November 23, 2016

Stepping Up the Financial Oversight of Public Corporations

HowToNote

Posted by Richard Allen and Miguel Alves[1]

Why should policy makers worry about the performance of public corporations (PCs)?  One reason is that, despite the large-scale privatizations that began in the 1980s, companies owned or controlled by the government continue to account for a large share of economic activity, and of public assets and liabilities (see charts below). Many PCs are pressured or mandated into fulfill political objectives and engage in public service obligations and other quasi-fiscal activities (QFAs) for which they are not compensated. PCs may also be used as a mechanism for circumventing traditional fiscal controls and as a conduit for financial corruption. (click to enhance images)

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November 22, 2016

Public Investment – The Perils of Premature Election Commitments

PublicInvestment

Posted by Jason Harris[1]

Increasing public investment is one of the more common pieces of advice given to countries over recent years, particularly in the presence of economic slack and low interest rates. In these conditions the short-term boost from increased demand adds to long-term benefits from increasing productive capacity. 

But while increasing investment is relatively easy to recommend in aggregate terms and at the political level, when it comes to the nuts and bolts of project selection, approval and execution, problems abound.  This is particularly so when premature commitments are made before a full project assessment has been done, resulting in cost blowouts and implementation delays.

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November 18, 2016

Senior Program Officer, Country Finance

GatesFoundation

The Gates Foundation is advertising a new position for a PFM expert in its Washington DC office. Details are provided in the Job Board page of this blog, on which information about other PFM-related positions may be advertised from time to time.

Enjoy!

November 15, 2016

PFM Reforms in South Africa after the End of Apartheid

An Interview with Trevor Manuel

South Africa

In this extended article for the PFM Blog, Trevor Manuel[1] describes some of his experiences as Minister of Finance in South Africa under Nelson Mandela and subsequent Presidents. Mr. Manuel oversaw huge reforms in the South African public finances as well as the creation of the National Treasury. The article is based on extracts from an interview taped during the Annual Meetings of the World Bank and the IMF held in Washington DC in October 2016. The interview was conducted by Lesley Fisher of the IMF’s Fiscal Affairs Department.

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November 10, 2016

How to Check Integrity of Fiscal Data

HotToNote

Posted by Benoit Wiest and Pokar Khemani[1]

Why is integrity of fiscal data so important?  Fiscal data relates to the use of public funds and its accurate reporting is a high priority for governments and donors, as well as for the IMF in its work on surveillance and program monitoring. Comprehensive fiscal reporting in line with international standards such as the IMF’s Fiscal Transparency Code and the Government Finance Statistics Manual (GFSM 2014) provides reasonable assurance about a government’s fiscal position and the integrity of the underlying data. However, the accuracy and reliability of government accounts and fiscal data can still be an issue. In many cases, the data provided by the authorities for program monitoring and surveillance are characterized by significant and persistent statistical discrepancies between the fiscal balance (“above-the-line”) and net financing (“below-the line”). These discrepancies are usually an indication of underlying weaknesses in a country’s public financial management (PFM) system, as well as issues with the integrity of financial data, and processes for collecting and disseminating this information. Significant and persistent discrepancies in data may require an investigation, and the development of specific measures to deal with these issues.

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October 26, 2016

Local Government Reform in Nepal Under the New Constitution

Nepal Under the New Constitution

Posted by Franck Bessette[1]

The 2015 Constitution defines Nepal as a federal democratic republic organized around three levels of government – federal, state and local[2]. The functions and powers of local governments will be substantially increased under this new framework. Roles will also be rebalanced. For example, district governments played a central part in the former system of local administration, but will now assume a largely coordinating role. A substantial reengineering of the public financial management system at local level will be required. The Constitution, however, is silent on many important fiscal issues, bare bones that will need to be fleshed out before the new system of intergovernmental finance can be effectively implemented.

