October 2016|bsi|

The International Budget Partnership recently published the 2015 Open Budget Survey and launched it at ODI last week. It sounds a bit underwhelming, but is actually a pretty big deal. The bi-annual survey is the go-to measure of fiscal transparency for researchers, investors and policymakers, covering a large number of countries since 2006.

Fiscal transparency, broadly defined, is a right. In an open society, where citizens have a stake in what their government is doing and contribute to it by paying taxes, they should have a reasonably good idea of what governments are doing with public money.  Fiscal transparency can enable this.

Unfortunately, the devil is in the details. Enumerating the different ways a government can be transparent about public funds and assigning weights and values to different elements is the greatest achievement of the indices of the Open Budget Survey.  At the same time this is the heart of the problem. There is always a question of how much they are a proxy for the actual issue of interest.

The OBS’s usefulness as a measure of transparency is threatened by its own success. Any indicator can be, and as soon as it matters enough for policymakers, will be gamed.  Fiscal transparency has been shown to affect government’s borrowing cost and access to credit, and rating agencies use the Open Budget Index to assess transparency. Governments therefore have an incentive to try and score well on the index, focusing on the dimensions measured by the index and potentially neglecting other important dimensions.

The biggest problem for the survey, however, arises when putting it into context. It literally measures whether certain pieces of budget information are published in a certain way. It assumes that this is a specific and close enough image of what transparent public finances looks like. If viewed solely as an issue of fiscal transparency as a right, this is just fine. It is then important enough to know about transparency in its own right, irrespective of how it fits into the bigger governance picture (a government could have an open budget, but still steal from it).

Unfortunately, the OBS reports departs from this focus in two important ways, each of which is unhelpful to the cause of strengthening fiscal transparency – IBP is, after all, not just a disinterested observer, but an advocate for this cause.

Firstly, the OBS broadens its scope beyond transparency to what IBP calls the ‘accountability ecosystem’ in government. It complements the transparency index with two other indices, budget participation and legislative and audit oversight. As a response to the “fiscal transparency, so what?” question, the addition of these two dimensions is both too ambitious and too narrow. Although 24 out of 102 countries achieve fairly high transparency scores (above 60 out of 100 points), only 4 countries score more than 60 in all three dimensions. When the survey finds only 4 accountable governments in the world, it makes one wonder if perhaps this measurement isn’t quite right. And if the vast majority of countries scores very poorly, even countries that look pretty accountable otherwise, then maybe participation is not quite so important an element of accountability?

Secondly, IBP argues explicitly that accountable government, as defined through the three pillars, will be critical for the implementation of the Sustainable Development Goals. Interestingly, the report mentions China nine times, elaborating that China runs one of the world’s least transparent, participatory or overseen public finance systems. It does not mention that China alone did the most of any countries in the world to make progress towards the MDGs. It is one thing to note that cross-country analyses suggest a relationship between transparency, accountability and development outcomes, quite another to claim that one is necessary to achieve the other. China is the most obvious example, but there are other country examples that reinforce this point.

There are two ways the OBS can filter into development practice. One is to focus on transparency on principle, even if that means that many governments won’t listen or won’t care, because they either feel no pressure or no inclination to share more. Pressure from domestic stakeholders and evenexternal influences may change that calculus over time, and knowing where a government stands in the OBI will help. Another way is to try and sell transparency to governments, together with participation and oversight as part of an “accountability package” to help countries achieve development outcomes and implement international strategies. Donors might be tempted to use the results from the OBS, or specific indicators, as policy conditions for the disbursement of aid. It is far from clear how transparency, participation and oversight relate to development outcomes in any one country. To pretend otherwise is a development policy dead end.

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