July 30, 2015

“Your Majesty, Rebuild that Fiscal Buffer” – Some Fiscal Policy Advice from the Eighteenth Century

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Posted by Renaud Duplay
[1]

 In 1774, Anne-Robert-Jacques Turgot, Baron de Laune, was appointed Minister of Finance by Louis XVI, and immediately resolved to set out his principles of good financial governance in a letter to the king. This letter is still considered a hallowed text in the French Ministry of Finance and its continuing relevance to fiscal policy is striking.

 Turgot proposes a set of fiscal objectives and rules. “No bankruptcy, no tax increase, no new indebtedness. In peacetime, the Crown should only borrow for the purpose of amortizing existing debt, or buying back old debts at a more favorable rate.” Thus, the government should in normal times not run a deficit. This rule would, however, accommodate exceptional circumstances—such as war—. It was the closest thing to a structural balance rule an eighteenth-century gentleman could have thought of. In normal times, debt and the cost of indebtedness would decline.

Continue reading "“Your Majesty, Rebuild that Fiscal Buffer” – Some Fiscal Policy Advice from the Eighteenth Century" »

July 27, 2015

Improving International Capacity Development: Bright Spots

Bright spots

Posted by Chris Iles[1]

 For many years, Dr. Jim Armstrong has been at the forefront in challenging the commonly held view that “international best practices” provide an effective solution to capacity development in developing countries.  He has been particularly concerned that many projects aimed at reforming public administration in poor countries fall short of their objectives, fail to sustain benefits after the project is complete and, by passively importing foreign practices, prevent the development of indigenous solutions. 

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July 24, 2015

Job Offer! Technical Assistance Advisor (HQBC), Public Financial Management Division

Snap1The selected candidate will provide technical assistance (TA) on public financial management (PFM) matters to IMF member countries, and will supervise the technical assistance work of experts based in member countries and/or at the IMF's Regional Technical Assistance Centers. The work focus may cover all PFM areas: the legal and regulatory framework; budget preparation (including medium-term budgetary frameworks and performance-oriented budgeting); budget execution (including expenditure control, treasury operations, cash management, accounting, fiscal reporting, and financial management information system); and internal control and audit. For this round of hires, a candidate with familiarity with macro-fiscal capacity building issues, including fiscal forecasting, medium-term-fiscal frameworks, and fiscal responsibly legislation, is encouraged to apply. The TA advisor will be required to travel overseas.

For more information and to apply click here.

 

July 23, 2015

How to Prepare for a Commodity Price Shock

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 Posted by Andrew Bauer and David Mihalyi[1]

 Headlines about resource-rich economies faltering under crashing world commodity prices fill the news. "Venezuela in a bind as Nicolas Maduro faces default dilemma;" "Alberta premier considers sales tax to fix ailing, oil-based economy;" "Iran says it can no longer afford Ahmadinejad's cash handouts".

Since February 2013, the metals’ price index has dropped by over 30 percent, led by a 60 percent decline in iron ore prices and a nearly 22 percent decline in copper prices. Crude oil prices have dropped nearly 50 percent since June 2014. The resulting loss in fiscal revenues in resource-dependent countries has exposed severe vulnerabilities in some.

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July 14, 2015

IMF Launches New Public Investment Management Assessment

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Posted by: Richard Hughes

  ADDIS ABABA, July 15, 2015 - The IMF today launched its new Public Investment Management Assessment (PIMA) at the Third Financing for Development Conference in Addis Ababa, Ethiopia.

  Speaking at seminar on Bolstering Country Public Financial Management Systems for Efficiency and Delivery, Sanjeev Gupta (Deputy Director of the IMF’s Fiscal Affairs Department) presented the findings of a new IMF research paper entitled Making Public Investment More Efficient. The paper showed that the average country was losing around one-third of the potential benefits from their public investment to inefficiencies in the way in which those investments are managed. Mr. Gupta stressed that the potential development benefits of closing this efficiency gap are significant, saying “The most efficient public investors get twice the growth “bang” for their public investment “buck” than the least efficient public investors.” 

  Mr. Gupta went onto explain that if government want to realize the full economic and social benefits from public investments, they have to improve the way in which those investments are managed. The IMF’s new paper also found that strengthening public investment management institutions can close up to two-thirds of the public investment efficiency gap.

 To help countries evaluate the strength of the public investment management practices and identify priorities for reform, Mr. Gupta unveiled the IMF’s new Public Investment Management Assessment (PIMA). The PIMA evaluates 15 institutions that shape public investment decision-making at the three key stages:

  • Planning sustainable investment across the public sector;
  • Allocating investment to the right sectors and projects; and
  • Implementing projects on time and on budget.

 The IMF will be piloting the PIMA over the coming year in close collaboration with the World Bank, Regional Development Banks, and country authorities

 To learn more about the PIMA and the IMF’s work on public investment click here, watch the video below, or contact us at pubinvest@imf.org.

