Baltic Journal of Economic Studies

Vol. 4, No. 2, 2018

DOI: https://doi.org/10.30525/2256-0742/2018-4-2-222-228

PROSPECTS FOR IMPLEMENTING PARTICIPATORY BUDGETING

AS AN EFFECTIVE INSTRUMENT FOR IMPLEMENTING
BUDGETARY POLICY AT THE LOCAL LEVEL
Natalia Sirenko1, Olga Melnyk2, Nataliia Shyshpanova3
Mykolayiv National Agrarian University, Ukraine

Abstract. The purpose of the study is to determine the methodological principles for implementing Participatory
Budgeting as an effective instrument of the budgetary policy at the local level, in particular, the analysis of the
main risks and limitations of this process, the identification of its main stages and the features of the main types
of activity, which includes each stage. Methodological bases of the study consist of general scientific methods of
obtaining knowledge of economic phenomena and processes. Realization of study tasks requires the following
methods: method of theoretical generalization – during the study of scientific works, regulatory legal acts; abstract-
logical method – to generalize the theoretical and methodical provisions, as well as to determine the purpose of the
study; method of a systematic approach – the definition of directions for improving the functioning of Participatory
Budgeting as an effective instrument for implementing budgetary policy. Results. The main components, which
should include Participatory Budgeting process are proposed, the purpose of which is to facilitate the establishment
of a social dialogue between local authorities and residents of the territorial community, and to create conditions
for the participation of the residents of the territorial community in the budgetary processes to meet their needs.
The analysis of the conducted studies made it possible to determine the main risks and limitations of participatory
budgeting. Practical implications. The main stages of the participatory budgeting process are outlined, in particular:
the preparatory stage, the stage of budget formation and its approval, the main point of which is the establishment
of a budget committee and the commencement of its work, the implementation stage, the stage of monitoring
and evaluation of participatory budgeting. The main types of activity included in each stage have been studied. All
of the above made it possible to develop a cycle of participatory budgeting as one of the directions of budgetary
policy. We believe that the popularity of this process is determined by the benefits received by the residents, local
authorities and the city in general. Value/originality. Formation and implementation of budgetary policy at the local
level in the current conditions of decentralization of power with the help of the developed cycle of implementation
of Participatory Budgeting will promote the establishment of a social dialogue between local authorities and
residents of the territorial community, creating conditions for the participation of residents of the territorial
community in a transparent budgetary process to meet their needs.
Key words: budgetary system, budget, budget of participation, fiscal policy.
JEL Classification: G18, H61

1. Introduction budgetary system of Ukraine in the conditions of

The budget is an inalienable attribute of each country decentralization of power determine the necessity
and an important instrument for implementing the of introducing new instruments of budgetary policy
economic and social policies of the state. Today, the implementation. Investigating modern changes and
problem of constructing a perfect and effective system initiatives in the sphere of decentralization of power both
for the formation of budgetary policy and ensuring in the world and in Europe, one can notice a tendency
transparency of the budgetary process is becoming of involving citizens in the process of direct impact on
especially topical. Modern trends taking place in the the functioning of those settlements, in which they
Corresponding author:
1
Department of Finance, Banking and Insurance, Mykolayiv National Agrarian University.
E-mail: sirenko@mnau.edu.ua
2
Department of Finance, Banking and Insurance, Mykolayiv National Agrarian University.
E-mail: melnykolga19@gmail.com
3
Department of Finance, Banking and Insurance, Mykolayiv National Agrarian University.
E-mail: shishpanova@mnau.edu.ua

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Vol. 4, No. 2, 2018
work and live. Citizens are given the opportunity to take Domestic and foreign scientists highlight the most
a direct part in the distribution and use of budgetary important principles of Participatory Budgeting (Fig. 3).
funds. We believe that adherence to certain principles of
The problems of involving the public in the budgetary Participatory Budgeting will make it possible to really
process and ensuring its transparency are to some extent involve citizens in making budget decisions.
considered in the works of domestic scientists, such as: In 2010, the idea of implementing the first
I. Lunina (2014), Zh. Belets (2016), O. Demianchuk participatory budgeting appeared in Poland within the
(2016), T. Kravchenko (2015), N. Buletsa (2016), framework of the Sopot Development Initiative, an
and others. The aforementioned problems are actively informal group operating in Sopot, in order to fulfil the
studied in western scientific literature; in particular, the requirements of sustainable development and increase
question of the functioning of participatory budgeting is public participation. To date, more than 1500 cities
studied in the writings of Polish economists R. Hurskyi, in the world have implemented the mechanism of
V. Kenblovskyi, B. Martel and other. However, without participatory budgeting. However, the amount of funds
diminishing the importance of the results obtained, it allocated for the distribution of citizens depends on the
should be noted that it is expedient to determine the specifics of the established procedure of a particular
methodological principles to implement Participatory country. In Table 1, we provide data on the amount
Budgeting as an effective instrument of budgetary of funds allocated for distribution by citizens in some
policy at the local level. countries of the world.

