Examining public administration and budget in Peru

Guest blog by Nohelia Navarrete Flores

There is a phrase that reads “A chain is only as strong as its weakest link”. After 10 years of managing Public Health projects, I had realized that it was more than just a phrase; it was a fact, and I started reflecting on how to make that weak link stronger.
I first thought of joining the Implementing Public Policy course to complement what I had learnt in Leading Economic Growth. I was looking forward to experiencing a longer and adaptive process to help me developing the policy challenge I had identified in the previous course.

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Creating Space for Better Post-Covid Public Policy Spending

written by Matt Andrews

Governments across the world are struggling with the many policy challenges wrought by Covid-19. While this pandemic is not yet over, many are already thinking about the recovery to come. Governments will undoubtedly be needed in this recovery process, helping people get back to normal or charting new paths to better normals—what some call ‘building back better’. 

I fear that governments are set to fail in their efforts to provide such help, however, because of limits to the budgetary and policy prioritization space needed to address post-Covid needs.

Will we have enough money to build back better?

Covid-19 hit the world at a time when many public finance experts were already commenting on the large role governments have turned out playing in their economies. Government spending as a share of Gross Domestic Product (GDP) was at historical highs in many countries prior to the pandemic given decades of growth in budgets across the world.  Consider the following graph and examples of such growth in countries as varied as South Korea, India, South Africa, the USA, Spain and Italy.

Figure: Government spending as a share of Gross Domestic Product, various countries, 1850-2020  

Source: Our World in Data and the IMF data mapper

These budgets continued expanding in response to Covid-19, fostering record debt levels across the globe. A Brookings paper written last year notes, for instance, that “In 2020, global government debt increased by 13 percentage points of GDP to a new record of 97 percent of GDP. In advanced economies, it was up by 16 percentage points to 120 percent of GDP and, in EMDEs [emerging markets and developing economies], by 9 percentage points to 63 percent of GDP.” 

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If on a Winter’s Afternoon Four Policy Students …

Guest blog written by Nathalie Gazzaneo, Tendai Mvuvu, Rodrigo Tejada, Matt Weber

On a winter’s afternoon in early February this year, a Mexican MPP1, a Brazilian MPP2, a Zimbabwean MC-MPA and an American MC-MPA randomly stepped up to the plate of abandoned projects in Nigeria. We, the four students and travelers, had never crossed our paths before (more accurately, we had never seen each other over Zoom). Additionally, none of us had ever worked in Nigeria. Before you think it could not get more chaotic, we had only 8 weeks to learn and experiment as much as we could on the assigned problem before coming up with novel and actionable ideas to expand its change space. Ready. Steady. Go! We weren’t ready, the journey wasn’t steady, but we definitely went on.

Maybe one of our first and most powerful realizations in our PDIA journey was that there was no silver bullet fix to the problem of abandoned projects in Nigeria. It took us two entire weeks to look at the problem with more curious and deconstructive eyes until we managed to draft a set of plausible causes and sub-causes that could be at its roots. We had to remain patient and above all curious and collaborative to shift from our initial planners approach to the searchers perspective required by the PDIA process.

As we deconstructed the problem through interviews and research, the Ishikawa fish diagram and the “five whys” heuristics helped us organize our insights in a meaningful fashion. At this stage, we also started to become more wary of our language usage versus our authorizer’s language usage (more on that later). And as our inquiry and knowledge deepened, so grew our ability to ask smarter questions and to find viable entry points.

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Can PDIA approaches help to enhance the development of Institutional Strategies in Multilateral Organizations

Guest blog written by Francisco Castro-y-Ortíz

I work for a multilateral development organization—the Inter-American Development Bank—and am a citizen from a Latin-American Middle-Income Country (MIC). Because of this background, the main economic problem I am most concerned about relates to my own country—Mexico—and the Latin-American and Caribbean region (LAC) as a whole. It is about low average growth rates—for more than two decades already. Low growth matters in LAC because it increases the risks of regression, particularly to poverty and other human-development and sustainability metrics. Such an outcome may erase the hard-earned development gains of the last two decades. Furthermore, the problem of low growth is today being amplified significantly because of the COVID-19 pandemic which, if not addressed, may have devastating economic consequences on both growth and sustainable human development.

The problem of low growth and its consequences lies at the heart of multilateral organizations’ Institutional Strategies (IS) working in the LAC region. Some of them will be considering updating them because of high-level managerial changes (tenure periods are expiring), or because of the adverse exogenous shock and economic consequences of the pandemic, or both. As I learned in the 2020 Leading Economic Growth course, following the steps of a Problem Driven Iterative Adaptation (PDIA) approach may decisively help to enhance the formulation and update of the IS of multilateral organizations. 

