This chapter provides an overview of the public governance mechanisms, tools and practices that can be leveraged to help governments allocate and manage resources in an efficient and effective manner. It then presents the reforms undertaken by Middle East and North African governments and the existing opportunities to strengthen integrity, transparency and participation in the design and management of spending.
Governing for Sustainable Prosperity in the Middle East and North Africa
OECD Public Governance Reviews
Abstract
Budgeting is a key policy instrument to set priorities and generate and allocate resources to achieve societal goals and objectives. Aligning planning and spending priorities is one of the challenges many governments face, particularly when trying to design policies to pursue sustainable prosperity while delivering on day-to-day priorities.
In general, governments face significant financial and budgetary constraints. In addition, armed conflicts, migration challenges and structural economic fragility are critical factors that are affecting Middle East and North Africa (MENA)’s economies’ fiscal space. Even where sound budgetary tools are available, challenges persist in allocating public resources efficiently.
This chapter provides an overview of the budgetary governance mechanisms, tools and practices that can be leveraged to help governments allocate and manage resources in an efficient and effective manner, along with the reforms undertaken by MENA governments in these areas. It then presents a short case study on spending in infrastructure development to illustrate the importance of budgetary governance for MENA countries and territories in this area. Finally, it provides strategic guidance and recommendations to foster existing opportunities to enhance sound and transparent public financial management as a driver to support sustainable prosperity and enhance resilience.
The budget is a policy instrument that enables governments to generate public revenues and allocate financial resources across their entire remit. The budget process operationalises political and policy decisions taken at the highest levels of government, affecting the way wealth is generated and distributed to fund the different areas of public action. As such, the budget, as a public policy tool, is integral to advance effectively and efficiently strategic priorities in the short-, medium- and long-term with the financial resources required to achieve them (OECD, 2020[1]).
The OECD Recommendation on Budgetary Governance (2015[2]) sets out core principles of good budgetary governance, that is “the processes, laws, structures and institutions in place for ensuring that the budgeting system meets its objectives in an effective, sustainable and enduring manner” (OECD, 2015[2]), covering the strategic, qualitative and technical aspects of the full budget cycle.
The reform of budgetary governance has been a key area of focus for governments in the MENA region since the 2000s. Most MENA governments have adopted large-scale budgetary governance reforms, focusing on developing and strengthening existing legal frameworks, institutions and practices. The aim has been to enhance the strategic allocation of scarce financial resources more efficiently and transparently across government, and to improve the efficiency and quality of service delivery at a lesser cost (OECD, 2017[3]).
While they vary in scope and depth, such efforts have been triggered by the commitment to strengthening integrity and transparency in the design and management of spending decisions on the one hand, and to tackling corruption on the other hand, as core levers to achieve accountable and good governance (OECD, 2017[3]). In addition, climate change challenges are significant in the MENA region, and require shifting policy priorities toward supporting climate-adaptation and mitigation strategies, as well as investing in climate-resilient infrastructure. These pressing issues have resulted in a reallocation of public resources to respond to new priorities, which may also impact the funding of other long-term priorities and budgetary-restructuring efforts.
The following sections present an overview of the budgetary governance mechanisms, tools and practices that can be further leveraged to help governments allocate and manage resources in an efficient and effective manner, and review key reform initiatives by MENA governments in these areas.
Developing a more strategic vision of public expenditures by establishing planning and monitoring budgetary tools
Fiscal discipline demands that governments place their annual budgets in a multi-year perspective. Policies provided for an annual budget can have impacts that extend well beyond the current budget year. Accordingly, the future fiscal impact should be taken into account and assessed fully. The one-year time span of an annual budget is not enough if a government wishes to assure itself and the public that it is indeed making rational decisions about priorities.
Medium-term expenditure frameworks (MTEFs) are at the heart of budgeting and are crucial to achieving a government’s fiscal objectives. They allow governments to plan expenditures beyond the budget year by taking account of the resource availability and current spending needs for the next three to five years (OECD, 2019[4]). They consist at their core of three elements: forecasts of resource availability, baselines of ongoing expenditures and expenditure ceilings. Resource availability is estimated on the basis of economic projections/revenue forecasts and the application of a government’s high-level fiscal rules (top-down). Current spending needs are baseline projections of existing policy expenditures (bottom-up). A MTEF brings the top-down and the bottom-up approaches together and is the foundation for each year’s budget allocation. In doing so, MTEFs operationalise high-level fiscal objectives in concrete terms and serve to demonstrate credibility and political will, while also enhancing the accountability and transparency of government action when they are made publicly available.
Several MENA governments have developed legal and strategic frameworks to introduce medium-term budget approaches, such as in Jordan, Morocco, Tunisia or the United Arab Emirates (UAE) (Hashemite Kingdom of Jordan, 2018[5]; OECD, 2023[6]; United Arab Emirates Ministry of Finance, n.d.[7]; OECD, 2017[8]). Among the most recent governments to have undertaken such reforms, Egypt enacted in 2022 the Consolidated Public Finance Law No.6 that introduces the publication of the medium-term budget framework, among other measures (OECD, 2024[9]).
In addition, some MENA governments have developed tools to support the implementation of multi-year budgeting frameworks. The Palestinian Authority developed a “Medium-Term Budgeting Procedures Manual” to guide both the medium-term and annual budget preparations process for programmes and reforms implemented by individual ministries and public institutions. It outlines the medium-term budget preparation cycles and provides more detailed guidelines, while emphasising the important link between planning and budgeting. Instead of providing a uniform calendar, the manual envisages that the Planning and Budget Management Group within each ministry sets the planning and budgeting calendar deadlines (OECD, 2024[10]). Efforts to establish strong MTEFs could be further pursued by MENA governments, including through the development of tools to ensure the appropriation and implementation of such budget frameworks by all public institutions. Measures could also be taken to make the MTEFs available to citizens in a user-friendly format in order to enhance the transparency and accountability of budget decisions.
Better alignment between budget and policy objectives can be found in the MENA region through the implementation of performance-related budgetary reforms
Since budgets enable governments to give effect to their priorities with practical actions, better aligning budget and planning frameworks is crucial to allocate the adequate funds to pursue the strategic objectives and priorities of the government, especially in the long-term. Performance budgeting can support achieving these long-term objectives and priorities by providing an approach focusing more on the outcomes of public expenditure rather than the input provided to public institutions to fund their activities.
Performance budgeting refers to the use of performance information in making budget decisions, either at the budget allocation stage or in budget planning (OECD, 2019[4]). In aligning policy and spending objectives, it enables governments to match spending targets and indicators in the budget’s programme areas with targets and indicators of national strategies and plans. It provides governments with a substantial policy instrument to achieve medium-term policy objectives, as promoted in the OECD Recommendation on Budgetary Governance (2015[2]).
As this process is broadened and deepened, governments can align more closely their fiscal, budgetary and strategic frameworks. It enables more efficient and coherent prioritisation and sequencing of strategic initiatives to pursue sustainable development outcomes that are properly funded in the budget, quantify progress toward their achievement, and report to themselves and to citizens on this progress.
As part of the transition towards performance-based budgeting, many countries including OECD Members are also developing programme budgeting and results-based budgeting.
Programme budgeting is a type of budget classification grouping expenditures with related objectives. It enables governments to identify spending targets under programming objectives and align them with objectives laid out in national strategies and plans, including Sustainable Development Goals (SDGs) and other long-term development objectives. By setting objectives, outcomes and performance indicators at the programme level, results-based budgeting frameworks can further support addressing inequalities between various groups in society arising from policy choices, and therefore facilitate greater targeting of public expenditure to address social issues while maintaining the long-term sustainability of public finances (OECD/KIPF, 2024[11]). In OECD Member countries, performance budgeting plays an increasingly instrumental role in enhancing efficiency and accountability throughout the public sector. Some good practices have been identified in the OECD Good Practices for Performance Budgeting (2019[4]), recognising that OECD Member governments offer a diversity in approaches to their implementation (Box 3.1).
