October 20, 2016

The Timing of the Government’s Fiscal Year


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

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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September 19, 2016

Sharing Resource Revenues: Common Mistakes and How to Get it Right

Natural Resource Revenue Sharing cover

Posted by Andrew Bauer and Sofi Halling[1]

In nearly every country, subnational governments receive public funds, either through direct tax collection or intergovernmental transfers. But in more than 30 countries—from Bolivia to Canada to DRC to Indonesia—policymakers have chosen to create a special revenue sharing system to distribute non-renewable natural resource revenues (see map below). A recently published report by the Natural Resource Governance Institute (NRGI) and the United Nations Development Programme (UNDP) examines this important topic (NRGI link to report; UNDP link to report).

In most of these countries, oil-, gas- or mineral-producing regions receive a percentage share of the production value extracted from their territory. In a subset of these countries—including Ecuador, Mongolia and Uganda—resource revenues are pooled separately from other fiscal revenues and distributed according to a unique formula that includes, for example, poverty and population indicators. Every year, hundreds of billions of dollars are distributed through these systems.

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September 15, 2016

The (Fiscal) Benefits of Transparency

Transparency Fiscal Benefits

Posted by Ben Roseth[1] and Carlos Santiso[2]

Crime doesn’t pay, but what about corruption?

Since the 1960s, some have argued that corruption is the grease on the wheels of development. Inefficient bureaucracies need graft to help circumvent roadblocks of excessive red tape or unmotivated civil servants, increase efficiency and improve outcomes in investment and overall economic growth (see Leff 1964, Leys 1964). This line of argumentation has been pushed back with a slew of empirical research. Numerous widely cited articles now document the deleterious effects of corruption on governance and the rule of law, on economic growth and public investment, and more.  

Nevertheless, in the real world, corruption is still a scourge. Recent events in Latin America have reminded us just how harmful corruption can be. But once the tide of scandals and protests has subsided, will anyone care about corruption? As policymakers and civil servants navigate the turbulent waters of anti-corruption policy design and implementation, perhaps it is useful to focus on a timeless outcome: money. Simply put, when a country suffers from corruption, everyone pays. And when a country improves its corruption indicators, everyone stands to gain.

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September 07, 2016

Progress on PFM Reform in Liberia


Posted by Bernard Jappah[1]

The Liberian civil wars, which lasted for most of the 14 years from 1989 to 2003, destroyed much of the country’s public and private infrastructure, as well as its human capital. Most people tend to forget or play down the fact that the public finance system – essential for the effective planning and execution of the budget, as well as the efficient management of cash, public debt and overseas development assistance - had also collapsed. The advent of the Ellen Johnson-Sirleaf administration, in 2006, provided a signal for positive change.

Challenges were in abundance, with financial management and economic governance taking center-stage. The Ministry of Finance and Development Planning (formerly the Ministry of Finance) was challenged to develop and apply a mix of policy measures to rebuild the confidence of partners, create an enabling business environment, reduce the debt burden, and restore the faith of the citizens.

With support from the IMF, and the strong leadership of Antoinette Sayeh, the then Minister of Finance, a Public Finance Management (PFM) law was enacted in 2009, while the country achieved HIPC completion status in 2010. There was buzz throughout Monrovia that good things were on the horizon. It became necessary to work on mainstreaming the new law within the country’s governance architecture.

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August 30, 2016

Innovative Financial Instruments for Fighting HIV/AIDS

Innovative Financial Instruments for Fighting HIVAIDS

Posted by Taz Chaponda[1]

The International AIDS Conference in July 2016 reported a resurgence of the disease, particularly in Africa and South Asia[2]. The number of people becoming infected every year, which had been dropping, has now stalled and is rising in some countries. Just under 2 million people become HIV positive every year; as the epidemic continues to grow, the cost of keeping people alive continues to rise. UNAIDS has reported that funding from donor governments fell last year for the first time in five years, from $8.6bn in 2014 to $7.5bn in 2015. This raises questions about the efficacy of current funding models, and the implications for fiscal sustainability in those low-income countries that have a large proportion of the population on HIV/AIDS treatment.  Most of these countries are in Africa and Asia.

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August 26, 2016

Organization of Central Finance Functions in Sub-Saharan Africa

Logo_afritac_south Headlights_afritac_south

Posted by Peter Murphy and Richard Allen[1]

The IMF’s Regional Technical Assistance Center for Southern Africa—AFRITAC South (AFS)—organized a one-week seminar on the Organization of Central Finance Functions at the Africa Training Institute in Mauritius from August 15-19, 2016. The seminar was attended by 37 participants from 12 countries[2]. The presenters and facilitators were Peter Murphy (AFS, IMF), Richard Allen (Fiscal Affairs Department, IMF), Renaud Duplay (Ministry of Finance, France), and Francois Vaillancourt (University of Montreal, Canada). The program for the seminar together with relevant materials may be viewed at www.southafritac.org

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August 23, 2016

Cash Basis IPSAS Needs to be More Ambitious


Posted by Andy Wynne[1]

The IPSAS Board has issued an exposure draft to revise its Cash Basis IPSAS and comments were being requested by end July:


Late comments are still welcome, however, and this article could be considered my informal submission. As a PFM practitioner in Africa and elsewhere I have worked on accounting reforms that are both achievable and of practical use. The proposed revised Cash Basis IPSAS is feasible, but does not add much for informing policy makers or providing accountability to the public. The initiative to amend the present standard is indeed welcome, but more is needed to make the standard a useful guide to good practice. Below we provide some comments on how the revised Cash Basis IPSAS could be improved.

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