The Millennium Development Goals (MDGs) were critical in presenting a global policy agenda with country-specific targets. MDG processes, however, were not well coordinated with countries’ national policies and budget processes. Ministries of finance were detached from the core dialog on MDGs, and there was a mismatch between the MDGs and budget classification systems. The 17 Sustainable Development Goals (SDGs) have replaced the MDGs with a more comprehensive policy agenda that now covers all countries. Developing countries, however, will face challenges in effectively transforming the SDGs into national policies and budgets. How therefore to build a stronger bridge between the SDGs and countries’ budget processes?

Even if development goals are effectively transformed into sector strategies, budget decisions are based on their own set of processes and parameters. Some reports suggest that the UN’s functional classification system (COFOG) has been used to bridge budget allocations with the MDGs, but COFOG was never designed to serve that purpose. In some countries, civil society organizations (CSOs) have monitored the impact of selected MDGs on the budget. However, in most cases, finance ministries have continued their routine budget planning and execution processes with only occasional reflections on the MDG targets.

In countries with a program-based budgeting system, one possible way forward would be to introduce a budget classification that groups and then bridges programs with the SDGs. However, such an approach is not ideal. A better solution might be for an international organization (e.g., UNSTATS) to design a universal SDG budget classification, and propose a methodology for mapping this system with other classifications. The advantages of such an approach are as follows:

A single and comprehensive SDG classification would help developing countries avoid the sporadic introduction of standalone budget tagging systems that have already been applied in areas such as gender budgets (in more than 30 countries); low emissions (Indonesia); climate change (Bangladesh, Indonesia, Nepal, and the Philippines); and poverty or disaster risk reduction. The introduction of a single budget coding that captures these policy areas and others covered by the SDGs would cost less and be more sustainable. The UNDP is considering the possibility of developing a budget code structure that incorporates all the SDGs, and piloting it in selected countries.
Application of the SDG classification through the chart of accounts would allow automatic presentation of budget allocations linked to SDG goals. It would eventually enable regular budget planning and reporting by direct incorporation of SDG policy targets, and the 169 related indicators, into budget programs.
A universal classification would allow cross-country comparison of SDG-related budgets.
An SDG budget classification could potentially contribute to a new evolving phenomenon – cross-country policies that go beyond national borders, e.g., on climate change and the environment, defence, poverty and migration. Cross-border SDG targets would require strong cooperation among countries and their finance ministries, and might be appropriate in economic unions that exist or are developing in Europe, Africa and elsewhere (e.g., the EU response on migration).
Of course, there would be challenges in introducing a universal SDG classification, such as resource constraints, potential overcrowding of budget databases, and the tendency for international organizations and donors to dominate the policy agenda. The introduction of SDG classification is a long journey and its first step might be some basic SDG budget table configured manually. In any case, the sooner the debate starts, the better the solutions that will be found.

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Note: Suren Poghosyan is Governance and Public Finance Specialist, UNDP, Bangkok Regional Hub. The content of this article does not necessarily reflect the official opinion of the UNDP.

Note: The blog was originally published in the IMF Public Financial Management Blog. Posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.