Defining Budget Support

Defining Budget Support

Different donor organisations use different definitions of budget support. In the most commonsense, budget support typically refers to predictable, annual, medium-term resource flowsthat are channeled to the recipient country using its own financial management system and budget procedures. Budget support is typically based on an agreed set of performance

indicators in the form of institutional or policy reform measures or outcome indicators.

While there is not yet an agreed definition of budget support, the following terms are those used most frequently in discussion about it. It is useful to list them here and make some comparisons for better understanding the budget support concept. The definitions below take into account the different positions of donor organisations engaged in the use of these instruments.

COST -OUTPUT RELATIONS

Cost output relations play an important role in business decisions pertaining to cost minimisation or profit-maximisation and optimisation of output.Cost output relations are expressed through a cost function.

Short run Cost Output Relations

The basic analytical cost concepts used in the analysis of cost behaviour are total,average and marginal costs.The total costs is defined ass the actual cost that must be incurred to produce a given quantity of output.

Long run Cost Output Relations

By definition,in the long run,all the inputs become variable.The variability of inputs is based on the assumption that in the long-run ,supply of all the inputs including those held constant in the shortrun becomes elastic. t.