Budgeting as a tool for strategic agility

One of the pillars of strategic agility is resource flexibility that is, the ability to quickly and flexibly reallocate resources from one area to another when priorities or needs change. The overall trend in recent years has been to decentralize budgets and give more freedom to line ministries in managing their resources this can create “information gaps” that may hinder resource flexibility for the whole of government. There are several mechanisms that can be used to introduce more flexibility, including top-down budgeting, spending reviews, performance budgeting and automatic cuts of productivity dividends. The 2008 financial crisis created a need for urgent action on fiscal consolidation in many countries, leading governments to re-centralise or fast-track, at least temporarily, some budgetary decisions. This chapter looks at lessons learned from the crisis in terms of budgeting, as well as the use of the above-mentioned mechanisms and their potential for increasing strategic agility.