New Zealand: New Zealand is known for its performance-based budgeting approach, which includes the use of "output budgeting." Departments and agencies are required to identify outputs and set performance targets, allowing for a focus on results and outcomes.
Norway: Norway's budgeting system focuses on performance through its "Responsibility and Results Framework." Agencies are required to set performance targets and are held accountable for achieving them.
Sweden: Sweden uses a results-based budgeting system where government agencies are required to set objectives, outcomes and performance indicators at the programme level. The government assesses and evaluates the performance of agencies, and funding is allocated based on the achievement of results.
United Kingdom: The United Kingdom introduced the "Public Service Agreements" and "Sustainable Development Indicators" to align budget allocations with key government priorities and sustainability goals. The use of the "Three Es" framework (economy, efficiency, and effectiveness) is common in performance assessments.
Source: (OECD, 2024[12]).
MENA governments are increasingly using performance-based budgeting frameworks, allowing funds to be linked to output objectives (OECD, 2017[3]). This is for instance the case in Morocco and Tunisia (OECD, 2023[6]; OECD, 2017[8]). In Jordan, the General Budget Department (GBD) in the Ministry of Finance applies a results-oriented approach to budgeting by linking budget programmes to strategic goals and measuring progress with Key Performance Indicators (KPIs). Moreover, the GBD publishes annual reports of their activities including the results against the KPIs (OECD, n.d.[13]). Previously using performance-based budgeting, the UAE have introduced since 2011 medium-term zero-based budgets, which specify activities and services against costs (United Arab Emirates Ministry of Finance, n.d.[7]).
Egypt is also gradually undertaking a process of moving from an approach of exclusively line-item budgeting to a mix of line-item and programme- and performance-based budgeting by the fiscal year 2025 (OECD, 2024[9]). In all MENA countries and territories that undertook such reforms, the aim is to overcome current challenges in linking the national budget to societal goals, and help match public expenses and investments to goals and KPIs related to the SDGs (OECD, n.d.[14]).
The implementation of reforms, however, is pending in most MENA countries and territories, where they are hampered by uncertain financial contexts (OECD, 2024[10]). Moreover, efforts remain often fragmented and require the adoption of additional regulations and mechanisms to develop comprehensive budgetary governance frameworks (OECD, n.d.[14]; OECD, 2023[6]).
It is also important to acknowledge that performance budgeting is complex and challenging to implement effectively. For instance, administrations are organised by entities and not by policies, so performance budgeting might require changes to the traditional structure as well as enhanced national co-ordination mechanisms amongst government entities. While performance budgeting links strategic planning to the budget, it can be difficult to establish a link between all spending and outcomes. It is not sufficient solely to provide performance information; it is important that this information be used during the budget process and be relevant in order to create a genuine demand for it among stakeholders such as decisions, line ministries and the general public. This requires a cultural change both at the level of the administration as well as within the government and main stakeholders. Budget transparency will be covered in detail later in the chapter.
The development of spending reviews as used in most OECD Member countries could also help align limited fiscal resources with the priorities of the government and to increase transparency and accountability. By systematically analysing the government’s existing expenditure, reviews enable governments to manage the aggregate level of expenditure and identify savings and/or reallocation measures, therefore improving effectiveness within programmes and policies during their implementation. Denmark has been undertaking spending reviews for over 20 years, as presented in Box 3.2. Budget impact assessment and expenditure appraisals for both current and capital spending can also help align inclusive growth objectives with resource allocation over different time horizons.
Spending reviews are led by the Ministry of Finance, with the government using spending reviews to reallocate resources and increase efficiency. The spending reviews inform budget negotiations and decisions on multi-annual budget agreements. The reviews are conducted over a relatively short period, where the decision on which reviews to conduct is taken in January or February and the reviews are undertaken over the ensuing months with the aim of having the findings available by the beginning of May. This ensures the findings of a spending review are available when the government decides on budget priorities in June.
Source: (OECD, 2024[15]).
Budgeting for long-term challenges contributes to advance sustainable development
The use of budgetary governance tools can facilitate the inclusion of a broad range of public policy dimensions into spending decisions, in line with long-term objectives in the policy formulation process. It is particularly the case for those associated with inclusive and sustainable development, such as climate and gender considerations. MENA governments are increasingly mainstreaming multidimensional, horizontal challenges linked to strategic priorities in budgetary frameworks and in budget tools mechanisms. Examples of these horizontal challenges include greening the economy, mainstreaming gender equality, and frameworks to mainstream intergenerational equity and wellbeing. A similar approach can be adopted to mainstream other multidimensional challenges-related priorities across public action. In particular, the systematic use of analytical tools in the budgeting process and the consequent allocation of specific funds is essential to ensure that budgets respond to the specific needs of different groups of the population (for instance, people with disabilities).
Reinforcing green budgeting in the MENA region appears essential to address rising climate challenges
Integrating climate change consequences and risks into long-term spending and fiscal decisions is one of the challenges that governments face today to promote the transversal integration of climate and environmental issues in public policies and services (Boustany, 2021[16]).
By 2022, more than 50% of OECD Member countries had adopted green budgeting tools to incorporate and mainstream climate and environmental matters into budgetary and fiscal choices across budgetary programme areas, against around 30% in 2021 (OECD, 2021[17]). There is no single approach on how best to initiate green budgeting, but tools can include (i) the ‘greening’ of medium-term budget frameworks, highlighting linkages among the economy, budget policy and the environment and guiding the allocation of resources within a framework that clearly demonstrates existing commitments and constraints; (ii) introducing climate change in fiscal-risk assessments and management; (iii) tagging budgetary items for their green impact (iv) policy evaluations and environmental impact assessments; (v) green spending reviews; and (vi) green accounting statements (European Commission, IMF, OECD, 2021[18]).
Green budgeting practices vary in nature across OECD Member countries, with approaches adapted to national contexts. Overall, the most common tools are carbon pricing instruments, environmental impact assessments, green tagging, and reviews of harmful tax expenditure, as part of a country’s larger green budgeting approach. The United Kingdom’s approach to green budgeting encompasses several of these tools and practices (Box 3.3).
In the United Kingdom, environmental considerations are taken into account as part of ex-ante cost- benefit assessments that inform budget decision-making. A Green Book is issued by His Majesty’s Treasury and provides information on how to appraise policies, spending proposals, programmes and projects, with instructions and supplementary guidance on the design and use of monitoring and evaluation before and after implementation. This ranges from policy and programme development to taxation and benefit proposals, as well as changes to existing public assets and resources. In particular, it provides an integrated approach to the assessment of climate mitigation, transition and other sustainability considerations across all government programmes. This encourages departments across the government to robustly quantify and monetise (wherever possible) the differential “green” impacts in calculations for value-for-money and cost-benefit assessments.
Source: (GOV.UK, 2024[19]).
MENA governments are increasingly keen to adopt green budgeting frameworks and practices to better address climate change (OECD, 2019[20]). For instance, by implementing programme budgeting, Egypt is developing an important foundation for green budgeting to classify budget areas according to their function. The government started to classify its expenditures according to the sustainable development goals, including those related to climate and environment. However, the process is still in its infancy.
