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Environment in emerging and transition economies

Greening public budgets in Eastern Europe, Caucasus and Central Asia, 2011

 

Main findings | Table of contents | How to obtain this publication | Русская версия отчета

 

ISBN: 978-92-64-11828-7 (print)
ISBN: 978-92-64-11833-1 (pdf)
Release: 16/08/2011

Public expenditure remain crucial for addressing environmental problems and, more broadly, promoting a greener model of development in the countries of Eastern Europe, Caucasus and Central Asia (EECCA). Traditionally, however, the environmental sector in the EECCA countries has not been very effective in attracting domestic public financing. As the global economic and financial crisis imposes ever-tighter constraints on public budgets in the region, and as donors shift to new approaches of delivering aid via country systems, this sector becomes increasingly vulnerable to underfunding.

 

This report aims to help EECCA environmental administrations to harness the potential benefits of on-going public finance reforms (PFM) in the region. More specifically, it analyses the opportunities for and obstacles to integrating multi-year public environmental programmes into the medium-term expenditure frameworks (MTEFs) that a number of EECCA countries are introducing. The results from this analysis are based on a regional survey, involving ten EECCA countries, namely: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, the Russian Federation, Ukraine and Uzbekistan. This survey was conducted within the framework of the Task Force for the Implementation of the Environmental Action Programme (EAP) for EECCA.

The analysis of the survey data shows that public spending on the environment in these countries is rather low. The share of public environmentally-related expenditure in GDP, in 2009, varies across the countries, from 0.01% in Georgia to 1.56% of GDP in Uzbekistan. On a per capita basis, these expenditure are also small and in 2009 ranged from less than one USD per capita in Georgia to about 70 USD per capita in Belarus. And compared to what national budgets in the EECCA countries spend on other social sectors (e.g. health, education), environmental ministries’ budgets are simply negligible.

 

Main findings

The report discusses whether the policy, legal, organisational and knowledge-related pre-conditions for achieving the financial sustainability of the environmental sector are in place in the EECCA countries. The overall conclusion is that, due to limited capacity, the environmental sector benefits only marginally from PFM reforms in these countries:

  • Despite the programmatic medium-term budgeting approach adopted by most of the ten surveyed EECCA countries, the programming process in the ministries of environment is generally weak and not sufficiently well understood.
  • While many countries have invested significant resources in developing programmes as a basis for contributing to the MTEF process, these programmes are often poorly costed and not supported by financial strategies, market studies or feasibility analyses. Only investment data are calculated, operating and maintenance costs are often not considered, as a result, programme estimates are not sufficiently robust.
  • Programmes often lack clear and measurable environmental targets, performance indicators (particularly for the investment part) are not consistent across the years of programme implementation. Thus, the link between programme estimates and annual budget allocations is rather poor.
  • Due to the lack of robust criteria, rules and procedures, and appropriate institutional arrangements, the management of investment projects (appraisal, selection and monitoring) is particularly weak.


This report is part of and continues the work of the OECD EAP Task Force on environmental finance that has been developed over the past 15 years.

 

Table of contents

Executive Summary
Part I:Cross-country analysis
Chapter 1. Setting the scene
Chapter 2. The regional and international context
Chapter 3. Public environmental expenditure trends
Chapter 4. Budget planning and management practices
Chapter 5. Budget planning and management practices in the environmental sector
Chapter 6. Major findings and recommendations
Part II: Country fact sheets

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