2. Foreign experience in the implementation Table 1

of Participatory Budgeting The amount of funds allocated for distribution
by citizens in some countries of the world, 2017
The concept of direct involvement of citizens in the
Amount of funds
budgetary process is relatively new in the world. For City (country)
Year of program
allocated to Participatory
the first time, the practice of Participatory Budgeting launch
Budgeting
was implemented in 1989 in the Brazilian city of 100 thousand EUR for
Porto Alegre (see Belets Zh., 2016). As a result of the Cologne (Germany) 2007
each district
implementation of Participatory Budgeting, civil activity 1.32 million USD for
has increased significantly, and the United Nations Chicago (USA) 2010
each district
Human Settlements Programme (UN-Habitat), which New-York (USA) 2011 40 million USD
seeks to promote sustainable urban development, has Gdansk (Poland) 2013 3 million EUR
announced the experiment with the “public budget” as Paris (France) 2014 100 million EUR
the best international practice (see Lunina, 2014). Source: prepared using information from the sites of the city councils and
It is important to note that in some countries, the Internet platform of Participatory Budgeting
different names for Participatory Budgeting are used.
So, in Ukrainian practice, there are the notions of Thus, the positive experience of many countries in
“Participatory Budgeting”, “Participative Budget”, and the world and the peculiar style for activating public
“Budget for Citizens”. We would like to emphasize participation make it possible to conclude that the idea
the fact that the process deserves to be called the of introducing “Participatory Budgeting” becomes a
Participatory Budgeting determines the basic principle – powerful instrument for implementing budgetary policy
real engagement of citizens in making budget decisions. in conditions of territorial decentralization of power.

Obligatory character of execution

Limited financial resources are the

subject of discussion
Principles of
Participatory
Budgeting Cyclicity

Public discussion

Participation of all residents

Figure 3. Principles of Participatory Budgeting realization

Source: prepared by the author based on (Hrynchuk, 2016)

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3. Positive results of implementation youngest age requirement is in Mykolaiv, where
In 2015, three cities – Cherkasy, Chernihiv, and residents who have reached the age of 14 can take part
Poltava – began to introduce the practice of Participatory in the participatory budgeting. We believe that low age
Budgeting for the first time in Ukraine (see Electronic requirement help to attract young people directly to
resource http://ngonetwork.org.ua). This was done, take part in the life of the city (see Electronic resource
in particular, with the support of the Polish-Ukrainian http://ngonetwork.org.ua).
Cooperation Foundation PAUCI and within the In Table 2, we present the regional peculiarities of the
framework of the Polish-Canadian Democracy Support implementation of Participatory Budgeting.
Program. Having carried out a research on the results of the
In Chernihiv in 2015, 4.8 million UAH were implementation of Participatory Budgeting in the cities
allocated, which during the year 2016 were of Ukraine, we note the characteristic features of this
allocated for the implementation of 17 projects. process:
In Cherkasy, in 2015, 54 projects were submitted, - creation of an effective mechanism of interaction
6 of which were selected after consideration by the between executive bodies and city residents in the
Coordination Council and to date, they are at the budgetary process;
stage of implementation. In Poltava, 0.1% of the - increasing the level of transparency of the decision-
total city budget is provided without taking into making process by providing residents with the
account transfers (in 2016 it is about 1.5  million opportunity to directly influence budgetary policy;
UAH), of which 50% is directed to city projects - participatory budgeting constitutes a part of the city
and 50% to regional ones (see Electronic resource budget;
http://ngonetwork.org.ua). In general, Participatory - projects must be implemented during the fiscal year
Budgeting has been introduced or is planned to be and only in the territories that the city has the right to
implemented in more than 50 cities in Ukraine today. dispose of in accordance with the current legislation
In most cities, there is a division of projects into (Kravchenko, 2015).
large and small ones. At the same time, on average 200- Next, we will analyse the amount of budgetary funds
250 thousand UAH is allocated for one small project for financing the Participatory Budgeting projects
and from 250 thousand UAH to 1 million UAH – for (Table 3).
large ones. The ratio of funding projects within one Having analysed the data of Table 3, it should be
budget is 60% for small and 40% for large projects. It noted that the amount allocated for the implementation
is worth noting that most cities have chosen a 16-year of Participatory Budgeting projects in the regional
age requirement for project authors and voters and centres of Ukraine ranges from 2.0 million UAH in
registration in the city where the campaign is being Khmelnytskyi to 150 million UAH in Kyiv. It should also
conducted. Only in the 8 regional centres, the age limit be noted that the largest number of submitted projects
is 18 years (Odesa, Dnipro, Zhytomyr, Ivano-Frankivsk, for the implementation in 2018 was registered in Kyiv
Lutsk, Khmelnytskyi, Kharkiv, and Cherkasy). The (809 projects) and in Lviv (297 projects). It should be
Table 2
Regional peculiarities of implementation of Participatory Budgeting in the cities of Ukraine
Selection requirement
Cities Peculiarities
for participation
Participatory Budgeting clause clearly identifies the areas in which projects may be
submitted: security and public order, landscaping and infrastructure, energy conservation,
Dnipro 18 years
culture and tourism, communal services, environment, education, healthcare, social
protection, sports and telecommunications, communications and information technology.
At the beginning of the calendar year, it is mandatory to hold public debates on the
Ivano-Frankivsk 18 years
priorities of the city development and identify problems – the themes of projects.
Residents of the city who due to physical peculiarities do not have an opportunity to fill
out the voting form by themselves or personally vote at the polling stations, have the right
Mykolaiv 14 years
to use the help of their relatives and other persons, instructing them to submit a completed
voting form.
Odesa 18 years
Voting is conducted exclusively in electronic form, which significantly limits the range of
Uzhhorod 16 years
potential participants to only active Internet users.
Lutsk 18 years
The procedure is exceptionally electronic, but residents have a choice between voting
Kharkiv through an electronic system or through a terminal in the Centre for Administrative 18 years
Services Provision.
Source: prepared on the basis of data (Electronic resource http://ngonetwork.org.ua)

