Allocation decisions on the expenditure side of the public budget that do not adequately account for principles such as Leave No One Behind (LNOB) are one of the factors cementing existing inequalities. Instead, they are based, for example, on the previous year’s budget or on the number of entities providing a public service. In healthcare they are often based on the number of hospitals rather than the number or needs of people using these service providers. Such decisions can lead to misallocations and may continuously favour certain groups or regions, thus widening inequality within a country. To address inequalities effectively, misallocations must be identified not only in the outcome of the budget process, but also during the budget planning stage.

The Equity Budgeting Tool (EBT) is an instrument to analyse the impact of budgeting decisions on equity outcomes and helps to identify the stages of the budgeting process where decisions that potentially aggravate inequalities tend to occur. It builds upon Gender Budgeting and offers a checklist of questions. With the EBT, practitioners, partner institutions, and civil-society organisations can:

• understand the relevance of equity aspects during the whole public budget process,
• gain better knowledge about the impacts of public spending on disadvantaged and marginalised groups in society,
• highlight unintended misallocation of funds that prevents the reduction of inequalities and
• better address issues of equity budgeting through clearer data visualisation.

The Equity Budgeting Tool in Practice

The EBT has already been successfully applied in several partner countries of the German development cooperation (GDC). So far, the EBT has been used in Burkina Faso a with focus on children’s and women’s rights in the education sector, in the health and agricultural sector in Guatemala, and in the health sector in Cameroon with a focus on gender-specific aspects. In all three applications, the EBT has helped the GDC provide sounder fiscal policy advisory services to help their partners in fiscal reforms and to bring important stakeholders together. Given the relevance of both taxation and expenditure on equity, and the need to improve the applicability of the tool, the German development cooperation is currently supporting a revision of the tool to include the revenue side.