Advocates of fiscal transparency and public participation in budget processes are often faced with the awkward “so what” question posed by skeptics. “It’s all good for you to say that transparency and participation are important”, the skeptical questioner asks, “but can you in fact show that they make any real difference?”.
The Dominican Republic Ministry of Finance, Latin American Treasury Forum (FOTEGAL, International Monetary Fund (IMF), Inter-American Development Bank (IDB), and World Bank jointly organized the sixth annual seminar that took place in Punta Cana, Dominican Republic, from August 26-28, 2015. FOTEGAL aims at providing a permanent regional dialogue for technical discussions and exchange of experiences among treasurers. The seminar, also supported by the Government of Switzerland through State Secretariat for Economic Affairs, Economic Cooperation and Development (SECO), is a key component of the IMF’s technical assistance program on treasury management.
Over the last two decades, almost all countries in Latin America have conducted substantive reforms to strengthen their public financial management (PFM) systems and generate reliable information in an effort to promote fiscal stability and sustainable development. These reforms have enhanced the quality of macro-fiscal management in the region and improved economic performance observed throughout the 2000s. As the recent economic crisis demonstrated, however, there is room for further improvement, as well as a need to increase the resilience of the PFM systems.
Throughout Europe, fiscal secrecy gave way to openness as absolute monarchy gave way to constitutional government, mainly during the nineteenth century. Kings, if they weren’t simply deposed, were constrained by legislatures and judiciaries, and budgets and accounts became public documents. Absolute monarchy has of course disappeared from Europe. Or, rather, it has almost disappeared. In a small corner of the continent, the Vatican holds out against the trend, describing itself as “an absolute monarchy” (albeit an elective one) in which the Pope “holds full legislative, executive and judicial powers.” Not surprisingly, the Vatican publishes less information on its finances than other European governments.
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.
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.
The 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.
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.
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 email@example.com.
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.
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.