Why Output based budgeting?

A good budget process is characterized by several essential features i.e., it incorporates a longterm perspective, establishes linkages to broad goals, focuses budgeting decisions on results and outcomes, involves and promotes effective communication with stakeholders, provides incentives to government management and employees. These key characteristics of good budgeting make clear that the budget process is not simply an exercise in balancing revenues and expenditures for a year, but is strategic and encompasses a multi-year financial and operational plan that allocates resources on the basis of identified objectives. Public sector budgeting systems evolve and change according to the dynamics of public sector management. Public sector budgets are not merely used to allocate resources among competing needs, their usage as a tool to monitor performance has grown tremendously in recent years. Since the traditional budget does not provide information on results to be achieved from the use of public resources, one needs to look at the output based budgets (OBB) of the departments. The Government of Khyber Pakhtunkhwa is cognizant of the challenges faced by the Province, which includes growing budgetary needs of the Province for socio-economic development, increase in population, higher dependency on federal transfers for service delivery and security related issues. Improved budgetary outcomes, consistent policy commitments, and maintaining sustainable level of quality service delivery require smooth and adequate flow of funds to finance existing endeavors and provide sufficient fiscal space for reforms. The Government is, therefore undertaking concrete steps to enhance revenue potential of the Province by exploiting not only the available natural resources, but also by expanding tax net and identifying new tax bases. The domestic resource mobilization will be further strengthened through systemic and operational reforms in the resource management regime.

The OBB in Khyber Pakhtunkhwa was, therefore, introduced in 2010, as a supplement to the traditional budget. The objective of OBB is to provide a link between the financial budget of public sector entities and tangible targets in order to enhance the effectiveness and efficiency of public spending. The OBB has been designed to rise above the traditional line item system to clearly define outcomes and outputs for all government departments and to bring about improvements in the quality of governance. It serves as a tool for evaluation of the achievement of last year’s results, which can be utilized to provide feedback to improve the policy design and measurement of key performance indicators.