Public Expenditure Reviews – Understanding the contribution of the environment to pro-poor development objectives

Harnessing public resources in support of poverty-environment mainstreaming is important towards pro-poor and environmentally sustainable development.  In many developing countries public sector financing is the main source of funds for implementing development policy and plans.  Increasingly donor funds at country level, either channeled through Government institutions or civil society, are reflected in national medium-term expenditure frameworks (MTEF) and annual budgets.  

Review of how public funds are spent by government across sectors and nationally and/or sub-nationally can serve to identify what was spent, what was achieved as a result, whether the results achieved meet pro-poor and environmentally sustainable development objectives, and an assessment of the performance and efficiency of the institutional mechanisms governing expenditure and reporting.

PEI has supported Ministries of Finance and Planning in a number of PEI countries to undertake Public Environment Expenditure Reviews (PEER) and Climate Public Expenditure and Institutional Reviews (CPEIR).   Adapting from the World Bank methodology, PEI supported PEERs have served to point out to decision-makers the level of public sector financing in support of environmental management across sectors, the benefits arising from these investments and the potential for strengthening social and economic benefits and institutional efficiencies by make changes in public budgeting and expenditure frameworks.

In collaboration with UNDP’s Climate Finance group and the Overseas Development Institute (ODI), PEI has supported several CPEIRs.  Drawing from the PEER process, the focus has been on investigating climate adaptation and mitigation related expenditure across budgets – between recurrent and capital development spending, institutional frameworks related to climate financing including between central and sub-national levels, and the results from climate related expenditure against pro-poor and environmental sustainability development objectives.

Achievements and Highlights

Bangladesh: The results of the Climate Public Expenditure and Institutional Review (CPEIR) in Bangladesh, undertaken with support from the Overseas Development Institute (ODI), revealed that the vast majority of climate funding is embedded within multi-dimensional programmes across numerous government departments. Taken together, Bangladesh currently spends US$1billion a year, equivalent to 6 – 7% of its annual budget, on climate change adaptation.This represents nearly a fifth of World Bank’s recent estimation for expenditure needs by 2050 a year already, three-quarters of which comes directly from the government.Household spending on climate change adaptation for the extreme poor and landless households, often exceeds their income, some by more than double the amount. 

Bangladesh’s Minister for the Environment has used the findings in statements in parliament and at international climate change negotiations to support a stronger negotiating position at the global level to leverage the kinds of funds required to fill the development gap as a result of climate change.  The Ministry of Finance is developing a sophisticated climate change accounting system (‘Climate Change Fiscal Framework’) that goes beyond physical capital investment to cover social protection as a result of climate change.  Lastly,the government has introduced a climate budget code, with indicators, in the 2013 budget so that it can track spending on a more continuous basis across all government departments and draw a much clearer picture of how local authorities are grappling with the practical dimensions of protecting communities and livelihoods. 

Bhutan:  PEI supported the Gross Happiness Commission to undertake a PEER with an aim of informing the 9th Economic Development Plan (Analysis of Public Environment Expenditure of the Royal Government of Bhutan for the 9th plan (2009) and 10th plan (2011).  The Public Environmental Expenditure Review pioneered by PEI has been institutionalized as reflected by the decision of the Government to repeat the PEER in 2010 and 2011.  The PEER has also influenced the government’s interest to initiate a greener inclusive economy process.  The repeated PEERs have revealed that local government in Bhutan have recorded increased expenditure for sustainable development during the first two years of the 11thNational Development Plan.

Nepal: PEI supported the Nepalese Government to undertake a Climate Public Expenditure and Institutional Review (CPEIR) in 2010.  Based on the findings and recommendations of the study, the Parliament of Nepal approved the creation of a climate change budget code in the 2012 national budget with an aim of tracking climate related expenditure and results over time.  There has also been an increased budget allocation to environment and climate related institutions in 2012.

Mozambique: In Mozambique 17% of the GDP is the yearly economic loss due to environmental degradation and the inefficient use of natural resources. This is specifically affecting vulnerable groups that are directly dependent on natural resources (crops, fish, forest, etc.) for their livelihood, and the achievement of the millennium development goals. Nine percent of the GDP is the estimated cost to remediate these damages and yet only 1.4% of GDP was the average environmental expenditure for the period 2007-2010. This was demonstrated when the Ministry of Environment (MICOA) with support from PEI carried out a Public Environment Expenditure Review (PEER) in 2012.

Following the strategic dissemination of the results the Ministry of Finance for the first time appointed two environmental focal points who are situated within the Ministry to actively follow up on one of the key recommendations from the PEER; to enhance the system and use of environment and climate codes in budget processes. For the 2014 budget processes, the Ministry of Finance has opened up a new budget classification code related to climate change and the Ministry of Environment (MICOA) has decided to test the feasibility to use a wider range of the available codes, including codes related to land management and physical and environment planning in order to facilitate measuring the progress towards achievement of development goals.

Key Documents



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