Moving forward, MENA governments could build on existing practices in OECD Member countries and the OECD Green Budgeting Framework (Figure 3.1) to develop the use of the green budgeting tools. The Framework applies across the budget cycle and provides a structure for countries to develop green budgeting (Blazey, A. and Lelong, M., 2022[21]). It is built around four building blocks: Institutional arrangements, Methods and tools, Accountability and transparency and the Enabling environment in budgeting.
Source: (OECD, 2020[22]).
Nevertheless, it is important to note that MENA governments have recently undertaken efforts to enable and support the use of sustainable finance mechanisms and practices. A study examining seven MENA countries1 found that each of them is using some of the key green financing mechanisms and policies (Beyer and Bayoumi, 2022[23]). Many MENA governments are also rolling out green bonds and green sukuk2 to mobilise private capital towards sustainable investments (Beyer and Bayoumi, 2022[23]). Similarly, MENA governments can capitalise on the prevalence of state-owned entreprises to drive the sustainable transition, which is in no small part driven by infrastructure investments, as also highlighted later in the chapter. Some governments have further included sustainable finance priorities within vision documents and national development plans (Beyer and Bayoumi, 2022[23]).
Most MENA governments are also developing sustainable finance taxonomies to better identify and classify activities that support environmental targets (Beyer and Bayoumi, 2022[23]). For instance, Egypt’s Financial Regulatory Authority announced in 2020 that they are developing a “green projects taxonomy” that defines three types of green projects: low carbon emissions, climate change adaptation and mitigation, and the protection of biological diversity (Zawya, 2020[24]). Similarly, the UAE’s Ministry of Climate Change and the Environment has recommended the establishment of a nation-wide taxonomy for sustainable finance along with tools for identifying and assessing eligible projects (UAE Ministry of Climate Change and Environment, 2021[25]).
Gender budgeting practices are well established in the MENA region but lack comprehensive frameworks
Gender budgeting is a public financial management tool that can be used to integrate gender considerations into budget decision-making (OECD, 2023[26]). It helps expose how gender inequalities may have inadvertently become embedded in public policies and the allocation of resources, and promotes budget measures that will be effective at closing gender gaps (OECD, n.d.[27]). The updated OECD Framework defines building blocks for effective gender budgeting: 1) institutional and strategic arrangements; 2) methods and tools; 3) enabling environment; 4) accountability and transparency; and 5) impact (OECD, 2023[26]).
Gender budgeting is a tool used to help close gender gaps in 61% of OECD Member countries. Support for gender budgeting measures have generally increased and broadened across the OECD. Although methods and tools vary, most Member countries tend to use multiple analytical tools to support gender budgeting, as it is the case in Sweden (Box 3.4). An increasing number of countries have also adopted legal basis for these practices (OECD, 2023[26]).
In Sweden, gender budgeting is applied throughout the budget process, steered at the operation level via the budget circular instructions. There is a government decision stipulating that gender mainstreaming of the state budget process, i.e. gender budgeting, is mandatory.
In addition to gender mainstreaming the budget process, there are specific government appropriations for gender equality measures to fund targeted policy measures to advance gender equality. In line with the principle of gender mainstreaming, specific gender equality challenges that are identified in various policy fields, such as the higher rate of long-term sick leave for women, the gender care gap, or women’s lower participation in paid work, are addressed with special measures in respective policy areas.
However, it was acknowledged that there is an opportunity for gender budgeting principles to be further operationalised, and to more frequently and widely influence policy design to address inequalities and reallocate resources to increase impact.
Source: (OECD, 2023[26]).
Many MENA governments are using gender budgeting mechanisms and practices. Morocco became the first country in the region to engage in gender budgeting in 2002, as highlighted in Box 3.5. Several governments have since introduced gender budgeting practices, including Bahrain, Egypt and Jordan (Kolovich, 2016[28]). In the case of the Palestinian Authority, gender-responsive budgeting was identified as one of the priority areas for reform included in the “Sectoral Strategy for Public Finance Management 2021 – 2023” (OECD, 2024[10]).
Morocco is a pioneer country in the implementation of gender budgeting in the MENA region, having started its initiative in 2002.
The government gradually introduced a gender dimension into ministerial department budgets. Gender equality considerations are integrated into the performance budgeting framework and each ministry must provide objectives and indicators relating to gender equality. Since 2007, several ministerial departments have created their own programmes to incorporate gender into budgeting at the local level. A Gender Budget Report is published annually, summarising the commitments to gender equality made by ministries (key priorities and targets). Since its introduction in 2006, it has become an important accountability and monitoring tool.
Finally, the government amended the budget law in 2014, making gender perspective setting and objectives a requirement for all budget formulation efforts.
Similarly to OECD Member countries, practices in the region vary from government to government, in part because of different approaches to budgeting and different institutional frameworks. Governments use a number of gender budgeting mechanisms and tools, as presented in Table 3.1. Among these instruments, presentation of fiscal data disaggregated by gender and the definition of performance indicators are most frequently used. Gender related provisions in the legal framework, ex-post impact assessments and gender-related audits are less common in the region.
Some MENA governments have also established dedicated authorities to oversee and regulate the use of gender-responsive budgets. In the UAE, the Gender Balance Council established in 2015 is responsible for developing and implementing the federal gender balance agenda, in co-ordination with the Ministry of Finance (United Arab Emirates Ministry of Finance, n.d.[7]). The Palestinian Authority and Tunisia have moreover established a gender unit in the Ministry of Finance to co-ordinate gender budgeting while in Egypt, the National Council for Women, established in 2000, co-ordinates these practices (Rame and Seiwald, 2019[31]).
However, although the use of gender budgeting tools is increasing in the MENA region, no country or territory has adopted a comprehensive framework so far (Rame and Seiwald, 2019[31]). Governments face a lot of common challenges when implementing these tools, notably a lack of gender-disaggregated data, weaknesses in the public financial management system and a limited understanding with regard to how different measures impact gender equality. These issues are similar to the ones faced across the OECD (OECD, 2023[26]). Further challenges contributing to the limited implementation of gender budgeting include limited institutional co-ordination of processes, the fragmentation of initiatives, the lack of monitoring mechanisms within the administration, as well as limited political support (Rame and Seiwald, 2019[31]). The OECD Framework on Gender Budgeting and good practices from OECD Member countries provide guidelines that MENA governments could use to pursue their efforts in building strong gender budgeting frameworks across the budget cycle.
Tools and practices could also be further developed to mainstream intergenerational equity and wellbeing in spending and financial decisions
MENA governments could further promote and strengthen the use of other phenomenon-based3 budgeting approaches to include other considerations that are essential to inclusive and sustainable prosperity, including budgeting for wellbeing, intergenerational justice and equality across societies.
Many OECD Member countries are using these different tools, as presented in Box 3.6. Countries have moreover adopted different approaches to develop comprehensive policy frameworks for budgeting and address multiple high-level priorities on the long-term. In Iceland for example, goals for the SDGs, gender equality, but also specific sectoral strategies and political priorities are embedded in the national strategy where targets feed into a set of 180 goals for expenditure areas and functions (OECD, 2021[32]).
Wellbeing budgeting
New Zealand has developed a framework which considers domains for wellbeing in its policymaking process. The Living Standards Framework (LSF) has worked to identify four “capitals” (Natural, Financial and Physical, Human, and Social) to help drive the basis for its recent wellbeing budget.
This process, driven by the Labour-led coalition in 2019, is attempting to develop multi-dimensional considerations to its budgeting process by facilitating cross-sectoral co-ordination through shared objectives by ministries and using evidence to drive person-centric needs and long-term considerations.
The Government sets out a list of five outcomes to focus on, determined every year, to ensure discretionary resources are prioritised to these areas.
