July 20, 2016

Managing the Wage Bill in Southern Africa

AFRITAC South

Posted by Imran Aziz[1]

AFRITAC South[2], in collaboration with the Fiscal Affairs Department of the IMF, held a regional seminar on Government Compensation and Employment from June 20 to 23, 2016.  The event was hosted by the Africa Training Institute in Mauritius, and brought together government officials from Botswana, Comoros, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Zambia and Zimbabwe.

The seminar focused on the conceptual framework presented in the IMF’s recently published board paper “Managing Government Compensation and Employment – Institutions, Policies, and Reform Challenges”. The lectures and group sessions were structured on strengthening the key institutions that underpin the effective management of wage bill spending. A well-designed system requires adequate fiscal planning to ensure appropriate financing of the wage bill, competitive compensation to attract and retain skilled staff and incentivize performance, and the flexibility to adjust the level and compensation of employment to reach efficient levels.  

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July 14, 2016

Accrual Budgeting in Kazakhstan

ThinkstockPhotos-522755040a

Posted by John Zohrab[1]

From the perspective of fiscal transparency, accrual budgeting (AB) is superior to cash budgeting, because it facilitates the management of the budget in terms of the full resource implications of policies and programs and provides a much wider set of fiscal indicators. A cash budget is managed in terms of cash flows and balances whereas, in addition, an accrual budget takes into account accrued expenses and revenues, as well as the full range of assets, and liabilities and net worth.[2]

However, implementing AB is generally perceived to entail risks and complexities. This is presumably why, starting in 1989, only a handful of countries have so far implemented it in central government: Australia, Austria, Canada, Denmark, Iceland, New Zealand, Switzerland and the United Kingdom. It is also presumably why most countries prefer to stick with cash budgeting. So why is Kazakhstan considering the introduction of AB?[3]

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June 28, 2016

How National Audit Offices Can Support Implementation of the SDGs

SDG

Posted by Gijs de Vries [1]

The 17 Sustainable Development Goals (SDGs) provide an ambitious roadmap to a fairer and more equitable world. To turn these goals into reality governments across the world will have to put them at the heart of their action. Governments will also have to put their money where their mouth is. National budgets need to be adapted to the task: revenue and expenditure will have to be managed more effectively and transparently. And national accountability institutions will have to step up to the plate.

Funding the SDGs will be costly, with incremental financing needs in low- and lower-middle-income countries estimated at $1.4 trillion. Much of this money will have to come from the public sector, whether through official development assistance (ODA) or via domestic resource mobilization in developing countries, where governments will have to collect more and spend better. Many countries suffer from weak public financial management (PFM) and inadequate public service delivery.  

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June 23, 2016

The New PPP Fiscal Risk Assessment Model (PFRAM)

Assessment Risk

Posted by Maximilien Queyranne, Isabel Rial and Genevieve Verdier [1]

The PFRAM, developed by the IMF and the World Bank, is an analytical tool to assess the potential fiscal costs and risks arising from Public-Private Partnership (PPP) projects. PPPs are increasingly promoted as a way to finance investment projects, with the objective of supporting national development goals. However, PPPs are not exempted from controversy. To supporters of PPPs, governments can benefit from efficiency gains derived mainly from the private sector’s technological innovation and superior managerial skills. Critics of PPPs, on the other hand, tend to view PPPs as a procurement option that might weaken fiscal discipline. In their view, many governments have procured investment projects as PPPs not for efficiency reasons, but to circumvent budget constraints and to postpone recording the fiscal costs of providing infrastructure services. Hence, some governments procured projects that either could not be funded within their budgetary envelope, or that exposed public finances to excessive fiscal risks.

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June 21, 2016

Central Government Expenditure Rule Under Scrutiny in France

Cour Des Comptes

By Guilhem Blondy and Vianney Bourquard[1]

A central government expenditure rule that has been in place in France for twenty years has been assessed by the Court of Audit in a report that was recently submitted to the Parliament. According to the Court, the rule has reduced the growth of central government expenditure, while loopholes in its coverage and poor in-year reporting have weakened the rule’s influence on budgetary policy. The full report (in French) is available at : Le budget de l’État en 2015 (résultats et gestion) / Publications / Publications / Accueil / Cour des Comptes - Cour des comptes.

The report notes that 17 EU member countries have implemented budget rules covering all or part of their public expenditure, using budgetary accounting, financial accounting, or government financial statistics as a measuring tool. France chose two such rules - a central government expenditure rule (“norme de dépenses de l’État”) created in 1996 and a healthcare expenditure rule (“objectif national des dépenses d’assurance-maladie”) established in 1997[2]. The report mentions that France was at that that time engaged in a difficult fiscal consolidation exercise to qualify for membership of the Economic and Monetary Union. These rules were supplemented in 2014 by a local government expenditure target (“objectif d’évolution de la dépense publique locale”), but this rule is less binding than the others. Both the central government and healthcare expenditure rules use accounting data rather than statistical data to improve the timeliness of reporting expenditure outcomes.

