The Transition from Traditional Budgeting to Performance-Based Budgeting in Advancing Public Financial Reform

Abstract

The transition from traditional budgeting to Performance-Based Budgeting marks a pivotal transformation in the evolution of public financial reform. As a modern fiscal management system, it connects budget allocations directly to measurable performance outcomes, thereby promoting greater transparency, fiscal efficiency, and accountability within public sector governance. Using a historical approach, this study explores the conceptual evolution, implementation challenges, and practical implications within the broader framework of public financial reform. The analysis reveals that this paradigm shift not only improves the efficiency of resource utilization but also fosters a culture of performance orientation and evidence-based decision-making across government institutions. Nevertheless, the study identifies several persistent constraints, particularly limited human resource capacity, inadequate performance measurement systems, and the inconsistent application of performance indicators among agencies. Furthermore, the findings underscore that the effectiveness depends largely on the successful integration of outcome-based evaluation mechanisms with strategic planning and fiscal policy frameworks. By providing a historical and analytical perspective, this study contributes to the growing literature on effective public financial governance and offers valuable policy insights for enhancing fiscal accountability, institutional transparency, and sustainability.