In 2020, the wellbeing budget had developed five outcomes of focus for the government’s efforts:
1. Taking Mental Health Seriously – Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds
2. Improving Child Wellbeing – Reducing child poverty and improving child wellbeing, including addressing family violence
3. Supporting Māori and Pasifika Aspirations – Lifting Māori and Pacific incomes, skills and opportunities
4. Building a Productive Nation – Supporting a thriving nation in the digital age through innovation, social and economic opportunities
5. Transforming the Economy – Creating opportunities for productive businesses, regions, iwi [indigenous communities] and others to transition to a sustainable and low-emissions economy
Existing frameworks (e.g. Living Standards Framework) and wellbeing domain assessments provide the structure for analysis if the government identifies green objectives as its set of priorities.
Budgeting for future generations and intergenerational justice
In Slovakia, the Council for Budget Responsibility considers intergenerational fairness in connection with the long-term sustainability of public finances and quantifies the net contribution to and receipt from public finances of individual age cohorts.
Moreover, in Finland, the Prime Minister’s Office has recently set up a working group to study child budgeting as part of the national children’s strategy. The task of the working group is to prepare a concrete proposal on how the child budgeting section will be introduced in the state budget process. This was piloted in the 2022 draft budget and consolidated in the 2023 draft budget. To support this, the Ministry of Finance worked on an assessment of the possibilities to move towards a phenomenon-based budgeting system in Finland.
Equality budgeting
In Ireland, equality budgeting was introduced as a pilot programme for the 2018 budgetary cycle and expanded in subsequent years. It is a cross-government commitment that builds on Ireland’s performance budgeting framework by encouraging departments to identify programmes and set performance targets related to inequality. According to a recent Public Service Performance report, all 18 government departments now report equality budgeting metrics, with some departments reporting progress on multiple high-level goals.
The equality budgeting initiative is also informed by the Equality Budgeting Experts Advisory Group, which is comprised of experts from academia, civil society, government departments and agencies. In March 2021, the Irish Government defined several priorities to take Equality Budgeting further, including the establishment of an Interdepartmental Network for Equality Budgeting. Along with the Expert Advisory Group that advises on the direction of Equality Budgeting in Ireland, the Interdepartmental Network helps build capacity within government departments and share information.
Strengthening transparency and accountability of the public action by reinforcing existing budget governance arrangements
Transparency and accountability are key principles for governments and public administrations to function better, deliver quality services and ultimately increase the legitimacy of decisions taken. When it comes to budgetary matters, it should drive the improvement of resources’ allocation and strengthen trust by showing citizens that their views and interests are taken into account in spending decisions and that public money is used well (OECD, 2017[35]).
As covered in detail in the following sections, ensuring budget transparency and accountability requires governments to provide adequate information and to engage citizens in the budget cycle. It also calls for strong budgetary oversight and reporting mechanism and practices.
A more comprehensive, systematic and user-centered disclosure of budget documents could further contribute to budget transparency
Budget transparency, referring to the full disclosure of all relevant fiscal information in a timely and systematic manner, is fundamental to improving accountability, integrity, inclusiveness and quality of budget decisions (OECD, 2019[36]).
Budget transparency is a key element in underpinning “the overall agenda of transparency and accountability of government” among others. The OECD Recommendation on Budgetary Governance (2015[2]) and the OECD Budget Transparency Toolkit (2017[35]) highlight the importance of ensuring that budget documents and data are open, transparent and accessible, so policymakers can take sufficiently informed budget decisions to address policy problems, and citizens and other stakeholders can play an active watchdog role and keep governments accountable for budget allocation and spending. Recent figures show that only 44% of the MENA region’s budget information is available, and in 63% of the cases, documents are not publicly disclosed, are only available for internal use or not published in a timely manner (Boustany, 2021[16]). In terms of budget transparency, although situation varies greatly across countries and territories, the MENA region has lagged behind compared to other regions in the world over the years, as shown in Figure 3.2.
According to the latest Open Budget Index4 (International Budget Partnership, 2023[37]), most participating MENA countries and territories5 are below average standards of budget transparency (average considered at 45/100), except for Egypt, Jordan, and Morocco, which scored 49/100, 60/100 and 47/100 respectively in 2023. Chapter 1 provides detailed information on documents published by the different governments.
Evolution of the Transparency Score at the regional level and in the OECD between 2012 and 2023
Notes: For categories other than Middle East and North Africa and OECD, the figure compares countries and territories that have been evaluated since the 2012 Open Budget Survey. Middle East and North Africa covers 10 countries (Algeria, Egypt, Iraq, Jordan, Lebanon, Morocco, Qatar, Saudi Arabia, Tunisia and Yemen). OECD covers 20 countries in 2012 (Colombia, Costa Rica, Chile, Czech Republic, France, Germany, Italy, Mexico, New Zealand, Norway, Poland, Portugal, Slovenia, Slovakia, South Korea, Spain, Sweden, Turkey, United Kingdom and the United States) and 24 countries in 2023 (Australia, Canada, Chile, Colombia, Costa Rica, Czech Republic, France, Germany, Hungary, Italy, Japan, Mexico, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Korea, Spain, Sweden, Turkey, United Kingdom and the United States).
Source: Author’s work based on (International Budget Partnership, 2023[37]).
Despite the challenges to introduce better budget transparency, a number of MENA governments prepare and publish an increasing number of budget documents at central level (see Table 3.2) (Frank et al., 2023[38]), building consistency in their budget transparency practices. Although some of the documents have not been published in the last decade, Jordan has been preparing and publishing Pre-Budget Statements, Executive’s Budget Proposals, Enacted Budgets, In-Year Reports, Mid-Year Reviews, Year-End Reports and Audit Reports since at least 2010 (International Budget Transparency, 2023[39]).
Public availability of budget documents in select MENA countries, 2023
Note: The table includes MENA countries publishing at least one type of key budget document.
A growing number of municipalities also publish budget information at the local level, where citizens have most interactions with governments and the issues are directly linked to daily livelihoods and basic public services. In Lebanon, Morocco and Tunisia, access to information laws require municipalities to publish all administrative documents (including decisions, budgets, annual accounts and tenders), create special websites for this purpose, and reply to access to information requests (OECD, 2019[40]; OECD, 2020[41]). In Egypt, the government also publishes the governorates’ budgets and financial statements on the website of the Ministry of Finance (OECD/UN ESCWA, 2021[42]).
In addition to the increase of documents published, some governments, notably in Jordan and Morocco, also advanced on the comprehensiveness of the documents made available (Frank et al., 2023[38]). This was further enhanced by the adoption of access to information laws that aim at facilitating the accessibility of public information and data together with their proactive disclosure (OECD/UN ESCWA, 2021[42]). In Jordan, the General Budget Department (GBD) developed a Citizen Guide which presents a user-friendly summary of the draft budget law and has published it on its website to allow citizens to provide comments on the draft law, which they opened for consultation (OECD, n.d.[13]).
A number of initiatives are also being implemented to raise awareness among citizens and public institutions on the budget process. In Egypt, the Ministry of Finance established a Transparency and Community Participation Unit in 2018, institutionalising a work area that started in 2015. The Unit aims at raising awareness among citizens on the concepts of budget transparency and participatory budgeting (Arab Republic of Egypt, 2020[43]). In Jordan, the GBD developed in 2023 an awareness campaign for youth on budget execution. In Lebanon, the government has undertaken significant efforts with the support of civil society to raise awareness of citizens and promote transparency on budgetary matters, as highlighted in Box 3.7.
In Lebanon, since 2018, the Ministry of Finance has been publishing citizen budgets that are simplified, easily accessible and readable documents comprising key public finance information targeted to a general audience.
