Governments undertake expenditures to pursue a variety of economic, social and political goals. An appropriate mix of public spending is vital to foster a responsive, responsible, and accountable public sector that helms the country toward economic development, social equity, and political convergence. The last two decades witness tremendous attention and efforts devoted to public expenditure analysis due to unsatisfactory performance of the public sector in developing countries, particularly in providing services and protecting the poor and other disadvantaged groups such as women and the elderly. The development of the WBI program on this subject reflects growing demand from World Bank operations and from client countries for knowledge sharing and learning from each other’s experiences. Public expenditure analysis is considered as the key area for Bank’s policy dialogue with member countries. It is an evolving and rapidly growing field within the Bank’s economic and sector work. A significant amount of Bank funding have been channeled to public expenditure analysis through Public Expenditure Review (PER), HIPC assessment, and other informal research or assistance. The importance of public expenditure analysis has been underscored by the recommendation of IDA in 1996 to integrate of PER results in Country Assistance Strategies (CAS) and the mandate for Bank-Fund collaboration in such work since 1995. In addition to PER, there is a growing number of informal public expenditure analysis reports prepared by resident mission or country officials with Bank advice. Another approach entails Bank staff providing guidance to country officials in conducting self-evaluation of public expenditure policies. Requested by Bank and Fund Board’s, HIPC assessment tracks poverty-reduction public spending in heavily indebted poor countries. The HIPC expenditure tracking assessment has been applied in 24 HIPCs over 2000-2002. The results showed that these countries generally have low capacity to track public expenditure. 
This program also reflects a strong demand from client countries experiencing a knowledge deficit in using public expenditure analysis to understand how their current budget allocation affects public burden, poverty reduction, social protection, gender safeguard, responsiveness, and accountability of government. With better insight into public expenditure, the country can make wiser decision on resource allocation and improve public service delivery accordingly. Countries committed to the Poverty Reduction Strategy Paper (PRSP) with the World Bank largely lack of knowledge and skills on public expenditure analysis to ensure budget allocation is consistent with the strategy. A recent Bank study on Tanzania, Bolivia, and Burkina Faso have found that budgetary allocation in these countries does not serve the PRSP objectives. A large number of countries representing all regions have sought WBI assistance for capacity building in public expenditure analysis. Developing countries, faced with daunting challenges of poor public service delivery, corruption, income inequality, massive poverty, and gender discrimination, need to be better equipped to understand their public expenditure and use it as an effective policy instrument. Bank’s operation has responded to the demand by injecting tremendous efforts and resources into research and assistance on public expenditure analysis. This program, by disseminating conceptual guidance and facilitating learning from each other’s experiences on ideas and practices, will open a window for knowledge sharing and provides an opportunity for developing countries to obtain knowledge and skills they urgently need to meet the pressing challenges of the time.
This component concentrates on the link between governance issues and poverty eradication by improving skills and raising awareness of the importance of transparency and accountability with activities aimed at key stakeholders – including ministries of finance, line ministries, local governments, supreme audit institutions, parliament, the media and civil society organizations. The Public Expenditure and Financial Accountability program (PEFA) aims at assisting selected African countries in identifying weaknesses in their public accountability systems, raising awareness of how to achieve accountability in the key stakeholders, i.e. those directly working with the systems (officials at national and local level), those legislating and controlling them (parliamentarians) and those receiving government services (citizens, NGOs, CSOs, CBOs, etc.). The basis for the Program is country leadership, the recognized gap between identifying instruments, such as CFAAs and PRSPs and implementation, and systematic weaknesses in financial management and accountability. The momentum of participation generated by the PRSPs can only be kept going with transparent, effective and accountable government mechanism for delivering the services, identified as necessary by the stakeholders. Furthermore, donors are increasing the amount of budget support funds, which further increases the pressure for transparency, efficiency and accountability.
Program Objective This program aims to disseminate knowledge and strengthen institutional and administrative capacity in conducting public expenditure analysis to facilitate responsive, equitable, pro-poor, gender-sensitive, and accountable public resource allocation; and improve performance of public service delivery. This goal is to be accomplished by: motivating, encouraging and training individuals in the use of analytical frameworks and tools to evaluate and design public expenditure in the way of serving policy objectives; building institutional and administrative capacity to utilize public expenditure analysis as an effective policy instrument to re-structure budget allocation and improve public service delivery; facilitating global, national, regional and local dialogues on knowledge and skills of public expenditure analysis to infuse a spirit of learning from each others’ experiences.
Course Content The program is organized under five broad themes. In each country in which the program is offered, the content of the delivered course is customized to the client’s needs: 1. Fundamentals of Public Expenditure Analysis
Public expenditure is one of the critical ingredients of a country’s development. To make public expenditure efficacious, it is essential that resource allocation decisions are underpinned by sound analysis and that a well designed set of institutions and systems guide budget formulation and execution. This theme focuses on broad principles of public spending including the appropriate role of government, public spending in a federal system, discipline on public sector involvement, fiscal risks embedded in government financial system, a proper mix of inter-sectoral expenditures, and right expenditure policies in promoting economic growth. 2. Distributional Implication of Public Spending
Public spending is an essential means of government intervention to help improve distributional outcomes in fostering a more equal, affluent, and harmonious society. Public expenditure incidence analysis is aimed at enlightening the way in which expenditure policy influences the distribution of real income. This theme will shed light on theories and practices of employing public expenditure incidence analysis to discover the orientation of the public sector on its role in safeguarding the interests of the poor, elderly, unemployment, and women. 3. Efficiency in Public Spending
Any proposed public expenditure has to be justified by improving either the distribution of income or the efficiency of economy. This theme discusses public expenditure on it's ability to improve government productivity and over-all performance while reducing cost. Principles and good practices of efficient and quality service delivery will be discussed and valuable lessons will be distilled for broader application. Efficiency in delivering core public services such as education, health, and infrastructure will be highlighted. 4. Public Spending and Public Service Delivery Performance
Developing countries are plagued with low public opinions on public service delivery due to politicians and bureaucrats’ endemic behavior of rent seeking. This theme tackles this critical issue through measuring public service delivery performance and through deepening public expenditure analysis from inter-sector allocation into intra-sector distribution. Measurement of public service delivery performance is examined under such topics as monitoring government-wide performance, designing measurement indicators of good governance, and assessing local government performance. Public expenditure analysis on intra-sector distribution is undertaken by evaluating service delivery in sectors of education, health, and infrastructure. 5. Techniques of Public Expenditure Evaluations
This theme introduces a variety of techniques in conducing public expenditure evaluations: Cost-Benefit Analysis is a set of economic tools used to evaluate the budget size and content of public spending and regulation; Data Envelopment Analysis is a mathematical programming approach for estimating the relative technical efficiency of production activities; Marginal Cost of Public Funds is a useful concept in evaluating public expenditure programs; and Generational Accounting is a method of long-term fiscal policy analysis to determine whether current fiscal policy is sustainable and to assess whether proposes adjustments to fiscal policy are feasible.
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