of resources.
  • Enhanced Trust: In many cases, perceptions of high levels of corruption, poor services and infrastructure, and opaqueness of operations lie at the heart of citizens’ distrust of their governments. The gesture of opening up government books of account is likely to lead to more trust in government.
  • Higher Revenues: Budget transparency is also instrumental in generating higher revenues for governments since citizens are more likely to pay taxes and contribute donations to local schools and health centres if they trust that their money will be well spent. In developing countries, where revenues are often inadequate to pay for needed investments in sustainable poverty reduction and development programs, this is of utmost importance.

Ways Through Which Budget Transparency Can Be Promoted

  • Release Of Budget Data: The systematic and timely release of all relevant fiscal information is what we typically associate with budget transparency. It is an absolute pre-requisite. Disclose budget documents and simplified budget information through electronic and print media as well as online portals and cell phones.
  • Effective Role For The Legislature: It must be able to scrutinise the budget reports and independently review them. It must be able to debate and influence budget policy and be in a position to effectively hold the government to account. This is both in terms of the constitutional role of the legislature and the level of resources that the legislature has at its disposal.
  • Effective Role For Civil Society Through Media And NGOs: Citizens, directly or through these vehicles, must be in a position to influence budget policy and must be in a position to hold the government to account. In many ways, it is a similar role to that of the legislature albeit only indirectly.
  • Improving Budget Literacy of parliamentarians, government officials, elected representatives, journalists, and select civil society representatives and Increasing their capacity to analyze budgets.
  • Create budget literacy manuals for capacity-building programs.

Thus, budget transparency, while not a goal in itself, is a prerequisite for public participation and accountability. Such information must be disseminated in a timely manner so that citizens can effectively provide feedback that can influence policy formulation and resource reallocation. 

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