In 2020, the Institut des Finances Basil Fuleihan at the Ministry of Finance created the Lebanon Citizen Budget Dashboard (LCBD) in cooperation with civil society, providing access to disaggregated budget data. The LCBD aims to transform metadata from the Ministry, retrieved from the official budget and monthly reports, into understandable, easy-to-read figures and appealing graphs and visuals. Information on the budget calendar helps citizens better contextualise the data. A feedback section is available for users to submit comments for improvements in presentation and request further information. Between 2020 and 2021, the dashboard became a unique point of access to budget data. The Institute witnessed a growing demand for accessing and understanding fiscal information, demonstrated by the large number of inquiries received through social media and other communication channels, as well the number of requests for awareness sessions, especially from youth groups and media. Live demonstrations and hands-on training on the use of the data were organised for more than 20 civil society organisations and development partners in Lebanon.
Finally, for the first time in 2022, the government published a booklet presenting in a simplified format the general budget draft law as received by the Parliament and prior to its discussion, amendment and ratification. It aims at providing citizen with information on what the government is intending to spend and how it intends to finance its activities.
Nevertheless, the evolution toward full budget transparency in the MENA region remains slow and heterogeneous. Data show that the increase in overall budget document publication rates between 2019 and 2021 was only 3%. Over the same period, two countries (Iraq and Lebanon) stopped publishing Year-End Reports (Frank et al., 2023[38]). Some governments develop documents but do not publish them, while overall the comprehensiveness of documents varies largely across governments (Frank et al., 2023[38]). Moreover, the application of budget transparency at the regional and local levels remains challenging in most countries and territories (OECD, n.d.[13]; OECD, 2021[17]).
To further strengthen their efforts in increasing transparency in the budget process, MENA governments could seek to improve their data collection and management systems to provide decision-makers and other key stakeholders with sound budgetary information for decision-making, scrutiny and accountability. In this sense, the Ministry of Finance in the UAE launched a project to consolidate financial data across the Emirates, in collaboration with local government departments. This initiative, expected to conclude in 2024, aims to prepare and publish unified national-level government finance reports encompassing revenue, expenditure, assets, liabilities and government spending by job classification. This would contribute to support assessing government policy impact, sound fiscal planning and monitoring and oversight of economic policies, in addition to enhancing transparency in government spending (National Committee on Sustainable Development Goals, 2023[48]). Similarly, in a number of OECD Member countries, such as Australia, the United States and Mexico (Box 3.8), budget information is regularly produced and analysed.
In Australia, the Final Budget Outcome is the government´s key ex-post accountability document and is published within three months of year-end, using the same basis as the budget and the mid-term updated, both as regards flows (revenues, expenditures and balances) and stocks (net debt and net financial worth). However, the financial statements in the Final Budget Outcome provide actual outcomes rather than estimates.
In the United States, the Office of Management and Budget provides Analytical Perspectives of budget which contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget into perspective. It also supplies Historical Tables which provide a wide range of data on Federal Government finances and Economic Assumptions from the 1970s. In addition, all US federal government budget data are now machine-readable in “raw” format, and publicly available on USAspending.gov.
In Mexico, the government has a budget transparency portal where it publishes its “citizens' budget”, whose first version was presented in 2012. This document summarises in a user-friendly way the key content of the budget document to improve citizens' understanding of government policies and increase transparency. This citizens’ budget is prepared in collaboration with Civil Society Organisations. In addition, the transparency portal includes citizen versions of other key documents, such as the annual public accounts report or a guide to the macroeconomic framework and public finance targets in the country.
MENA governments could also ensure that budgetary information is more systematically available in a clear and simplified way as a means to i) allow the executive and the legislative to participate in a timely discussion on policy priorities; ii) inform citizens and stakeholders on government actions and foreseen allocation and spending of public money; and iii) enable citizens and stakeholders to engage actively with the government, participate in the budget cycle and monitor the budget activities and performance of their government.
A growing momentum for participatory budgeting, which could be further institutionalised
Beyond the disclosure of budgetary information, budget transparency also encompasses citizen participation in the budget process (OECD, 2019[36]). As highlighted in the OECD Recommendation on Budgetary Governance (2015[2]), budgetary decisions can be improved if they are the result of discussions and engagement with parliament, citizens and civil society organisations (CSOs), about the key priorities, trade-offs, opportunity costs and value for money.
Participatory budgeting has proven to be an effective tool to involve citizens and stakeholders in public decisions, with concrete and tangible impacts on inclusion, democratic quality, and social wellbeing. They allow citizens to have a role in deciding how public money should be spent. It encourages them to identify, discuss, and prioritise public spending projects, and gives them a role in the decision-making process. This trend is accentuated when participatory budgeting mechanisms are institutionalised and implemented over a longer period. In addition, participatory budgeting supports social inclusion and increases diversity in public decisions. Data show that traditionally under-represented groups in the public sphere, such as women or lower-income segments of society, participate more in participatory budgeting processes than in other democratic processes (OECD, 2022[52]).
The OECD Guidelines for Citizen Participation Processes (2022[53]) identify two types of participatory budgets:
Project-based processes: a pre-defined amount of the budget is allocated to citizens’ projects and ideas. The amount depends on each authority.
Budget cycle processes: citizens and stakeholders can participate throughout the budget cycle by providing comments or making recommendations on the overall budget or strategical priorities. This can be done by creating a dedicated participatory body or by inviting participants to public decisions bodies, such as budget committees.
In addition, there are different approaches regarding who can take part in a participatory budget:
Universal access: the process is open to individuals of a certain territory or institution.
Targeted audiences: some processes can be aimed at more targeted audiences or specific social sectors.
Efforts to involve citizens in public budgeting have been undertaken in the MENA region at different levels of government. At central level, some governments have started strengthening institutional frameworks and developing practices to promote citizen and civil society participation across budget cycle. In Egypt, recent preliminary Pre-Budget Statements and draft proposals included approaches to a citizen budget. The Ministry of Social Solidarity has furthermore deployed an accountability tool for local communities to provide feedback on social programmes in order to better direct social funds and public service delivery (Frank et al., 2023[38]). The Ministry of Finance also adopted the Participatory Budgeting initiative, which is being led by its Fiscal Transparency and Citizen Engagement Unit (OECD, n.d.[14]). While this mechanism has been rolled out, future editions could be more ambitious and enhance the representativeness and engagement of non-governmental stakeholders in these processes (OECD, n.d.[14]). In Tunisia, the Ministry of Finance created in 2013 a joint commission for financial transparency. The commission was composed of high-level public officials and CSOs working on transparency and open governance. It was responsible for preparing the citizen budget and advising the Ministry, strengthening the monitoring and supporting co-ordination of reforms and co-operation with civil society in this regard (OECD, 2016[54]).
Nevertheless, similarly to OECD Member countries, participatory budget initiatives are undertaken mainly at the local level in MENA countries and territories. It allows citizens to be involved in the orientation of dedicated municipal resources through their participation in the definition, implementation and monitoring and evaluation of projects that concern them and respond to their needs.
If some municipalities started adopting participatory budgeting as early as the 2000s, its use has been expanding in the region in the last decade, notably in Egypt, Jordan, Morocco and Tunisia, often with the support of central authorities (Frank et al., 2023[38]; OECD, n.d.[13]; OECD, 2024[55]; OECD, 2019[56]). In Egypt, there has been a total of 10 to 13 participatory budgeting processes, including eight to ten at the local level and three in large cities (Qena, Sohag and Alexandria) (Participatory Budgeting World Atlas, n.d.[57]). In Jordan, participatory budgeting represents a good example of collaboration between the government and CSOs. The organisation Partners Jordan works alongside the government to implement participatory budgeting at the municipal level, bringing together public officials and their communities across municipalities (Partners Jordan, n.d.[58]). Jordan has also recently engaged local communities in the decision-making process of their Governorate Councils’ budgets (OECD, n.d.[13]).
