March 27, 2017

Fiscal Rules and Fiscal Councils: New Data Just Out!

Fiscal rules and councils 

Posted by Victor Lledó[1]

Fiscal rules and fiscal councils have been increasingly recognized as important tools to promote sound fiscal policies.[2] By constraining discretion and fostering transparency, they enhance fiscal discipline and make fiscal policy more predictable. In particular, fiscal rules can help governments establish fiscal targets that support fiscal sustainability, while fiscal councils help ensure those targets are realistic.

Together, they can raise the financial and reputational costs of deviating from the announced targets. In doing so, they help prevent excessive fiscal deficits and unstable debt dynamics. Fiscal rules and fiscal councils also contribute to improve fiscal behavior over the business cycle and encourage better risk management as building buffers in good times makes space to conduct countercyclical policies in bad times and to absorb the realization of fiscal risks. Healthy and resilient public finances, in turn, give policymakers the room needed to serve other objectives, including economic efficiency and growth, as well as achieving a more equitable distribution of income.

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March 21, 2017

A Conversation with Carolina Renteria

Richard and Carolina

Posted By PFM Blog Administrator 

Carolina Renteria has recently taken over from Richard Hughes as Chief of the PFM1 Division in the IMF’s Fiscal Affairs Department. In this article, which is extracted from a longer conversation with Richard Allen, Carolina describes her previous career, and the fresh approaches and perspectives she plans to bring to her work in FAD.

RA: Carolina, could I start by asking you to briefly summarize your professional career so far? What skills and expertise do you bring to your new job in FAD?

CR: I come from Colombia, worked for 10 years in PFM areas as Senior Advisor to the Fiscal Council and Budget Director in the Ministry of Finance, and as Director of the National Planning Department (equivalent to being Minister of Planning). That experience gave me a very broad view of how the functions of planning, budgeting, and public finance relate to each other. For example, when I was Budget Director, we introduced a medium-term expenditure framework in Colombia for the first time. As advisor to the Fiscal Council, we were responsible for the calculation of fiscal rules and the consolidation of fiscal data. Later, I became Executive Director for Colombia at the World Bank and, from 2013-2016, I was Lead Economist in Africa for the World Bank’s macro-fiscal global practice. During this time I provided technical assistance (TA) on public investment management and other fiscal issues. My Bank experience gave me an opportunity to expand my regional knowledge, and also to assess and understand the varying levels of institutional capacity in the countries of sub-Saharan Africa.

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March 15, 2017

A New Path to Improve FMIS Performance


Posted by Gerardo Uña[1]

In a previous blog article, I spelled out some of the reasons why the performance of FMIS systems in developing countries around the world has been generally disappointing. These reasons include the lack of well-crafted conceptual design, sufficiently strong leadership by the ministry of finance, financial and technical capacities within the government, secure financing, good project management, adequate testing of the systems before they are implemented, and a feasible maintenance strategy. In this second article, I consider the question of whether there is an alternative path for implementing FMIS that would be more cost-effective, and could lead to improved results.

Looking back historically, we can see that the implementation of FMIS went through two main phases. In the first phase, from about the early-1980s until the mid-1990s, the dominant approach was to implement a comprehensive IT system that supported core PFM business processes, including budget preparation and execution, cash management, accounting, and debt management. In addition, “peripheral” functions such as public procurement, payroll, and asset management also used the same technological platform. This approach broadly replicated the so-called Enterprise Resource Planning (ERP[2]) systems that were widely used in the private sector to support companies’ resource management business processes.

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March 09, 2017

How to Assess FMIS Performance


Posted by Gerardo Uña[1]

Financial Management Information Systems (FMIS) are comprehensive systems that support the preparation and execution of the budget, accounting and financial reporting, and many other public financial management (PFM) functions. They are used to integrate budgetary, accounting, treasury, and public debt management processes, and to generate a country’s in-year fiscal reports and annual financial statements. As well as producing timely, relevant, and reliable financial data, well-designed FMIS can play a critical role in improving the quality of public expenditures and fiscal transparency.

After three decades of FMIS implementation across different regions, such as Latin America, Africa and Asia, many countries have initiated a process of modernization to improve the functionalities, coverage, and integration of their systems. However, the cost and implementation challenges of these reforms have been very large, leading to disappointing results in many cases. For these reasons, countries are looking for new ways of designing FMIS that make the best use of modern technology to integrate functions and processes efficiently and cost-effectively.

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March 07, 2017

Public Finance Professionals: Guardians of the Purse


Posted by Susanna Di Feliciantonio[1]

Public money matters. How governments manage it should be an issue that concerns all of us. In recent years, the debate has tended to focus on fiscal sustainability issues, as well as the role of financial reporting and public sector accounting. But improved public financial management cannot be achieved through improved reporting alone. Ultimately, it is public finance professionals who are at the heart of the system – and ICAEW (the Institute of Chartered Accountants in England and Wales) wanted to know how they feel about how well they are doing.

ICAEW recently commissioned a series of in-depth research interviews with selected senior finance professionals in ten EU member states, large and small, older and newer. We asked them to reflect on the public finance functions they operate, the challenges they face, and the changes that are taking place. The public finance ecosystem in Europe is a varied one, yet it is clear that professionals from the Czech Republic, Estonia, France, Germany, Greece, Italy, the Netherlands, Poland, Romania and Sweden face similar issues and challenges.

