Will Government Budgets in 2021 involve more COVID-19 ‘Whack-A-Mole’?

written by Matt Andrews

Governments started 2020, as they do every year, with budgets that set out plans for raising and spending public money. Then COVID-19 hit, disrupting even the best laid plans and forcing officials to shift from planning to triage mode in the face of rapidly changing crisis conditions. 

According  to a recent informal survey we conducted, with 48 respondents from across the world, the COVID-19 effect is generally widespread and significant:

  • Over 75%  of respondents noted that their governments faced growing spending needs, which required revisions on the spending side of most budgets.
  • Over 90% of respondents noted that their governments faced declining revenues, which necessitated urgent efforts to access funds and fill gaps.
  • Over 90% of  respondents noted that public sector deficits grew in the year, which called for changes in fiscal policies, norms and even rules in many  places.

These pressures turned 2020 into a series of constant budgetary  revision and re-negotiation in most governments. Some officials I was in contact with, described the  experience as frustrating and exhausting; they were never able to keep up with all the problems that emerged.

In a sense, managing public  finances in 2020 was like a long game of ‘whack-a-mole’.

Now, in late 2020, governments need to think about how they budget for 2021 (and beyond) hoping that they can plan more effectively given what they now know about the impacts of COVID-19. 

Stated differently, can they budget in a way that fosters less COVID-19 ‘whack-a-mole’ in 2021?

We at the Building State Capability program are intent on helping in this process, by offering ideas about how governments can foster more stability in 2021 – both by preparing their 2021 budget plans differently and by developing strategies to engage with emerging pressures to those plans throughout 2021. We will offer a few blogs on this in the coming weeks – as many governments are in the final throes of preparing their 2021 plans – and will hold a one week executive education program on budgeting  through crisis from October 26th to 30th, 2020.

We have some amazing faculty members contributing to the executive program:

  • My colleague  Ricardo Hausmann will address – among other things – ways of thinking about the macro-fiscal uncertainties associated with COVID-19 and the difficult trade-offs governments are being forced to consider at this time (read some of his views in  this blog)
  • Teresa Curristine, the Deputy Division Chief in the IMF’s Fiscal Affairs Department, will lead a session on the difficulties of budgeting in a time of COVID-19 (see a blog on the topic she recently co-authored here).
  • Louise Sheiner, Policy Director of The Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, will address challenges in the United States context and speak to the tensions involved in programming different  kinds of social expenditures at this time (see a recent related blog here).
  • Sandra Naranjo Bautista, former Secretary of Planning and Interim Vice President in Ecuador, will  share her personal experience leading the public  finance response to Ecuador’s 2016  earthquake, including  discussing the  challenges associated with leadership at this time (something she references in two recent blogs, here and here).
  • Paolo de Renzio, Senior Research Fellow for the Open Budget Initiative at the International Budget Partnership, will reflect on the importance of communications, transparency and partnerships in developing and managing public budgets at this time (a topic he discussed in this blog).

If you, or anyone you know might be interested in participating in this program, please share this link with them. We would love to have you join us.

If  you can’t join the program, watch for more blog posts on the topic!