Participatory budgeting mechanisms have been institutionalised by a number of local authorities. This is the case, for instance, in a number of municipalities in Morocco. In Larache, the municipality formalised a steering group, made up of CSO representatives who participated in the first participatory budget cycle experience, as its key interlocutor for all actions related to the development of the medina (OECD, 2024[55]). In Tunisia, 18 municipalities adopted participatory budget initiatives in 2018, involving around 6,500 citizens in the process (OECD, 2023[59]). Several municipalities, including La Marsa, Menzel Bourguiba, Gabès, Tozeur, La Manouba, Sfax and Gafsa, further signed an inter-municipal mutual aid agreement on participatory budgeting to support the sustainability of the mechanisms on the long-term (OECD, 2019[56]). Some governments also adapted legal frameworks and developed guidance tools to promote the broader use of such practices. In Morocco, the General Directorate for Local Authorities of the Ministry of Interior develops operational guides in an effort to support the generalisation of participatory budgets in a growing number of municipalities (OECD, 2024[55]). In Egypt, the government has organised seminars, workshops and trainings for university students, governmental and non-governmental actors, and has established a network of different actors (e.g. CSOs, ministries, local authorities) with governors to begin expanding participatory budgeting in different regions around the country (Egyptian Ministry of Finance, 2020[60]).
Despite these efforts, opportunities for citizen participation in budgetary matters remain limited, especially at the central level (OECD, n.d.[13]; OECD, 2024[55]; OECD, 2019[56]). The 2023 Open Budget Survey data highlight that several countries and territories, including Algeria, Iraq, Lebanon, Qatar, Saudi Arabia and Yemen do not have mechanisms and practices in place for citizen participation on budget matters (Frank et al., 2023[38]). In addition, opportunities for structured dialogue between governments and civil society that could have enabled citizens to channel their feedback on budget issues are largely limited (Boustany, 2021[16]).
Some experiences of participatory budgeting at local level in OECD Member countries, presented in Box 3.9, provide key information on possible areas for improvement and avenues to scale up participatory budgeting at the national level in the MENA region.
Kotrijk Participatory Budgeting (Belgium)
Since 2021, the participatory budgeting process of the city of Kotrijk incorporates elements of deliberation in conjunction with the traditional participatory budgeting methods. Citizens can propose their ideas online, after which a randomly selected citizen jury deliberates and recommends certain proposals for their neighbourhoods. They then move on to budget gaming. Here, citizens can negotiate with each other about (fictive) budgets related to the proposals from the online platform. The output of these budget games become a source of input for the randomly selected citizen jury to make the final recommendations.
School Participatory Budgeting in Phoenix (United States)
After several schools decided to experiment with school participatory budgeting, in 2017 Phoenix’s Union High School District implemented this concept on a larger scale, introducing a district-wide opportunity for participatory budgeting. Students brainstormed ideas for school improvement projects for six months, after which they developed formal plans which were then put to a school-wide vote.
Citizen Budget Committee in Oregon (United States)
The Budget Committee is made up of five county commissioners and five citizens. This committee reviews and approves the County budget, limits the amount of tax which may be levied by the County and establishes a tentative maximum amount for total permissible expenditures for each department and fund in the County budget.
Portugal’s National Participatory Budgeting
The Portugal Participatory Budget (PPB) is the first participatory budget done at the country level. To ensure the maximum engagement of citizens from all over the country, the PPB consists of a hybrid participatory model that combines digital and face-to-face interactions. The face-to-face approach is based on participatory meetings held nationwide, in which the population can present and discuss their ideas in person, with the assistance of facilitators. In addition, citizens can also submit their proposals at the Citizens Spots (assisted digital services counters) and at some public libraries all around the country. The citizens can use digital tools to participate, but also more traditional channels, so anyone can take part of the initiative, even the ones with fewer digital skills or without internet access.
The role and capacities of Parliaments and Supreme Audit institutions in budgetary oversight could be further strengthened
Adequate internal and external budgetary oversight strengthens the checks and balances required for budget accountability and fiscal sustainability (Frank et al., 2023[38]). As reaffirmed in the OECD Recommendation on Principles for Independent Fiscal Institutions, oversight institutions such as fiscal councils, parliamentary budget offices and Supreme Audit Institutions (SAIs) “both promote and operate under independence, non-partisanship, transparency and accountability, while demonstrating technical competence and producing relevant work of the highest quality that stands up to public scrutiny and informs the public debate” (2014[65]).
Legislative bodies have a key role in approving budgets, allocating resources and providing external oversight to budgetary debates or ensuring the underlying assumptions of the budget are sound (OECD, 2019[66]). Additionally, SAIs are fundamental to parliaments’ ability to hold government to account. Through independent, timely and quality audits, they can assess whether public funds were spent economically, efficiently and effectively by government entities, in compliance with existing rules and regulations.
In recent years, a number of MENA countries and territories have experienced an increase in their budget oversight scores. Some of them have made progress in strengthening oversight of the Parliament and/or the SAI. In Iraq, which reaches the highest score for the region, the adoption of the General Financial Management Law of 2019 provided a solid foundation for the parliamentary authority to amend the budget (Frank et al., 2023[38]). The law stipulates that legislative committees discuss the Pre-Budget Statement, review the Budget Proposal and budget execution as well as meet with SAI members during the budget year. However, the budget process remains in practice often delayed and lacks transparency and participation (UNICEF, 2023[67]). In Morocco, the Organic Budget Law No. 130.1 from 2015 strengthened the oversight role of Parliament and the Court of Auditors (Court des Comptes) (Transparency International, 2021[68]).
Nevertheless, budget oversight in the MENA region remains overall limited (Figure 3.3). Data show that the MENA region is the only one displaying a “weak” budget oversight with a score of 27.6 in 2023, far below other regions in the world. None of the MENA countries and territories have “adequate” legislative oversight and only Iraq has “adequate” SAI oversight (International Budget Partnership, 2023[37]).
Evolution of Budget Oversight Score in MENA countries and territories in 2019, 2021 and 2023
Note: Global average was calculated by averaging the scores of all countries included in the survey
Source: Author’s work based on (International Budget Partnership, 2023[37]; Partnership, 2020[69]; Partnership, 2018[70]).
More specifically, parliaments have the authority to amend the draft budget in only four countries (Algeria, Egypt, Iraq and Jordan), where they still face limitations in that respect (Frank et al., 2023[38]). Parliaments in the region have traditionally suffered from a lack of information and resources for better oversight and accountability. For instance, only three countries have legislative committees that either examine in-year execution of the budget (Iraq, Jordan, and Morocco) or examine the Audit Report on the annual budget produced by the SAI (Algeria, Jordan, and Morocco) (Frank et al., 2023[38]).
The role of parliaments in scrutinising and approving the executive’s budget proposal as well as holding the executive to account on behalf of citizens for spending and policy execution could be strengthened in the MENA region. Parliamentary committees are a useful forum for focused, in-depth scrutiny and effective engagement with the budgetary process. Parliamentary Budget Offices have also been established to provide independent budget and fiscal analysis in various OECD Member countries. Some examples of budgetary oversight by parliaments are highlighted in Box 3.10.
