There is a need to change the approach to the state budget in Azerbaijan. Many experts suggest transitioning from an input-based budget model to an outcome-based budget model.
To put the matter in simple terms, away from technical jargon, a fundamental renewal of the approach to how the state spends money is now considered inevitable. In the input-based budget model, the main principle is that state institutions declare how much funding they need from the budget each year, and the government allocates finances based on these requests. Ministries and other state institutions submit budget requests to the Ministry of Finance, and these requests are primarily based on previous years' expenditures, salaries, administrative, and current needs. In other words, a Ministry or other state p states that a certain amount of funds is needed for the maintenance of the institution, its planned work, and other expenses for the coming year. The Ministry of Finance then reviews the request, makes adjustments if necessary, and includes the request in the budget draft.
In this system, attention is more focused on the spending process. Funds are allocated, activities are carried out, but the real results created by these funds for society and the problems they solve are not seriously evaluated. In most cases, institutions receive an amount of funds similar to what they received in the previous year. Although the input-based budget model ensures the continuity of state expenditures, issues of efficiency and outcomes remain in the background. The difference between successful and unsuccessful programs is not clear, and the real impact of budget funds is not fully measured. It is unknown which Ministry operates successfully and which does not.
Precisely for this reason, the transition from an input-based budget to an outcome-based budget is currently on the agenda. The goal is no longer just to allocate money, but to highlight what real changes the allocated funds create for society. In this model, the main question is not “how many manats were spent?” but “what changed as a result of these funds?”
When requesting funds from the budget, state institutions must now promise concrete results. For example, in the healthcare sector, the goal is not merely to allocate funds to hospitals, but to achieve measurable outcomes such as improved public health indicators and increased accessibility of services. In the education sector, the main objective is not the maintenance of schools, but the improvement of students' knowledge levels. This approach promotes a more efficient view of state expenditures. Budget funds are no longer simply spent; they must also generate results. If the allocated funds do not produce the expected effect, the financing of those programs may be reduced or completely stopped in the future. Thus, the budget transforms into a tool aimed at solving real problems.
Modern.az reports that this model has already begun to be tested in several small institutions and will soon be implemented in other institutions, especially central executive bodies (Ministries, state committees, agencies, etc.).
This decision is also intended to increase transparency and accountability. Society and the media should have the opportunity to see not where budget money is spent, but what these expenditures yield. State institutions, in turn, will be held accountable for the results of their activities. The funding of institutions that fail to achieve their promised results may be reduced, or their expenses may be lowered in other ways.
At the same time, experts state that the success of this model depends on how it is implemented. Correctly measuring results, defining real indicators, and avoiding formal reporting are key conditions. Otherwise, the outcome-based budget may remain on paper and not significantly differ from the previous system.
Many countries around the world have already transitioned from an input-based budget to an outcome-based budget for years and have made it one of the main tools of public administration. This practice is particularly widespread in developed countries with strong institutional governance. The USA is one of the most well-known examples in this field. When preparing the federal budget, specific goals and indicators are defined for government programs. For instance, funds allocated to an education or healthcare program are evaluated based on the real results achieved in that area. In the United Kingdom, public expenditures are assessed according to the “value for money” principle. When receiving budget funds, Ministries must prove not only their action plan but also what benefits these activities will provide to society.
The National Audit Office independently verifies the results of allocated funds. Sweden, Norway, and Finland are considered the most successful countries in implementing outcome-based budgeting. In these countries, budget programs are measured by concrete indicators such as social welfare, quality of education, and environmental protection. For state institutions, the main issue is not spending, but improving the quality of life for society.
Turkey has also been gradually transitioning to an outcome-based budget in recent years. Strategic planning and performance indicators have become a core part of the budget process. State institutions are now obliged to link their expenditures to targets. This international experience shows that outcome-based budgeting is a management culture. The main conditions for success are real, measurable indicators, robust statistics, and public oversight. It is precisely when these factors are present that budget funds generate results not just on paper, but in real life.
Overall, this transition is regarded as a step taken by the state from a “we allocated money” approach to a “we solved the problem” approach. The goal is to transform the budget from merely a collection of numbers into a mechanism that genuinely impacts society's daily problems.
Elnur Amirov
