publication December 17, 2018

Budgeting for Performance in Malaysia

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Key Findings

  • Performance-based budgeting has been a popular reform among ministries of finance globally to make national budgeting processes more aligned with medium-term strategic plans. It also helps provide incentives to improve public service delivery. However, despite significant time and effort devoted to implementation, the experience of many countries is rather mixed.
  • In Malaysia, the government has undertaken a more outcome-based approach to the annual budget process, which represents an evolutionary step towards performance-based budgeting.
  • Using outcome-based budgeting, Malaysia has helped successfully link high-level national strategies to specific budget programs and activities using a common results framework to define accountability.
  • The outcome-based budgeting reform was instrumental in enabling the government to re-orient budget preparation toward the achievement of clearly defined policy outcomes. Part of the strategy included change management, staff training, and stakeholder outreach.
  • While the “front-end” program and results structure of outcome-based budgeting is very well developed, the stages related to performance reporting and evaluation are much less developed.
  • Many countries with performance-based budgeting have found that merely collecting performance information from ministries is not enough. However, Malaysia is still at a stage where it can carefully contemplate. strategies that will enable information to be used effectively in decision-making.
  • For Malaysia’s outcome-based budgeting to have a more direct impact on public sector performance, the Ministry of Finance may need to enhance the value of performance information to policy makers and improve the institutional capacity to evaluate such information.
  • This can be achieved through systematic reporting on performance indicators to the Ministry of Finance, building capacity to evaluate performance information effectively, and creating additional IT modules to facilitate budget preparation and performance reporting.