In Germany, the Bundestag’s Budget Committee has a strong and active role in scrutinising the government’s draft budget. The committee sends “rapporteurs”, along with representatives from the Supreme Audit Institution, into each ministry to discuss proposed spending allocations. This allows for a strong feedback loop from audit into the budget deliberations. The rapporteurs are responsible for this portfolio for the full electoral term, allowing them to develop expertise. The committee considers proposals from the sectoral committees and amendments to the draft budget and can place conditions on the execution of particular budget lines.
In Sweden, the annual budget process is divided into two distinct phases, with a Spring Fiscal Policy Bill in April setting down broad aggregates for fiscal policy development, followed by a government Budget Bill in the autumn specifying allocations for the budget year ahead. The Spring Fiscal Policy Bill provides for parliamentary debate on fiscal policy in general terms. The main budgetary aggregates are voted on in a single spring vote.
In Austria, the Parliament decides on financial resources and on results (outcomes and outputs) as part of an annual budget bill. The Parliament also assesses the performance reports by the government, reflecting critically on performance information and using it to ensure a more strategic budget debate. The Parliament and its Budget Committee are assisted by a Parliamentary Budget Office (PBO) helping parliamentarians to engage constructively with performance information by providing information, analyses and studies. In doing so, the PBO contributes to counteracting the information asymmetry between the Parliament and the federal government on budgetary matters.
In the United Kingdom, the Parliament and some of the devolved regional legislatures have established in-house technical units to support budget scrutiny and enhance transparency. For example, the Scottish Parliament, helped by its Financial Scrutiny Unit (FSU), negotiated with the executive to speed up the provision of detailed budget information for all portfolios, in order to enable effective oversight. In addition to providing in-depth technical analysis of the budget figures, the FSU has worked to simplify the presentation of budget information by producing different resources and tools to help MPs and committees with financial scrutiny.
Moreover, a general pending issue in the MENA region concerns SAIs’ restricted independence. Data show that in a number of countries and territories of the region, the government can remove the head of the SAI without the need for consent from the judiciary or the Legislature. It can also interfere with the SAI's mandate and operations, including by limiting access to information and delaying the provision of resources (Frank et al., 2023[38]).
Governments in the MENA region could strengthen the role of SAIs to allow them to actively engage in budget formulation and execution and oversee budget implementation. The independence of SAIs could be further improved, for example, by making the appointment or removal of their heads subject to legislative or judicial, and not only executive, approval. Allocation of resources could be further improved to ensure full independence in financial terms. Technical capacities and timely delivery of reports could also be further strengthened. Publishing information about the implementation of the SAI's recommendations would enable analysis as to the extent to which the government and public institutions use these recommendations.
Financial Management Information Systems enhance budget monitoring and transparency
Financial Management Information Systems (FMIS), or Information Technology (IT) systems used by governments for financial management, offer structured platforms for gathering, processing and analysing real-time, comprehensive and reliable financial and non-financial data.
They allow for the monitoring of daily financial operations and debt management, and thus help in detecting irregularities and providing inputs to control and audit institutions. As such, they can play an essential role in streamlining processes, bolstering the control mechanisms financial transactions and promoting heightened fiscal transparency (OECD, 2024[75]).
The introduction of FMIS has been a major reform in the MENA region. Such tools have been introduced by a number of governments to improve the efficiency and transparency of budgetary systems, building on international control criteria and safeguards (OECD, 2017[3]). In Egypt and Jordan for instance, the specific objectives linked to the implementation of the FMIS are defined in manuals, as detailed in Box 3.11 (OECD, 2017[3]). Governments have also made significant technical and human investments to ensure their effective implementation (OECD, 2017[3]). For instance, training programmes and awareness-raising campaigns about the benefits of FMIS were organised both for public officials and citizens in several countries and territories (Boustany, 2021[16]).
Egypt
The Financial Control Manual defines the objectives for implementing the GFMIS:
Directly linking the different budget authorities/units and accounting units to the Ministry of Finance
Reducing the time taken to receive results of works and reports
Approving a unified design for the databases of the standard government applications
Issuing overall and detailed reports to monitor government spending from the state budget
Obtaining clear indications on the volume of spending in due time, to help prioritising spending and rationalising it
Providing the data needed to ascertain the availability of cash in due time and the amounts needed to fulfil obligations/liabilities with greater efficiency and as little cost as possible, while assisting decision-makers by determining the deficit or surplus
Being able to compare revenues and expenditures, enabling the burden of debt service interest to be reduced in the case of deficits and investment increased in the case of surplus, and helping to plan the issue of treasury bonds and bills
Carrying out all government financial payment and collection operations centrally through the e-payment and e-collection system
Comparing expected and actual cash flows to show the degree and cause of any deviation, to take it into consideration when drawing up future expectations.
Jordan
The FMIS is used for:
Providing an electronic financial system that manages the financial processes in all budget institutions
Enhancing the accountability and transparency of the public sector accounting system
Improving the budget cycle to enhance the effectiveness of governmental performance and provide quality services to the citizens
Appling procedures to control the allocation of financial resources in the budget law and unify the government systems for information and the financial and accounting database
Source: (OECD, 2017[3]; USAID, 2018[76]).
To ensure that such systems remain effective in supporting the implementation of new budget procedures and processes, MENA governments should provide public administrations with the necessary technical and human capacities to develop, make use and update when necessary the systems in an informed way (OECD, 2024[75]).
The infrastructure sector is a good illustration of the importance of developing strong budgetary frameworks and tools. The G20 Principles for Quality Infrastructure Investment recognise infrastructure as a “driver of productivity, economic prosperity and strong, balanced, inclusive growth and sustainable development” (G20, 2019[77]). Public investments also deliver public outcomes and determine the quality of people’s lives.
Better governance of public infrastructure investment is therefore crucial to ensure that the affordability of public investments is considered along the entire life cycle of infrastructure, and that projects are accommodated within the government’s current and future budget constraints.
This is especially important in the MENA region where the public sector (especially through State-Owned Entreprises - SOEs) is a major actor in the infrastructure sector, in which important investments are needed to sustain the development of the region.
Today, MENA countries and territories face increasing strains on their existing infrastructure with a need for technologically advanced, sustainable and resilient infrastructure that can support the economic growth by attracting investment and promoting industrial development and economic diversification. Some of the challenges for transforming infrastructure are the low quality of hard and soft infrastructure, such as connectivity infrastructure, fragmented maritime networks, insufficient diversification of renewable energy resources, high costs of Information and Communication Technology infrastructure. It is estimated that the region will need over USD 100 billion a year (7% of the annual regional GDP) over the next five to ten years to maintain existing and create new infrastructure (OECD, 2021[78]).
Improving infrastructure governance is essential to ensure that public resources are spent effectively, but also to attract more private investments that will be critical to meeting investment needs, especially in fast-developing regions like the MENA region (IEA, 2021[79]). The OECD Recommendation on the Governance of Infrastructure (2020[80]) highlights that sound policies, frameworks, norms, processes and tools are a precondition for the use of innovative funding and financing, efficient channelling of finance, and can support quality investment at both national and sub-national levels. This requires strengthening capacities for public investment and promoting policy learning at all levels of government, ensuring adequate financial resources, professional skills and sound institutional frameworks.
Many MENA governments have launched national strategies to upgrade infrastructure that promote sustainable development, (OECD, 2021[78]). A number of governments have been developing project selection methods, notably cost benefit analysis6 (CBA), to systematically calculate the benefits and costs of policy options and projects, also supporting budgeting by ensuring that capital and operational expenditure is being allocated to the highest priorities. While CBA has traditionally been used to monetise the benefits and costs of public investment proposals, it can also include wider economic benefits that are harder to monetise, such as peoples’ ability to access community services.