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Table 3 the budgeting process at the local and regional level,
The amount of budgetary funds for financing improving communication between citizens and local
the Participatory Budgeting projects authorities in order to improve the efficiency of the
in the regional centres of Ukraine for 2018 process of allocating budgetary resources.
Amount allocated to Number of
Regional centres Participatory Budgeting, submitted
million UAH projects 4. Methodological principles of
Vinnytsia 7 39 implementation of Participatory Budgeting
Lutsk 10 14 We believe that a well-conducted process of
Dnipro 16 271 implementing the Participatory Budgeting should, first
Zhytomyr 12.1 99 of all, contribute to improving the quality of life of the
Uzhhorod 10 79 whole city. In addition, Participatory Budgeting should
Zaporizhzhia 10 72 be a part of the reform of local self-government, which
Ivano-Frankivsk, 2.5 0 provides for the possibility for citizens to dispose of a
Kyiv 150 809 small part of public funds. Thanks to the long-term
Kropyvnytskyi 5 48 model of Participatory Budgeting, cooperation and
Lviv 20 297 interest in public opinion, it is possible to achieve long-
Mykolaiv 10 117 term results: rationalization of public expenditures,
Odesa 100 141 construction of public-private partnership, realization
Poltava 5 81
of citizens’ expectations.
Rivne 10 86
We have proposed a conceptual model of Participatory
Sumy 9 66
Budgeting (Fig. 2).
Ternopil 9 68
We believe that the main objective of Participatory
Khmelnytskyi 2 82
Cherkasy 10 109
Budgeting is to facilitate the establishment of a social
Chernivtsi 10 76
dialogue between local authorities and residents of the
Chernihiv 9.5 100 territorial community and to create the conditions for the
participation of the residents of the territorial community
Source: prepared on the basis of data (Electronic resource
https://www.voting.in.ua) in the budgetary processes to meet their needs.
However, as well as any process involving economic
noted that Kherson is the only regional centre, in which and social interference, Participatory Budgeting has its
Participatory Budgeting has not been adopted. own limitations and risks.
Thus, the analysis showed that Ukraine needs to In our opinion, one of the main limitations is related
increase opportunities for public participation in to the specifics of social activity, when most citizens are

International experience
The Law of Ukraine
in enhancing community
“On Local Self- Participatory Budgeting participation in decision-
Government in
making
Ukraine”

Goal To facilitate the establishment of a social dialogue between local

authorities and residents of the territorial community and to create the
conditions for the participation of inhabitants of the territorial
community in the budgetary processes to meet their needs.

