Decentralisation of budgeting process

This literature review examines evidence about the impact of public financial management (PFM) interventions in the field of decentralisation of budgeting. It asks:

  • What is the effectiveness of devolved budgeting models in relation to the efficiency of PFM systems, service delivery, budget allocation, citizen involvement, accountability and anti-corruption?
  •  What factors contribute to, or prevent, the decentralisation of budgeting?
  • Under what circumstances does devolved budgeting yield the greatest impacts? (Including effectiveness of interventions, critical success factors and barriers, and the dynamics between central ministries and devolved/decentralised units).

A total of 20 studies of high and medium quality were used for the analysis in this Rapid Evidence Assessment (REA). The analysis is organised around three different types of devolved budgeting: participatory budgeting, budget consultations, and gender-responsive budgeting. The overwhelming majority of studies fall under the category of participatory budgeting (16 studies, half of which are assessed as high quality, and half of medium quality). Two medium quality studies concern budget consultations, and two studies (both scoring at the lower end of medium) concern gender-responsive budgeting.

The material used in this literature review shows that participatory budgeting has a good chance of being associated with positive outcomes, if properly and sustainably implemented, particularly in the form of greater pro-poor budget allocation and increased citizen involvement, and potentially also in improving service delivery. The evidence on whether it can improve the efficiency of PFM systems, enhance accountability and support anti-corruption is mixed: both positive and negative outcomes are associated with participatory budgeting.

A small number of the case studies included in this REA provide analysis of the drivers of decentralised budgeting. Three interrelated drivers can be identified from these cases: 1) participatory budgeting emerged as a response to a commonly perceived problem; 2) stakeholders understood the value of participatory budgeting, and 3) societal conditions were favourable to participatory budgeting.

A larger number of studies included in this REA identify factors seen to be contributing to effective decentralisation of budgeting. Strong cases are made both for ensuring there is political buy-in from central and local government for the participatory processes, and for ensuring the presence of a strong, able, motivated and supportive civil society. Budget transparency is also identified as an enabling factor in participatory budgeting.

The material also identifies a number of critical barriers for effective decentralisation of budgeting. There is relatively strong evidence of several factors blocking participatory budgeting processes, including political and elite capture, lack of capacity and understanding among stakeholders, lack of resources, and cultural barriers for civic engagement.

Following DFID’s methodology on assessing the strength of a body of evidence, the body of evidence for participatory budgeting falls under the ‘medium’ strength category while the small number of studies concerning budget consultations and gender-responsive budgeting makes those bodies of evidence fall under the ‘no evidence’ category.

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Suggested citation

Mills, L. (2016) Decentralisation of Budgeting Processes. London and Birmingham: Department for International Development and University of Birmingham.