Public financial management under austerity: A systematic review of budgeting techniques, fiscal decentralization, and public service management during fiscal constraints

The systematic review studied public financial management (PFM) by evaluating three main pillars, which included budgeting methods, fiscal decentralization, and public service delivery. The study followed PRISMA guidelines to locate 87 peer-reviewed articles that were published between 2010 and 2025 from Scopus Web of Science, JSTOR OECD iLibrary, and Google Scholar. The synthesis showed that performance-based budgeting produced efficiency improvements only when three conditions existed together, which included high-quality performance data, legal requirements, and multi-year planning. Participatory budgeting maintained citizen trust only through hybrid models that balanced citizen voice on discretionary spending with executive cutback authority for urgent adjustments. Fiscal decentralization produced divergent outcomes, which enabled local innovation through strong equalization transfers, while it created regional disparities because of insufficient equalization. Public service management selected attrition as its primary method for budget reductions, which resulted in serious adverse effects that included increased employee workloads and reduced ability to provide services. The successful methods required neither political willpower nor initial funding because austerity budget restrictions prevented governments from backing those solutions. The study found that multi-year planning horizons, together with transformational leadership, served as the most effective success factors for all performance sectors. The research identified major deficiencies because it showed that geographical research focused mainly on OECD nations, while there were no long-term studies and no intersectional studies, and the field of digital transformation remained under-researched, and the political economy remained insufficiently developed. The study demonstrated that public financial management during austerity periods operated under different rules compared to normal economic growth periods, which created a need for new theoretical systems and particular policy solutions.