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October 20, 2016

The Timing of the Government’s Fiscal Year

Calendar

Posted by Guohua Huang and Holger van Eden[1]

What is the best fiscal year from an economic and public management perspective? It’s a question not often asked, as it seems a topic that has been resolved by history, tradition and common sense. However, in fact governments around the world have adopted different fiscal years (FYs). The Gregorian calendar year is used by about 70 percent of IMF member countries; the end dates of the 1st, 2nd, and 3rd quarters of the calendar year are used by most other countries. A few use a religious calendar. Examples include:  

  • 1 January – 31 December. All Latin American countries, Francophone Africa, most European countries and many South East Asian countries.
  • 1 April – 31 March. Many countries with historical ties to the United Kingdom follow this calendar, including Brunei, Canada, India, Singapore, South Africa, as well as the U.K. itself.
  • 1 July – 30 June. Australia, Egypt, Kenya, New Zealand, Pakistan, Tanzania, and many countries from the southern hemisphere.
  • 1 October – 30 September. United States (federal government), Thailand, Trinidad and Tobago, and Laos.
  • Religious New Years. Countries such as Iran and Afghanistan use 21 March – 20 March.

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October 14, 2016

Ten Tips to Improve the Transparency of Budget Documents

ThinkstockPhotos-488496739_477x358px
Posted by Greg Rosenberg[1]

Many countries produce voluminous budget documentation, with reports that run for hundreds of pages, and thousands of pages of raw data[2]. The main documents form a verbose, jargon-heavy, disjointed collection of policies, spending programs, and irrelevant or marginally relevant details, with little analysis of macroeconomic or fiscal trends. In a few countries, the story is different. The budget documents are concise and plainly written. They focus on relevant information, with frank analysis of expenditure and revenue trends, and explain clearly how public finances are being managed.  

Producing transparent budget documents requires policy makers to explain complex concepts to a range of audiences. Doing so has tangible benefits. Clear, transparent budget documents can strengthen policy impact, fiscal planning, legislative oversight, and citizen involvement. Such reports enable policy makers to send signals about developing economic and fiscal trends, helping to shape public debate and foreshadowing future responses. 

An open budget that acknowledges economic and fiscal realities, in a way that is easily understood, supports accountability and effective budget planning. It enables civil society organizations to engage with the budget. This, in turn, strengthens the social contract between citizens and the state. And, crucially, the act of clear writing itself helps finance ministries to refine their own thinking on budget strategy and policy, leading to better and more coherent policy choices.

All of this may sound elementary, but experience suggests that it is not.

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September 26, 2016

A Roadmap for Implementing Accrual Accounting

Accrual in the Public Sector

Posted by Suzanne Flynn, Delphine Moretti, and Joe Cavanagh[1]

Last week the IMF published a new paper in its technical notes and manuals (TNM) series, a guide to “Implementing Accrual Accounting in the Public Sector” by Joe Cavanagh, Suzanne Flynn and Delphine Moretti (TNM 16/06). The technical note is available here.

Many countries have changed or are considering changing the basis of their financial accounts from cash to accruals. This TNM explains what accrual accounting (AA) means for the public sector and discusses current trends in moving from cash to accrual accounting.  It outlines the factors that governments should consider in preparing for and sequencing the transition. The note recognizes that governments will have different starting points and objectives, and varying practices in preparing financial statements. Countries also vary considerably in the volume of stocks and flows, and the number of public sector entities, that are recorded outside the government accounts. These factors need to be considered when planning and sequencing the implementation of AA.

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September 21, 2016

Managing Government Wages and Employment

Wages and Employment

Posted by Teresa Curristine and Mercedes Garcia-Escribano[1]

Government wage and employment policies have important social and economic implications. The government is the major employer in many countries, delivering key public services and typically spending around 25 percent of its budget on the wage bill (See Chart 1). Given its sizable budget weight, how the wage bill is managed heavily influences the sustainability of public finances, the quantity and quality of key public services, and as governments are major employers, private sector pay and employment.

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