IMF Conference on “Fiscal Risks: Sources, Disclosure, and Management” (Paris, October 28–29, 2008)

Posted by Ricardo Velloso

The IMF’s Fiscal Affairs Department and the Offices in Europe organized a conference on “Fiscal Risks: Sources, Disclosure, and Management,” at the IMF’s Paris Office on October 28 and 29, 2008. The conference was attended by high-level officials from ministries of finance representing twenty European countries as well as representatives from international institutions, rating agencies, think tanks, and academia. The opening address was delivered by Mr. Saleh M. Nsouli, Director of the Offices in Europe, followed by former FAD Director, Mrs. Teresa Ter-Minassian's keynote speech.

Norway’s Government Pension Fund–Global

Posted by Thomas Ekeli

A recent post by Mauricio Villafuerte and Jon Shields described newly established guidelines for sovereign wealth funds (SWFs). One of the best known SWFs is the Norwegian Government Pension Fund–Global, formerly known as the Government Petroleum Fund. The Petroleum Fund was established in 1990 as a fiscal policy tool to support a long-term management of the petroleum revenues. Renaming the Fund the Government Pension Fund–Global in 2006 was part of a broader pension reform, highlighting also the Fund’s role in facilitating government savings necessary to meet the rapid rise in public pension expenditures in the coming years. However, the Fund is not earmarked for pension expenditures.

Strengthening Political Economy Analysis to Address the Resource Curse

Posted by Teresa Dabán

photo by Ellie Sandercock (CC)

The chances of resource-rich countries to avoid the resource curse hinge on the existence of sound institutions. While several initiatives have emerged to promote the transparency and sound management of natural resource revenues (NRR)— including IMF’s Resource Revenue Transparency Guide and the EITI, there is still a need to develop an overall framework for the assessment of NRR-related political economy and governance challenges. Against this background, the Bank has launched a project to develop a framework to assess and promote good governance in each of the stages of the “value chain” of NRR, from their extraction to their use, and incorporate political economy issues in the dialogue with resource-rich client countries. To refine such a framework, and concretize the timeframe for its implementation, the Bank held a workshop on October 16, 2008. The workshop revealed that the adoption of the usually proposed mechanisms to mitigate NRR-related governance challenges raises complex issues.

World Bank—Sovereign Debt Management Forum (October 27-29, 2008)

Posted by Brian Olden

The World Bank hosted the Fourth Sovereign Debt Management Forum between October 27–29, 2008 in its Washington, D.C. headquarters. Despite the ongoing turmoil in world financial markets, the event was well attended, with representatives from over 55 advanced OECD, emerging, and low-income countries (LICs), as well as representatives from international institutions, including the IMF and the EU.

The forum was very timely, given the current market turmoil, and naturally much of the discussion centered around the impact of the crises on economies, in general, and on debt management operations, in particular.  Much of the focus was on what the role of debt managers will be in helping to mitigate the effects of the crises on economies in the short and medium-term.

Strengthening Ministries of Finance

By Bill Dorotinsky

In recent years, the World Bank and IMF have undertaken reviews of ministry of finance (MoF) organizational structure, with an eye to strengthening the operation of the ministry and putting public financial management (PFM) on a sound footing. Creating strong ministries of finance able to manage national finances can better position countries for achieving their national policies and weathering weak economic conditions. Relatively less attention has been paid to building strong ministries of finance compared to strong central banks or even strong supreme auditing institutions. However, building strong MoFs has been an area of increasing requests for international assistance, and a coherent approach is needed for the task. Leaving recommendations to individual professions, or the absence of a framework for review, often means fragmented advice and ministries.

Where does the Public Sector Boundary End? New Publication in French

Posted by Ian Lienert

The terms “government” and “public sector”, when used in relation to fiscal deficits or debt, are sometimes used rather loosely. What is the coverage of “government”? Does it differ from the “public sector”? With the private sector increasingly participating in “government” activities, including via public-private partnerships (PPPs), has the boundary between the public and private sector become more blurred?

A recently published study in La Revue du Trésor presents the definition and components of the “public sector,” as defined in the IMF’s Government Financial Statistics (GFS) Manual 2001. The “public sector” is broader than the consolidated general government, as it includes public enterprises. The GFS framework, which discusses the notion of government “control” (important for identifying whether an enterprise or a PPP should be attributed to the private or public sector), provides a conceptual basis for a clear delineation of the public and private sectors. It is acknowledged that not all accounting issues – including those relating to PPPs and other “borderline” institutional arrangements -- have yet been settled.

