Why Are Budgets Important?

The budget is governments’ most important economic policy tool. Public budgets translate a government’s policies, political commitments, and goals into decisions on how much revenue to raise, how it plans to raise it, and how to use these funds to meet the country’s competing needs, from bolstering security to improving health care to alleviating poverty. A budget system that functions well is crucial to developing sustainable fiscal policies and economic growth. In many countries, economic problems are exacerbated by weak budget systems and faulty budget choices. Given its wide-ranging implications for a country’s people, the budget should be the subject of significant scrutiny and debate.

While a government’s budget directly or indirectly affects the lives of every one of its citizens, it can have the greatest impact on certain groups, such as the elderly, children, the poor, rural residents, and minorities. The well being and prospects of these people can hinge greatly upon government decisions on raising and spending money. Budget cuts tend to have the greatest impact on programs that benefit the poor and vulnerable, as other items, such as interest on the debt, the public-sector wage bill, or military expenditures, are more likely to have first claim on scarce funds.

Moreover, even when funds have been allocated to specific programs—whether for minorities, children, or the disabled—weak expenditure and program management can result in funds never reaching the intended beneficiaries. The lack of political power among these marginalized people to hold their government accountable is another factor in poor budget execution (i.e., after the budget is passed, how money is actually raised and spent).

It is critical for civil society organizations to engage in all stages in the budget cycle not only because they can contribute valuable technical skills to the process but they also have connections with the community that enable them to bring critical information about the public’s needs and priorities to budget debates. In addition to representing the concerns of marginalized people, civil society can strengthen and support the ability of the poor and most vulnerable to participate in the budget process and advocate for themselves.

The Budget Cycle

The budget is more than just a single document—it is a year-long cycle whose different phases offer civil society varying access points to influence how public resources are raised and spent and, ultimately, the budget’s desired outcomes.

This “budget cycle” can be broken down into four major events or stages:

  • Formulation—when the executive branch puts together the budget plan
  • Approval—when the legislature debates, alters (if it has the power to do so), and approves the budget plan
  • Execution (implementation, monitoring, and control)—when the government implements the policies in the budget
  • Oversight (auditing and legislative assessment)—when the national audit institution and the legislature account for and assess the expenditures made under the budget

In order for civil society and the public to be able to influence budget decisions and provide effective independent oversight throughout the process, there are a set of documents that should be produced and made public at each stage. The information in these documents should be comprehensive and accessible, and they should be made available in a timely way to support effective public participation.

Read more about the budget cycle and roles civil society can play throughout the process.

Budget Work Around the World

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How does budget transparency affect people’s lives

Social Audits in Kenya: Budget Transparency and Accountability The activities of Muslims for Human Rights (MUHURI), a civil society organization (CSO) based in Mombasa, Kenya, demonstrate the significant role budget transparency plays in improving accountability. Read more >>

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