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Evaluating Public Spending: A Framework for Public Expenditure Reviews

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This 1996 paper presents a framework for evaluating the level and composition of public expenditures, illustrated by
sectoral and country examples. It emphasizes six elements which should be an integral part of an ongoing exercise
to evaluate public spending. First, the aggregate level of public spending and deficit of the consolidated public
sector must be consistent with the macroeconomic framework. Second, aggregate spending should be allocated to
programs within and across sectors to maximize social welfare, including the impact on the poor. Third, the role
of the government versus the private sector ought to be a principal criterion governing the choice of programs for
public financing and provision; public expenditures should complement rather than substitute for private sector
activities. Fourth, the impact of key programs on the poor, including their incidence and total costs, should be
analyzed. Fifth, the input mix, or the allocations for capital and recurrent expenditures, should be analyzed in an
integrated manner within programs and sectors. Finally, budgetary institutions should be analyzed to ensure that
the underlying incentive structure contributes to aggregate fiscal discipline, allocative efficiency and equity in the
composition of spending, and technical efficiency in the use of budgeted resources.

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