 

 Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

July 13, 2015

Seychelles Moves Toward Cash-basis IPSAS

Seychelles

Posted by Johann Seiwald[1]

According to Seychelles’ Public Finance Management Act (PFMA) as of 2012, the government is required to prepare its financial statements in accordance with international public sector accounting standards (IPSAS). The government recently reached an important milestone on this path by producing a set of financial statements for the fiscal year 2013 which comply with many of the requirements of the cash basis IPSAS. Seychelles is a front runner among the 18 countries in Africa which have announced plans to align their accounting systems with international standards. These countries include Mozambique, Nigeria, Rwanda, Swaziland, and Zimbabwe.

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July 09, 2015

Closing Efficiency Gaps Means Big Gains for Public Investment

Public Investment

IMF Survey - re-posted from the IMF Survey Magazine: In the News website.

  • “Efficiency gaps” in public investment spending are large and hinder growth
  • Better public investment management can significantly reduce efficiency gaps
  • New assessment tools can identify gaps and pinpoint reform priorities

On average, about 30 percent of the potential value of public investment is lost to inefficiencies in the investment process, and closing this efficiency gap could substantially increase the economic dividends from public investment.

Continue reading " Closing Efficiency Gaps Means Big Gains for Public Investment " »

July 01, 2015

Fiscal Institutions in Latin America: Have They Worked?

Latin America

Posted by Bogdan Lissovolik and Marcos Poplawski-Ribeiro[1]

Latin America’s countercyclical response to the 2008–09 global financial crisis (GFC) was the right medicine at the time, but resulted in a significant fiscal stimulus that it has yet to be fully withdrawn. Does this mean that the fiscal institutions established in the region before the crisis were not the Holy Grail to enshrine discipline? A recent study sheds light on this question by looking at the performance and design of fiscal institutions in six large Latin American countries (LA6: Brazil, Chile, Colombia, Mexico, Peru, and Uruguay). Overall, the crisis revealed both strengths and weaknesses in the fiscal frameworks in the LA6, underscoring the perils of making discretionary changes in fiscal policy without a medium-term anchor.

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June 29, 2015

A Very Short Introduction to Accounting

Posted by Tim Irwin[1]

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Christopher Nobes’s Accounting: A Very Short Introduction (Oxford University Press, 2014) is about private not public financial management, but it may be of interest to people working on PFM.

For one thing, there are many similarities in the accounting problems faced by firms and governments, even if there are also crucial differences in their objectives, their functions, and their influence on the economies in which they are located. Moreover, Nobes offers a succinct and persuasive explanation of why private-sector accounting developed as it did, in response to the changing needs of businesses and their investors (e.g., why accounts payable and receivable were shown on balance sheets before cash and inventory). That explanation may prompt thoughts about how government accounting should develop.

For another, Nobes’s comments on the rise of International Financial Reporting Standards (IFRS) suggest interesting parallels with the development of International Public Sector Accounting Standards. He writes (pp. 75–76),

  • The UK’s joining the EU was “the main spur to the setting up by accountants of the IASC [International Accounting Standards Committee, the forerunner of the IASB, or International Accounting Standards Board] to try to keep accounting out of the control of governments.”
  • “The EU had always been opposed to the IASC, as a Trojan horse of Anglo-American accounting, but eventually it accepted IFRS as the only practical way of getting harmonized standards for EU capital markets.”
  • “The inability of governments in Roman law countries (e.g. France) to give up control of accounting has led to constant attempts at interference from the EU in the operations of the IASB.”

Nobes also presents interesting data on the number of members of each of several national accounting bodies (pp. 5–6). The chart above expresses these numbers as percentages of each country’s population in 2013, rounded to the nearest decimal point. Nobes notes that international comparisons are “fraught with difficulties” (p. 7) and that there are accountants who are not members of accounting bodies. Nevertheless, the differences are striking. If they reflect differences in the influence of accountants in each country, they may help explain why the Australian and New Zealand governments were among the first to adopt private-sector-like accounting, while the German government has shown little interest in doing so.


[1] Senior Economist, PFM1 Division, Fiscal Affairs Department, IMF 

 Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

June 25, 2015

Developing Fiscal Risk Statements in Central Asia and the Caucasus

Posted by John Zohrab[1]

The new fiscal risk[2] provisions of the IMF’s revised Fiscal Transparency Code (English, العربية , Español, Français, Português) are resonating in Central Asia and the Caucasus. They are stimulating increased efforts to improve and expand fiscal risk disclosure.

Armenia, Georgia, the Kyrgyz Republic and Tajikistan present fiscal risk statements to parliament in their annual budget documentation. These statements – which are typically published on the ministry of finance websites – are a substantial step forward in meeting international good practice (see table below).

  Snap2

To be specific:

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