Page 1 of 16
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 01 Issue 11
December 2015
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 582
Budgeting System in Ethiopia: Program Budget System
“Two Birds with One Stone” Ethiopian Proverb
Tefera Asefa Moreda (MPMP)
Lecturer and Department Head, Public Administration and Development Management, collage of
Business and Economics, Dilla University SNNPR
Email: teferaasefa@gmail.com
Abstract
Program budget system is one of the
results of the budget reform which is the
part of public sector financial management
reform initiatives. Different budgetary
reform were undertaken in developed as
well as developing counties, but most
extensively in OECD countries. In the case
of Ethiopia, program budgeting system was
introduced recently under the expenditure
management and control program (EMCP)
which is one of the sub-programs of the
public sector reform. This budgeting
system was not as such applied and
implemented in government institutions
and levels. In Ethiopia, successful
implementation of program budget system
has been faced different challenges.
Ethiopian government started the program
budget without considering necessary
condition for the successful implementation
of the program. Important institution and
institutional framework are under
developed in Ethiopia. Despite some
progress in introducing program budget at
federal level, Ethiopia faced different
challenges in successful implementation of
the reform program. Lack of sufficient
training to the public personnel, absence of
basic infrastructures (IFMIS, accrual
accounting system and new institutional
set-up) which support the reform program
are not yet developed and improved in
Ethiopia
Page 2 of 16
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 01 Issue 11
December 2015
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 583
1. Introduction
Background of the paper
Whenever we are talking and writing about
program budgeting system, it is mandatory
to touch the historical backgrounds of the
term in American perspectives. This is
because the term is the results of budgetary
reform in America in the 20th century and it
was originated there. Program budget
system is one of the results of the budget
reform which is the part of public financial
management reform initiatives. Different
budgetary reform were undertaken in
developed as well as developing counties,
but most extensively in OECD countries.
These budgetary reforms include line item
budget, performance budget, program
budget and zero based budgets which are
the most commonly known (Huge, 2003;
the world bank, 1998). From these the
paper concentrates on program budget
system in Ethiopian budgetary system.
In reality Program budget has passed
different distinctive evolutionary period
starting from 1907, but it was first initiated
and attempted for the entire agencies by
president Lynda Johnson in 1960s, in USA
along side with the introduction of program
budget by secretary of defense McNamara
and his comptroller Hitch in defense force
(Huge, 2003; Hagen, 1968, the world
Bank, 1998; Novick, 1966).
It is very difficult to define the term
program budgeting system in precise and
single word. There are different meanings
and connotation of the term in different
parts of the world. Exactly how program
budgeting terms are used varies
enormously in practice. It is a confusing
term that uses different name in different
countries especially in developing
countries. (The World Bank, 2007)
Obviously, if there are multiple ways of
defining a program budget, no particular
approach has a special claim to legitimacy
(KIPF and WB, 2007). But there is
consensus among the scholars. This is a
key to program budgeting is the program -
a public policy objective along with the
steps necessary to attain it (The world
Bank, 1998). Added to this, World Bank
stipulated that the budget is classified in
terms of programs, rather than along
organizational lines. Program budgeting
requires that program objectives stretch
beyond a single fiscal year. In addition,
program budgeting requires effectiveness
measures, which means the measurement
of outputs and outcomes. The advocates of
program budgeting hoped that budget
Page 3 of 16
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 01 Issue 11
December 2015
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 584
allocation decisions would be made
according to the marginal value that could
be attained from varying use of public
resources. (ibid)
Program budgeting aimed at direct funding
more towards the achievement of actual
policy objectives or outputs. Under
program budgeting, government activities
are divided into the hierarchical structure
of program, subprogram, activity and
component (if necessary). Appropriations
can then be made to particular program
according to the priorities of the
government of the day. Instead of funding
inputs to the administrative process as in
the traditional budget (salaries, overtime,
postage and so on), identifiable program
are funded. Management reporting systems
can then be based on the program structure
to encourage better feedback on program
performance, and allow, in principle, for
evaluating the effectiveness of managers
and staff. This, or the extension of program
budgeting to funding outcomes, depends
on the establishment of suitable
performance indicators. The proper
development of objectives, Program
structures and performance indicators are a
difficult and time-consuming task for all
levels in an organization, but is a logical
extension of the change from
administration to management in
government. (Huge, 2003; World Bank,
1998; World Bank, 2007)
Even if it is a principal budgetary reform
which was imported to many developing
countries, program budgeting system had
never be practically successful in ether
developed or developing countries. Many
critics have been raised from different
angles. For instance, as quoted in Huge,
2003 (Wildavsky, 1979) provided a very
prominent criticism of the programbudget.
In the case of Ethiopia, program budgeting
system was introduced recent time under
the expenditure management and control
program (EMCP) which is one of the sub- program of the civil service
reform(MoFED, 2011) and even it was not
as such applied and implemented in many
government institutions and levels. At the
first time, some selected government
institutions at the federal level are being
implementing program budgeting system
as a pilot base. The Ministry of Finance
and Economic Development (MOFED),
has made some progress in the
implementation of the Programme-Based
Budget (PBB), which is an essential part of