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March 02, 2017

Bringing a Political Economy Analysis to USAID’s TA Programming


Posted by Corinne Rothblum, Steve Rozner and Jay Totte[1]

Over the past decade bilateral and multilateral donors including DFID, the Dutch, SIDA and the World Bank have undertaken political economy analysis (PEA) with the goal of informing their programming strategies and approaches.  Building on their methodological tools and experience, in 2014, USAID began testing its own  PEA framework, which is organized around four core themes: foundational factors, rules of the game, ‘here and now’, and dynamics. To date, USAID missions in over a dozen countries have used the PEA framework to examine issues in sectors ranging from health to biodiversity to governance. USAID/Washington staff provide technical support and offer headquarters field-based workshops that explore how to use the PEA framework and other approaches to embed ‘thinking and working politically’ in USAID program design and implementation.

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February 27, 2017

Latin American Treasurers Discuss Cash Management


Posted by Mario Pessoa[1]

During February 16-17, 2017 the Latin American Treasury Forum (FOTEGAL) together with the International Monetary Fund (IMF), the Inter-American Development Bank (IDB), the World Bank, and the Swiss Economic Cooperation (SECO) organized a high level workshop in Washington to discuss active cash investment and electronic payment systems.

The FAD Deputy Director, Chris Towe, emphasized in his opening remarks that investing excessive cash can potentially generate positive financial returns to the treasuries, but the challenge is to minimize risks and avoid a negative impact on the payment of government obligations. On the use of electronic payment systems, he pointed out that developments have been impressive. The challenge is how to incorporate these facilities in treasury’s operations and provide better services to the public.

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February 23, 2017

SARTTAC is Launched and Completes its Maiden Training Course


Posted by Udaya Pant[1]

The South Asia Regional Training and Technical Assistance Centre (SARTTAC) was inaugurated on February 13th, 2017 by the Secretary of Economic Affairs of the Government of India, Shaktikanta Das, at its first class facilities in New Delhi. Representatives of all six SARTTAC member countries (Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka) attended as did six development partners, four of whom are contributing to SARTTAC (Australia, DFID, the EU, and Korea). A delegation of senior IMF staff was led by Deputy Managing Director Carla Grasso, and included the Directors of the Asia and Pacific Department and the Institute for Capacity Development, as well as representatives of the Fiscal Affairs Department (FAD).

Both member countries and development partners commended the IMF for setting up SARTTAC within eleven months of the signing of the agreement between Minister of Finance Jaitley and the IMF’s Managing Director, Christine Lagarde. The collective efforts of several IMF departments and SARTTAC staff were recognised as were those of counterparts within India’s Finance Ministry.  Expectations over SARTTAC are very high from all stakeholders, notably with regard to its unique design in combining technical assistance and training under one roof. Member countries in particular stressed the demand-driven design of SARTTAC programmes and the need for flexible and swift responsiveness. In sum, SARTTAC was envisioned to become a center of excellence, blending capacity building, knowledge sharing and policy advice.

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February 16, 2017

Big Data Analytics for Better Revenue Administration

Big Data

Posted by Duncan Cleary[1]

The IMF’s senior management recognizes the potential value of Big Data and Analytics[2] for its work. In late 2015, the IMF hosted a symposium on Big Data, and following this event the Managing Director, Christine Lagarde, sponsored the Big Data Innovation Challenge, where she urged staff to ‘step out of your comfort zone and propose bold new ideas’. The challenge saw 109 entries from across 16 departments. There were ten finalists chosen by a panel of internal and external experts. Of these finalists, six were awarded seed money. A proposal from the IMF’s Fiscal Affairs Department (FAD) was placed fifth, with the title ‘Applying Analytics for Better Tax and Customs Administration’. This proposal laid out in broad terms how applying analytics can assist tax and customs administrations in improving their performance across a range of business areas, but with a focus on risk management.

FAD, through its Revenue Administration Divisions, provides technical assistance to many countries on a regular basis. The objective is for these countries to achieve systems of tax and customs administration that are sustainable, fair, and efficient. How can making better use of available data assist in achieving this goal, and what role can FAD play? The proposal from the Big Data Innovation Challenge seeks to develop a methodology that combines both in-country field work and headquarters-based analysis of micro-level tax and customs data. Tax and customs administrations are often holders of large quantities of micro level data, their ‘Big Data’, at the taxpayer/ trader level, and at the transactional level.

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February 01, 2017

Tilting the Balance towards Quality Infrastructure in Developing Countries


Posted by Taz Chaponda[1]

At a recent international conference[2] on “Quality infrastructure and the Multilateral Development Banks”, the Director General of the Japanese Ministry of Economy Trade and Industry (METI) issued a stark reminder of the potential costs of “poor” infrastructure. He cited the Kobe highway disaster, when in 1995 a major highway in Japan collapsed following an earthquake.  The Director-General explained that the highway was built in a rush and the poor construction works resulted in its collapse several decades later.  He went on to discuss the expansion of power generation in the country’s early years of development through high-polluting plants that were subsequently phased out due to the negative impact on local populations.

Such examples remind us that even the richest nations went through a period of development where low quality infrastructure was pervasive, with very negative social and environmental consequences. Such issues are still common in many developing countries. This motivated the conference to explore what exactly is meant by “quality infrastructure”.  Do countries really need this type or level of infrastructure, and if so, how should it be procured and paid for?

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