Despite these efforts, MENA economies are facing various challenges in relation to public spending. The application of project selection methodologies varies across the MENA region but remains overall limited. For instance, in Morocco, prioritisation is essentially based on sectoral strategies and criteria are not standardised. Each sector has its own informal selection criteria, which are often not communicated to the Ministry of Finance or the public (OECD, 2024[81]). Egypt’s criteria for prioritising investments in transport and water remain large, limiting the possibilities to compare investments within or between sectors and ensure public resources are being directed to the highest priorities. A more widespread adoption of CBA would help with these bottlenecks.
Moreover, infrastructure reforms require mobilising the necessary resources through planning and prioritisation of projects. While infrastructure project budget and investments are typically set over mid-term planning and financing, MENA governments tend to operate on a shorter-term allocation planning that is not always aligned with their strategic priorities. Moreover, public investment processes and frameworks remain to be further strengthened (International Monetary Fund, n.d.[82]). On the other hand, and more generally, most MENA governments have struggled to keep their finances on a sustainable track, as a large share of public funds is used to pay wages and salaries, in addition to debt servicing in a context of low tax revenue generation (Biganzoli and Gagliardi, 2021[83]).
To move forward, MENA governments could make sure that long-term infrastructure plans are fiscally sustainable by systematically and rigorously linking these plans with their medium-term fiscal plans and the annual budget formulation process. In particular, a MTEF can help to integrate fiscal policy and budgeting over a multi-year horizon, by creating linkages between fiscal forecasting, fiscal objectives, and rules and the forward planning of multi-year budget estimates. It provides the basis for budget negotiations in the years to follow (OECD, 2019[66]). To support implementation, the MTEF could take into account estimates of the costs associated with the infrastructure projects of the government.
Infrastructure plans could have a proper link to the annual budget formulation process, since it is at this time that resources are allocated to government projects and programmes. The way capital expenditure is integrated into the overall budget process has different advantages and disadvantages. While full integration between current and capital expenditure can improve planning, facilitate co-ordination and increase flexibility, separate budgets can ensure that mandatory items, such as entitlements, do not crowd out discretionary items, such as capital investment (OECD, 2021[84]).
In addition to project preparation and selection, monitoring and evaluation of public investment projects are also crucial to ensure that the purpose of the investment meets the objectives initially identified during project preparation (OECD, 2020[85]). The monitoring of investment projects can serve two different purposes, i.e. facilitating the proper allocation of resources and the early identification of potential problems and their corrective measures (European Commission, 2022[86]).
Monitoring of the investment project during implementation should be complemented by ex-post evaluations after completion and commissioning, through to decommissioning and dismantling. Indeed, right from the preparation phase of public investment projects, public entities verify the need for the project and the contributions it can make to achieving the objectives set out in national or sectoral plans. The objectives of the project itself are then defined, and indicators created to measure whether these objectives have been achieved. Thus, ex-post evaluation should not only measure whether the public investment project has been achieved on time and within budget, but also whether and how the project has achieved the objectives for which it was designed (OECD, 2024[81]). In addition to project performance, ex-post evaluation not only provides detailed information for future investment decisions, but also enables to draw lessons about the governance of the public investment system, for example by measuring the impact of certain policies on public investment, identifying improvements that need to be made to certain investment programs, or evaluating the fiscal impact of the public investment system (OECD, 2024[81]). Another key area of improvement concerns the governance of SOEs, responsible for the majority of infrastructure delivery and management in the MENA region. Improving their governance would contribute greatly to improving infrastructure investment. Finally, while their use remains limited, Public-Private Partnerships (PPPs) could also represent an avenue through which private sector resources and expertise could be leveraged to finance resilient infrastructure systems (OECD, 2022[87]). Political support for PPPs has been growing across MENA countries and territories in the recent years, and a number of MENA governments have boosted efforts to build a enabling environment for PPPs by updating their regulatory frameworks and setting up PPP agencies or specialised units within existing institutions as a first step (Middle East Business Intelligence, 2020[88]).
To foster efficiency and accountability in public spending, governments could pursue their efforts in the following areas:
Establishing planning and monitoring budgetary tools to support a more strategic approach to public expenditures
Pursuing efforts to established medium-term expenditure framework, including through the development of tools to ensure the understanding and implementation of such frameworks by all public institutions and other stakeholders.
Promoting the use and development of performance budgeting, through the development of frameworks, tools and capabilities across public administrations.
Mainstreaming considerations of long-term cross-cutting issues in spending decisions
Further promoting the use of phenomenon-based budgeting approaches, including green and gender budgeting but also mainstreaming of other considerations (intergenerational equity, well-being, etc.).
Reinforcing governance arrangements and tools to foster transparency, accountability and inclusiveness of spending decisions
Providing stakeholders with sound and accessible budgetary information though improved data collection and management systems and more comprehensive, systematic and user-centered processes of disclosure for budget documents.
Strengthening the use of participatory budgeting initiatives across all levels of government, and considering their institutionalisation when relevant.
Enhancing oversight by strengthening the role of Parliaments and Supreme Audit Institutions throughout the budget process.
Developing and reinforcing Financial Management Information Systems and building capabilities to develop, make use and update when necessary the systems in an informed way.
Leveraging budgetary governance to improve infrastructure investment
Reinforcing the use of project selection methods, notably cost benefit analysis, to systematically calculate the benefits and costs of policy options and projects.
Linking long-term infrastructure plans to medium-term fiscal strategies and the annual budget process to ensure their fiscal sustainability.
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Notes
← 1. Bahrain, Egypt, Kuwait, Iraq, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
← 2. The green sukuk is a new green Islamic bond where the proceeds are used to fund specific environmentally sustainable infrastructure projects (World Bank, 2018[89]).
← 3. Phenomenon-based policymaking means addressing phenomena (e.g., climate change, social disintegration, urbanisation, and immigration) for which no single part of the system holds full responsibility for and which require the collaborative interaction of different parts of a system. This often requires establishing cross-ministerial policy networks and the ability of government to aggregate financial and human resources from across individual entities to cross-administrative objectives to achieve higher impact. The main idea is that societal problems (e.g., climate change, urbanisation, and immigration) tend to get lost in government silos and ‘projectification’ of government action, meaning that the money in government is divided into small projects that do not sufficiently follow cross-administrative objectives and needs and their combined impact remains unclear (Observatory of Public Sector Innovation, 2022[33]).
← 4. The Open Budget Index (OBI), prepared by the International Budget Partnership (IBP) results from the Open Budget Survey (OBS), a comprehensive assessment of government budget transparency, public participation, and accountability in over 100 countries and territories around the world. A country/territory’s score on the OBI is calculated from the results of a subset of the survey that assesses whether governments give the public access to budget information at the national level. It looks at the availability and comprehensiveness of eight key government budget documents. OBI scores can range from 0 (no transparency) to 100 (total transparency) - https://www2.internationalbudget.org/.
← 5. Algeria, Egypt, Iraq, Jordan, Lebanon, Morocco, Qatar, Saudi Arabia, Tunisia and Yemen.
← 6. Cost benefit analysis (CBA) is the standard project selection methodology. CBA can be used to establish the following points in relation to a project proposal:
Whether people’s wellbeing, welfare or utility, would be higher under the proposal than the status quo
Whether people are willing to pay for a benefit and accept compensation for a cost
When the sum of all individuals’ benefits and costs are aggregated, whether the collective social benefit outweighs the social cost
Whether beneficiaries can hypothetically compensate the losers from a change, and have some net gains left over, which indicates that the benefits exceed the costs (OECD, 2018[90]).