Participants Local Public and non- Business Individual

authorities governmental environment citizens
organizations

Principles Risks Limitations

Figure 2. A conceptual model of Participatory Budgeting

Source: prepared by the author

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Vol. 4, No. 2, 2018
less interested in studying the rights, fiscal responsibility 4. Stages of Participatory Budgeting
of the government, etc. than in obtaining and developing implementation
a particular infrastructure project. The preliminary analysis of the theory on Participatory
Another limitation is the dependence of citizens Budgeting made it possible to determine the sequence
on the administration of the region since it is the of stages of its regulation (Fig. 3), with the distinction of
local authorities that organize the meeting, provide the main activity at each stage, which is mandatory for
information, provide meetings of officials with citizens implementation.
and guarantee the implementation of a certain policy. The following steps should be taken at the preparation
In our opinion, the main risks of the implementation stage. Firstly: dissemination of information about
of Participatory Budgeting are:
the participatory budgeting; secondly: conducting
1. Expenditure limitation. For the implementation
a situational analysis and problem analysis; thirdly:
of Participatory Budgeting projects, only a certain part
carrying out activities to ensure that participants in the
of local budget revenues is allocated.
process understand the principles of decision-making
2. The weakening of the law. In particular, the
experience of Brazil in the field of participatory throughout the whole process of budgetary regulation, as
budgeting suggests that the local authorities were well as the real economic, political, and social situation in
weakened due to parallel participatory processes with the region.
the executive branch. In our opinion, the second stage involves the following
3. The escalation of conflicts related to the measures: conducting negotiations between groups and
distribution of resources among the population participants in order to prioritize projects; establishment
involved in the implementation of participatory of the Budget Committee, whose function is to assess
budgeting. Interest groups can view this process as a the efficiency of the allocation of resources priorities; as
place to compete for resources and participate in it for well as discussing and voting for the draft budget.
that purpose. The main objective of the third stage should be the
4. “Usurpation” of participatory processes by the preparation of technical plans and contracts by local
local elite. Participation in the process of participatory authorities. At this stage, detailed planning, defining
budgeting, which is accompanied by decentralization, technical tasks, tender conditions, tendering procedures
can give the local elite more opportunities to benefit and selection of projects, the order of implementation
from the budget, despite increasing public control. of selected projects should be carried out.
However, despite the risks and limitations, we believe It is also worth noting that local authorities should
that the popularity of this process is determined by the provide periodic reports on the implementation of the
benefits received by the residents, local authorities, and community budget. These reports should include the
the city in general. Consequently, the participatory status of implementation of projects and problems that
budgeting is the most effective decision-making occurred during their implementation.
instrument at the local level, because residents not All of the above made it possible to develop a cycle
only determine the investment priorities that will be of implementation of Participatory Budgeting as an
implemented by local authorities but also actively element of decentralization of local budget expenditures,
participate in the management of budgetary resources. which is shown schematically in Fig. 4.

Stages of implementation of Participatory Budgeting

I. Preparatory stage Budget planning

ІІ. The stage of budget formation Organizing projects

and its approval according to the priority

ІІІ. The stage of implementation Preparation of technical

of the participatory budgeting plans and contracts

IV. The stage of monitoring and Budget execution

evaluation reporting

Figure 3. Stages of implementation of Participatory Budgeting

Source: prepared by the author

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Vol. 4, No. 2, 2018

Information and training

Conducting workshops and meetings on the
methodology for implementing the
Current budget period
participatory budgeting

Consultations
The general definition of development
priorities of the city and its districts Establishment of a committee
Assessment of technical and financial Establishment of a coordination group of
capabilities for implementation of solutions to representatives of the public and city authorities
solve them
Participation in the drafting of the budget
Definition of directions of use of funds
Approval of draft participatory budgeting

Implementation of participatory budgeting

Details of investment plans
Preparation of technical plans and contracts

Introduction of participatory budgeting

Voting for the draft budget
Approval of participatory budgeting

Next budget Monitoring the performance of

period participatory budgeting

Figure 4. The cycle of implementation of Participatory Budgeting

Source: prepared by the author

5. Conclusions only in a civic, socially responsible society, which

Summing up, it should be noted that for the effective will want and have a real opportunity to participate
implementation of participatory budgeting in Ukraine, in them.
the following is necessary: The last important element is the available financial
Firstly, the introduction and implementation of this resources for the implementation of planned projects,
instrument require regulatory support and support from selected by the citizens. At the same time, the right
state authorities, which will not block public initiatives of citizens to participate in the adoption of budget
and procedures and will be ready to refuse to exercise a decisions can be fully realized when a certain amount
part of its powers in favour of citizens. of budgetary funds is allocated in the general budget
Secondly, we believe that the mechanism of of the administrative-territorial unit for the exclusive
participatory budgeting can function effectively disposal of citizens.
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Hrynchuk N. (2016) Budgetary process at the local level in Ukraine: legal regulation, powers of local authorities,
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