Driving Efficiency in Government Spending: Five Strategies for a Multifaceted Approach

More than two years after direct public funding for the COVID-19 pandemic has ceased, governments worldwide continue to grapple with the arduous task of recalibrating strained national budgets to navigate persistent challenges in the post-crisis landscape. In this part one of a two-part series, discover five strategies to help governments at any level budget effectively—and drive outcomes that matter for citizens.

‍The Importance of Effective Resource Allocation, Especially in Challenging Times

It’s been a difficult few years for governments and their citizens around the world—from climate change to conflict to COVID-19—and more. COVID-19 alone has revealed broken global trading systems, highlighted weaknesses in global health governance, and underscored the necessity of reevaluating economic approaches for improved resilience in the future.

Yet, despite implementing a mix of fiscal measures, borrowing strategies, and support programs, governments still encounter challenges to fostering inclusive economic growth. For instance, governments must: 

• Translate government spending into sustainable growth;
• Juggle numerous priorities;
• Manage unpredictable revenue streams; and
• Address escalating program costs.
  

And they must do all this while seeking to meet public expectations.

In this era of profound structural challenges such as government inefficiency, resource scarcity, conflicting priorities, and ever-greater citizen demand for quality public services, prudent and effective resource allocation is—and will become even more so—paramount. Emphasizing efficiency is pivotal for governments to maneuver budget management and service delivery effectively, ensuring optimal resource allocation and sustainable economic growth. In the next section, we highlight five strategies governments and other organizations can use to drive progress towards “economic growth that is distributed fairly across society and creates opportunities for all.”

Five Budget Transformation Strategies to Help Deliver on What Matters 

1. Prioritize outcomes: In 2005, Rwanda was an early adopter of performance-based budgeting (PBB), a strategic tool that enhances government spending efficiency by prioritizing outcomes, fostering transparency, and aligning resources with impactful programs. 

Specifically, the method involves allocating resources to programs, projects, or activities according to their effectiveness, efficiency, and progress toward predefined objectives. 

Rwanda used PBB to strengthen its national healthcare system, which was listed by the 2000 World Health Report as one of the world’s weakest healthcare systems. By linking budgets to policy outcomes in the healthcare sector, Rwanda was able to allocate resources effectively and improve service delivery and governance, especially in the areas of maternal and child health.

2. Optimize bureaucratic processes: Streamlining workflows and digitizing processes helps institutions increase operational efficiency, reduce processing times, and save money. Digitization not only reduces paper usage but also improves productivity and customer satisfaction.

Additionally, centralizing all purchasing and procurement activities under a single team or department boosts purchasing power, enhances visibility and control, and standardizes policies and procedures. This technique is especially useful for controlling escalating government-financed program expenses. The Government of Mexico, for example, successfully implemented a pooled procurement method for pharmaceutical spending, which yielded an approximate 10% in savings. 

3. Leverage new technologies and data sources: Keeping abreast of and utilizing new technology and data sources can enhance governance quality through data-driven decision-making. Saudi Arabia leveraged data to enhance healthcare service delivery, exemplifying the power of analyzing patient needs to allocate resources effectively and design services that meet citizens' requirements.

4. Perform a cost-benefit analysis (CBA): In 2019, the United Kingdom's Department for Transport used CBA to assess the economic viability of major railway projects, such as the High Speed 2 (HS2), a new national high-speed rail network. The study concluded that the net cost to the government is worth the investment, leading to more informed policy choices that balance economic considerations with the net benefit to populations. The UK’s example illustrates how using CBA can lead to more impactful investments with enduring positive societal effects.

5. Benchmark against best practices. By comparing performance metrics with similar entities, policymakers can glean insights from successful policies elsewhere, fostering continuous improvement and learning. Despite potential risks such as data misinterpretation, the benefits of benchmarking far outweigh concerns by driving innovation and sector improvements.

Effective Practices. Long-term Sustainability.

By implementing these key strategies, governments can elevate transparency, accountability, resource allocation, service delivery, and financial performance to benefit governments and their citizens. Yet even the most transformative practices are only as good as their ability to persist and adapt over time. Therefore, in addition to implementing these strategies, governments must also put systems in place to ensure the strategies’ long-term success. In part two of this blog series coming soon, we highlight how governments can ensure the sustainability of effective budgeting practices.

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Photo credit: Katie Moum via Unsplash.com