November 20, 2015

Sector Ministries: As Important as the Finance Ministry for Good PFM!


Posted by Lena de Stigter[1] and Jennifer Moreau[2]

Post Addis Ababa, the debate on development finance focuses in large part on the generation of the necessary additional resources to support the Sustainable Development Goals (SDGs). Improving tax systems and compliance is an important element in this regard and strongly supported by the German Development Cooperation agency GIZ. Yet, taxation is only one side of the coin. Sound public financial management (PFM), especially at the level of sector ministries, should be the other. The generation of savings through more effective and efficient budgeting and expenditure policies in sectors may be as important for countries as resource mobilization through taxes. For instance, the IMF has recently shown that there is much to gain by reducing the inefficiencies around public investment management (IMF, 06/2015, Making Public Investment more Efficient). Moreover, the Collaborative Budget Reform Initiative (CABRI), through its sector dialogues, has done important work on highlighting the possible gains of improving value-for-money in program expenditure in key parts of the public sector. Sound investment policies and development-oriented public expenditure will enhance trust of citizens in their government and increase their willingness to pay taxes. Moreover, it will have a positive impact on the socio-economic environment of a country and generally, serve as a catalyst for development. 

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November 18, 2015

IDB and IMF Launch a New Book on PFM Reforms in Latin America

Pages from Public Financial Management in Latin America_ The Key to Efficiency and Transparency,Gestion financiera publica en America

Posted by Carlos Pimenta and Mario Pessoa[1] 

The International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) launched today the English version of the book “Public Financial Management in Latin America: the key to Efficiency and Transparency”. The volume, which was edited by Carlos Pimenta and Mario Pessoa, is a joint work based on extensive technical assistance provided by both institutions. 

The areas covered in the book include treasury single accounts, performance indicators for treasury management, financial management information systems, accrual accounting, cash and debt management, public procurement, and cost accounting. These topics were selected to bridge the gap in the literature about the results achieved in the region. 

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November 09, 2015

The Functions and Organization of Ministries of Finance


Posted by Richard Allen, Yasemin Hurcan, and Maximilien Queyranne[1]

There is surprisingly little literature on the functions and organization of modern ministries of finance. Yet some critically important questions arise. What are the core finance functions that a state needs to carry out? What resources—financial, human and IT—are required to carry out these functions efficiently and effectively? Where should the functions be located—in a department or directorate of the finance ministry, in another ministry, or in a specialized agency? Are there any “good practice” models or approaches that can be identified looking across a range of countries, advanced, emerging and developing? What principles should developing countries follow in reorganizing their finance ministries? 

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November 06, 2015

Trapping the White Elephants: Can the Latest Public Investment Boom Avoid the Mistakes of the Past?

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By Richard Hughes[1]

On November 11 and 12, the Overseas Development Institute’s Centre for Aid and Public Expenditure (CAPE) in London will be dedicating its annual conference to the question of how developing countries can get a bigger “bang” for their public investment “buck”. The conference takes place against the backdrop of a surge in public (and private) investment in infrastructure in developing countries in recent years. However, the impact of this latest investment boom on economic and social development will depend crucially on the way in which that investment is managed. Past public investment booms in the developing world have often been associated with “white elephant” projects, time delays, cost overruns, inadequate maintenance, illusive returns, and ultimately fiscal instability and retrenchment.  

Will this time be different? On the eve of the 2015 CAPE conference, Richard Hughes, Division Chief in the IMF’s Fiscal Affairs Department and co-author of the Fund’s new policy paper “Making Public Investment More Efficient” explores these issues below.

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October 28, 2015

Steady Progress on PFM Reform in Cambodia


Posted by Suhas Joshi and Frans Ronsholt[1]

Work on preparing the 2015 Public Expenditure and Financial Accountability (PEFA) assessment for Cambodia is nearing completion. A high-level workshop to discuss the draft report was held recently in Phnom Penh, and the final report is expected to be issued by late November.

This latest PEFA assessment updates the one completed in 2010. The main objectives of the exercise were to update the PFM reform action plan, track progress since the 2010 assessment, and develop internal capacity to enable any future PEFA assessments to be carried out independently.

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October 16, 2015

Strengthening External Audit at Subnational Level in Brazil


Posted by Francisco Javier Urra[1]

The early 1990s was a turning point for the Brazilian economy. After successive crises and pervasive macro-economic instability, the so-called “Plano Real” restored balance to the economy and brought inflation under control through a mix of policies that included price de-indexation, fiscal adjustment, monetary contraction and the adoption of a fixed exchange rate. A new Fiscal Responsibility Act (LRF, Lei de Responsabilidade Fiscal, Act n.101/2000) become the cornerstone of sound macroeconomic management and fiscal discipline, both at federal and subnational level.

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October 13, 2015

Getting the Dog to Bark: Disclosing Fiscal Risks from the Financial Sector



Posted by Tim Irwin[1]

For many years, the IMF has said that governments should publish statements of fiscal risk—or reports that explain what could cause the government’s debt and deficit to be higher than forecast. A question that arises is whether these statements should disclose implicit guarantees, or the risk that the government will have to rescue a failing bank even if it has no legal obligation to do so. Careless talk could exacerbate the problem of moral hazard, or even trigger a bank run. Yet a statement that says nothing about implicit guarantees ignores one of the biggest risks around. In the United Kingdom, to take a striking example, the nationalization of banks during the financial crisis caused gross public debt to rise from 51 to 202 percent of GDP in the space of a year—an effect that few other fiscal risks could produce.[2]

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October 05, 2015

Finance Ministries, Social Media and PFM

Posted by David Fellows and John Leonardo[1]

What contribution does the Social Media have to make to improving PFM and fiscal transparency? In a recent study, we found that 26 of the 34 OECD states had Twitter sites and 18 had a Facebook presence.[2] Further work on African countries revealed that 11 finance ministries have active Facebook accounts (Angola, Egypt, Ethiopia, Ghana, Liberia, Rwanda, Senegal, Somalia, South Africa, Uganda and Zambia) with four of these using Twitter on a regular basis (see table below). The number of African Facebook accounts stood at 51.6 million as at 31st December 2012 and more than doubled to 120million by 30 June 2015. Nigeria, South Africa and Kenya accounted for a quarter of this total but other African countries have been gaining ground. There appears to be a moderate correlation between internet use and per capita GDP for the group (excluding Somalia).

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September 24, 2015

Trends in Fiscal Transparency

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Posted by Rachel Wang, Tim Irwin, and Lewis Murara[1]

What do El Salvador, Hong Kong, Russia, and the Slovak Republic have in common? They are the only economies that submit fully comprehensive government finance statistics to the IMF. That is one of the results of a recently published Working Paper, Trends in Fiscal Transparency: Evidence from a New Database of the Coverage of Fiscal Reporting.

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September 18, 2015

A Think Tank Amidst The Vast Blue Sea



Posted by Suhas Joshi, Benoit Wiest and Ali Abdul-Raheem[1]

The small island nation of Maldives was absolutely buzzing this July, as it celebrated its 50th year of independence, amid the bright lights, festive decorations, fireworks, parades and processions. The country’s transformation over the past half a century has been tremendous. From an economic backwater the country has become South Asia’s richest economy, with a per-capita income of US$ 8,625 in 2014. Growth has been driven by the Maldives’ now world-renowned tourism industry. Yet the country has experienced its fair share of development challenges: vast income inequalities, a chaotic political transformation, macroeconomic mismanagement, and the threat posed by climate change and rising sea levels, among others.

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