For instance, let us begin with the first steps, constructing and deconstructing the problem to develop a clear problem narrative and “provoke reflection, mobilize attention and promote targeted and context-sensitive engagement”. In the case of LAC, the region has experienced low growth rates since the 1980s consistently. Despite being acknowledged as a “middle income region”, LAC has been stuck in that stage for decades. In addition, if the numerous exogenous and internal shocks that the region has experienced, are factored in, the low growth problem becomes critical because the region does not have enough fiscal space to confront the crises adequately. Consequently, living standards recede, per-capita income decreases, infrastructure and productivity get eroded. 

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Public policy during a crisis: 3 Lessons learned from Ecuador’s earthquake

Guest blog written by Sandra Naranjo Bautista

Last October, I was a guest lecturer at Harvard’s Executive Education ProgramBudgeting Through Crisis. I talked about my experience as a minister during Ecuador’s 2016 earthquake with Salimah Samji, Director of the Building State Capability Program. Our conversation brought up memories that motivated me to write this blog. You can also listen to the podcast.

I’ll share 3 lessons from my experience dealing with a crisis. I also prepared a cheat sheet with additional information and examples that complement this blog. You can download it here.

Ecuador’s 2016 earthquake 

In April 2016, Ecuador was struck by a 7.8 magnitude earthquake, the strongest earthquake in nearly a century. The epicenter was between the coastal provinces of Manabí and Esmeraldas, around 200 Km away from the capital, Quito. At the time I was Minister of Planning and Development. That night, as the reports started to arrive, I could literally feel the weight of the world on my shoulders. The next morning, the scale of damages became clearer and the severity of the situation started to sink in. Homes, businesses, schools, hospitals, and major infrastructure had been destroyed. More than 600 lives were lost, and damages and losses amounted to US$ 3 billion (0.7% GDP). 

Lesson 1: Have your priorities clear

Emergencies are unexpected and their effect can surpass government’s installed capacity to respond. There can be confusion about what to prioritize and how to find the required resources. Breaking the process into manageable steps can help to avoid becoming overwhelmed. 

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Leveraging Technology to Improve Forecasting and Monitoring of Local Government Budgets

Guest blog written by Ruth Huette

Public budget uncertainty is a defining characteristic of the COVID-19 pandemic

Last week, governments of France and Germany announced that their countries would enter yet another phase of lockdown as new cases of COVID-19 were on a steep rise again. As Europe is grappling with a second COVID wave, other governments around the world are expected to make similar announcements soon. 

Although long expected by epidemiologists, the announcement took many smaller and medium sized companies by surprise. To help ease the impact on businesses forced to close during the lockdown, Germany’s finance minister, Olaf Scholz, promised that the government would compensate small firms with up to 75% of their revenue for the same time last year, thereby tearing yet another hole into already diminished public budgets. Not only in Germany but around the world have local governments taken a massive doublet hit in their budgets since the start of the COVID-19 pandemic, as tax revenues went down and social spending and economic support increased. Until a vaccine will be developed and widely distributed, this uncertainty on future public budgets will persist.

Data analytics can improve local government budgeting processes

To prepare for future phases of budget uncertainty local governments should take advantage of technology and replace manual processes and basic tools with specialized analytics systems. This will help them enhance prediction accuracy, improve data exchange between different government units, facilitate budget-related decision making through visualization and increase citizen participation in budgeting.

Enhancing the accuracy of forecasts

Already in normal times, local budgeting requires bringing together many moving parts – during a global pandemic even more so. In a time of unprecedented uncertainty, both short- and long-term local financial management has become ever more complex. Public health and safety predictions, complex economic scenarios, and accompanying public social spending forecasts are new sources of information, among others, that must now be incorporated into robust budget planning analyses. With increased complexity, manual manipulation of spreadsheets is even more prone to errors and can be difficult to replicate. Advanced data analytics tools offer the potential to improve government’s ability to extract value from various sources and large volumes of data.

Breaking up siloed data and coordinating systems

Data silos in budgeting can be the result of limited insights which the various institutions that help inform the budget planning process gain from their traditional Excel spreadsheets and ERP reports. During crisis times, even more and potentially unusual data sources from various sources need to be taken into account – including for example forecasts of future COVID-19 cases, of required government measures to curb the spread and of the measures’ expected impact on small businesses. This further complicates data transmission and analysis and increases the risk of loss of relevant information.

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