The Santiago Principles: Generally Accepted Principles and Practices for SWFs

Posted by Mauricio Villafuerte and Jon Shields

Do you still wake up in the middle of the night, worried that your country is about to be gobbled up by a rampaging, politically-inspired Sovereign Wealth Fund (SWF) from the other end of the world? Or do you dream that the current financial crisis is going to be solved by massive, daredevil rescues by charitable white knights from Sovereign Wealth Funds? In either case, maybe it’s time to rest peaceably again. Because 23 countries with SWFs agreed, in October 2008, on a set of “generally accepted principles and practices” (GAPP) that would commit them to operate purely on commercial principles. And, as part of this commitment, SWFs abiding by the GAPP would make their objectives, governance structures, and investment practices visible to all.

Activity-Based Costing: Is it Applicable in Governments?

Posted by Ian Lienert

One of the principal objectives of a performance-oriented budgeting system is to link the results and the funding of budget programs. In order to make well-informed allocative choices in the national budget, it is important to obtain the best possible information on program costs. However, it is costly to obtain detailed and accurate program costing information. Compromises need to be made when choosing between simple methods of costing and more sophisticated models.

Activity-Based Costing (ABC) is an accounting technique initially developed for use in the private sector. With the push for program budgeting, ABC has also been used in the public sector of some countries. Proponents argue that ABC provides full cost information and also addresses the problem of allocating indirect (or "overhead") costs of government programs. However, if recent experience in the United Kingdom’s police service is to be taken as a guide, ABC is too expensive and demanding to be generalized for use in government budget programs.

The IMF Hosts the Second Annual Seminar and Annual General Assembly of the AIST

Posted by Jean-Luc Hélis

On October 14 and 15, 2008, on the heels of its Annual Meetings, the IMF hosted the second annual seminar and Annual General Assembly of AIST. The International Association of Public Treasury (AIST--its French acronym) is an international association of treasuries officially created in May 2007. Its objectives are as follows: (1) promoting the sharing of information and experience, and cooperation among public treasury services; (2) organizing conferences and seminars, and publishing reports, studies, and documents relating to treasury issues; and (3) developing partnerships with international organizations. The AIST is currently presided by Morocco (the president is M. Ibrahimi, General Treasurer of the Kingdom of Morocco) with the French Public Finance General Directorate holding the Secretariat. The membership is composed of treasuries from many French speaking countries in Africa, the Middle East, or Asia, but also includes treasuries from many other countries (e.g., Hungary, Ghana, Russia, Ukraine, etc.) Other countries, not yet members of the association, can be invited to participate to the AIST’s activities. The IMF, as well as the World Bank, are members.

IMF/CEF Technical Assistance in South East Europe: End of Assignment of Mr. Eivind Tandberg, Public Financial Management (PFM) Advisor for South East Europe

Posted by Mira Dobovisek, Center of Excellence in Finance (CEF), Slovenia

According to this year’s CEF Supervisory Board conclusions, over the last three years, the South East European (SEE) countries have largely benefited from the presence of the IMF/CEF technical assistance program and more specifically the public financial management advisor, Mr. Eivind Tandberg, based at the Center of Excellence in Finance (CEF) in Ljubljana, Slovenia. The program primarily consisted of providing technical advice to SEE countries, assisting them in defining PFM reform priorities, and carrying out regional and cross-country analytical and research activities. Furthermore, the advisor provided numerous inputs to courses and other CEF’s events, and helped the CEF in formulating training programs, based on findings from his missions. Satisfied with the results in the area of PFM, the CEF Supervisory Board confirmed the appointment of the IMF government finance statistics advisor, Mr. Vincent Marie, who was posted at the CEF in October 2007. Mr. Brian Olden is expected to take over Mr. Tandberg’s previous duties from January 2009.

A Step Toward Multiyear Budgeting in Central America, the Dominican Republic, and Panama

by Teresa Dabán

In early August 2008, Central American countries held the First Meeting of the Working Group (WG) on Medium-Term Expenditure Frameworks (MTEFs). Discussions focused on the benefits, challenges, and strategies for the adoption of an MTEF in the region. The WG saw the desirability of adopting such frameworks, in a gradual and country-specific way, and decided to prepare a regional paper to outline a strategy for their adoption. The Fund and donors are actively supporting the Central American region in this effort.