Evaluation

8.4.1 In Terms of Legal Infrastructure of Budget Management

1n public financial management, flexibility and accountability in utilisation of budget appropriations are more important than ever under the exceptional conditions caused by the epidemic.

(i) 1n many countries affected by the epidemic, public financial management systems provide some flexibility for the executive to use budgeted appropria­tions. This flexibility is provided, for the budget and between administrations, through provisions that allow for allocation transfers between expenditure items or programs. 1n some countries, however, the existing legal frame­work allows some funds to be mobilized by the executive in emergencies. For example, the declaration of a national emergency by the president allowed the US administration to apply the Stafford Act, which regulates disaster relief efforts, allowing it to direct $50 billion of emergency funding to the states (Barroy et al. 2020).

(ii) In some countries, the top members of the executive, such as the head of state or the finance minister, exercise their regulatory authority to approve spending decisions for emergency response through existing budgets and simplified approval mechanisms. 1ndeed, in some European countries, heads of state or finance ministers have regulated the use of some allowances in combating the epidemic through decrees and other legal regulations (Barroy et al.

(iii) 1n some countries, state budget flexibility allows for increased financial trans­fers to local governments and procurement agencies. For example, state units in China were authorized for health expenditures, which increased the central budget transfers to the state of Hubei. Under normal circumstances, powers at this level should be evaluated within the state budget process or in a separate budgetary process. For example, in France, a separate legislative process is required for the National Health 1nsurance Fund, and France has approved a temporary budget increase of 2 billion euros in the fund to finance masks and tests (Barroy et al. 2020).

(iv) Existing flexibility in the use of budget resources can facilitate the spending process and the rapid response to the epidemic. However, the size of the resource needed often requires supplementary budgets. 1n some countries, the supplementary budget process has been accelerated, and the supplemen­tary budget has been quickly approved by the legislature. However, from the perspective of budget formulation and structure in this process, the supporting documents should be as robust as possible (Barroy et al. 2020).

(v) In some other countries, spending plans are put into effect through the exec­utive body using exceptional procedures without a new budget. For example, the process in China is managed by the Ministry of Finance Communiques. With the communique published on 31 January 2020, it was clearly stated that the funds allocated to local governments should be used only for the control and prevention of the epidemic (Barroy et al. 2020).

(vi) It is important to use budgetary resources in a timely and effective manner in combating the epidemic. For this reason, some countries also facilitate the procedural steps related to the release of allowances. France, for example, has adopted a rapid expenditure authorization procedure to speed up the release of funds. According to the revised law, all allowances are automatically released.

However, despite the facilitation regarding the release of such appropriations, risk-based and/or ex-post controls are emphasized, especially for large-scale public procurement (Barroy et al. 2020). In addition to these controls, countries should strengthen their reporting and accountability mechanisms for resource use, while accelerating the release of funds and smoothing spending procedures. In this respect, a budget and reporting system based on program classification may be useful. However, here, it is also important to determine the program officer correctly. Ultimately, an expenditure program for combating the epidemic requires multi-actor cooperation, and more than one ministry and administration spend under this program. The general trend in determining responsibility is to assign the fiscal responsibility for the anti­epidemic program to the ministry of finance (budget) or to the prime minister. China, Germany and France have chosen this method. The new budget program in France is under the budget ministry, and the expenditures are carried out by various ministries and administrations and are accounted under the budget code declared by the budget ministry (Barroy et al. 2020).

8.4.2 In Terms of the Content of Budgetary Measures

How the support provided by governments to combat the economic consequences of the COVID-19 pandemic is designed is important for the success of the post­crisis recovery process. OECD (2020d) recommends support packages that are time­limited, targeted, cash-based and consistent with long-term goals, in terms of sustain­ability. Accordingly, the seeds planted by the support programs carried out by the governments should not be of nature to create permanent market distortions in the

future. Therefore, priority should be given to supporting the small enterprises oper­ating in the service sector, and public investments should be focused on health and social security areas that initiate final consumption and benefit the whole society:

(i) One way to ensure that the necessary economic stimulus does not disturb the long-term market equilibrium is to provide the supports in a time-limited manner.

(ii) Another point to note is that the supports should target the sector(s) and/or companies most affected by the epidemic, and it should exclude companies that would fail, even if there was no pandemic. This will reduce the risk of the stimulus leading to corporate structures that can limit competition, reduce domestic productivity growth, prevent economic recovery and increase economic inequalities. For example, the German Development Bank KfW provided guarantees of up to 90% for financially sound companies before 31 December 2019.

(iii) Who benefits from the supports is also important. In terms of demand, govern­ments should turn to direct cash benefits from which end consumers can directly benefit, without interfering with the content of the demand. 1n terms of supply, attention should be paid to the market size and position of the companies in the supply chain when deciding on the companies to provide support. 1n terms of the market size of the company, it is recommended to support small and medium-sized companies, as they are not an impressive force in the market balance, despite the positive effect they create in terms of employment and social stability.

(iv) However, governments should consider support measures that have a double effect, without sacrificing long-term policy objectives for short-term economic incentives. Accordingly, even if countries try to control the economic and social consequences of the COV1D-19 epidemic, for example, the change in shape continues to be a cause for concern. In this context, governments should align support measures more broadly with climate and environmental targets. More generally, support for companies should be designed to contribute to the maintenance of existing production capacity and innovation efforts to recap­ture R&D and personnel training expenditures that many companies have cut back during the pandemic.

8.4.3 In Terms OfTransparency of Budgetary Measures

Perhaps the most important aspect of providing government support to a crisis is that governments are transparent about the measures they have adopted as well as their impact. Transparency is valuable for many reasons, including managing business prospects and focusing on guiding the actions of economic actors. Knowing that taxpayers’ money is directed not only to large multinational companies but also to small and medium-sized companies, transparency about who benefits from support programs will contribute to public support.

More importantly, being transparent and knowing what countries are doing to stimulate the economy allow experience exchange. Detailed information on policies implemented and funds mobilized can help assess actual cost of government support and it can also provide lessons and insights about its efficiency (OECD 2020d).

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