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June 16, 2016

Decentralizing Revenue in Latin America

IDB

By Vicente Fretes Cibils[1]

When Teresa Ter-Minassian and I took on the task of looking back to the fiscal performance of Latin America and the Caribbean in the last few decades we expected to find a lot of “could haves” and “if only’s”.  A lot of academics and journalists commonly refer to Latin America as “the region of the future”. And that is mostly true. But there is still a large hurdle that the region as a whole has to overcome if it is to achieve sustainable and inclusive growth: namely, much improved fiscal performance.

Our recently published book[2], “Decentralizing Revenue in Latin America: Why and How” looks at the extent to which seven countries — Argentina, Bolivia, Brazil, Colombia, Mexico, Peru, and Venezuela — have succeeded in decentralizing their tax systems to increase their overall revenue collections.  The book also discusses why most countries are still far from exhausting their revenue potential.  The short answer is that taxes in many countries of the region are not yet designed to promote development and growth.

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June 14, 2016

The Fiscal Ship

The Fiscal Ship

Posted by Brendan Mochoruk and David Wessel[1]

How to use a computer game to elevate public debate over the U.S. Federal deficit? The mission of the Hutchins Center at the Brookings Institution www.brookings.edu/hutchinscenter is to improve both the quality of fiscal and monetary policy and public understanding of it. Finding ways to explain fiscal realities to people who know that the federal debt is important but never get to the end of any newspaper story on the subject can be difficult. Mention the federal budget and eyes glaze over.  

Our challenge was to engage these people, young and old, so that they are better informed citizens. We wanted them to understand that the U.S. doesn’t face a big problem with this year’s budget deficit or next, but that the federal budget is on an unsustainable course. We wanted to remind them that fiscal policy is not just about the numbers, but also about what role government plays in the economy.  And we wanted to show them that it’s possible – not easy, but possible – to pursue their own priorities for the government (reducing inequality, shrinking government, fighting climate change, bolstering national defense) while stabilizing the federal debt.

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June 09, 2016

The Capabilities of Finance Ministries

ODI Logo
Posted by Richard Allen
[1]

How do finance ministries go about performing their tasks, what do they look like as organizations, and does it matter how they are organized? What makes a finance ministry capable of doing its job?

The Overseas Development Institute (ODI) has published a report[2] investigating the capabilities of finance ministries, based on case studies of Germany, Mexico, Nepal, Uganda, Sierra Leone, South Africa, the United Kingdom, and Vietnam. On June 6, 2016, Her Majesty’s Treasury (the U.K’s finance ministry) and the ODI organized a High-Level Roundtable to discuss the findings of the report. Opening remarks were made by the Rt Hon Greg Hands, Chief Secretary to the Treasury, and were followed by a presentation of ODI’s report, remarks by H.E. Do Hoang Anh Tuan, Vice Minister of Finance of Vietnam, and Edmund Koroma, Financial Secretary of Sierra Leone, and a general discussion. Participants in the Roundtable included representatives of the Treasury, ODI, the IMF, think tanks, consultancy firms, academia  as well as specialist media. In the afternoon, a workshop was held to discuss the ODI’s report with a wider audience of experts and practitioners.

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June 06, 2016

Analyzing and Managing Fiscal Risks: Best Practices

Risk

Posted by Brian Olden and Amanda Sayegh[1]

Events of the past decade serve to underscore how damaging shocks to public finances can be. Financial sector bailouts after the global financial crisis, the fiscal impact of the great recession that ensued, and the more recent collapse in commodity prices have driven public indebtedness to unprecedented levels during peacetime and impaired the ability of governments to exercise good fiscal policy.

The IMF has been working with member countries to improve and inform fiscal risk analysis and management and has also drawn on the experiences of countries with leading edge practices.

Some tools to assist countries better understand and manage fiscal risks are already in place, including  the Fund’s debt sustainability analysis tools and the fiscal transparency code, which provides detailed guidance on how fiscal risks should be assessed.  

The Fund has released a new report to expand the existing toolkit by providing practical guidance and new analytical tools to help policymakers better understand and manage fiscal risks.    

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June 03, 2016

IFAC, MOSAIC and Strengthening Public Accountancy

IFAC

Posted by Alan Edwards[1]

Collaboration between the International Federation of Accountants (IFAC) and various donors that operate under the name MOSAIC is quietly making a big impact on the global accountancy profession, and public financial management (PFM) more broadly. In 2013, MOSAIC issued the innocuous sounding Professional Accountancy Organization (PAO) Global Development Report which launched a program of capacity building for public accountants around the world. In a related initiative, IFAC and one of the MOSAIC partners, the UK’s Department for International Development (DFID), formed a partnership to invest in the capacity of PAOs in countries that are focal points of UK’s development assistance.

The initial emphasis of the IFAC-DFID programme is on three African countries - Ghana, Uganda and Rwanda. Four accountancy organizations in the UK[2] were selected to partner with the PAOs in these countries - ICAEW for Ghana, ACCA for Rwanda, and ICAS and CIPFA in partnership for Uganda. Tailored terms of reference were developed for each country depending upon their needs. In Uganda, for example, CIPFA is developing a roadmap to assist the national PAO in strengthening public sector accountancy. This work should be completed by December 2016.

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