A New IMF Fiscal Affairs Department's Publication: the Technical Notes and Manuals

Posted by Michel Lazare and Richard Allen.

The IMF has just launched a new series called: Technical Notes and Manuals.The first three issues have been authored by the IMF's Fiscal Affairs Department.

They deal with:

1. A Basic Model of Performance-Based Budgeting by Marc Robinson and Duncan Last  Download FAD Technical Manual 1
2. Transition to Accrual Accounting by by Abdul Khan and Stephen Mayes                     Download FAD Technical Manual 2
3. Modernizing Cash Management by Ian Lienert                                                              Download FAD Technical Manual 3

Earlier versions of these Technical Notes and Manuals were previously issued as part of a series of technical notes on our PFM blog.

Future issues will include topics in revenue administration, tax and expenditure
policy, and public financial management. Other IMF departments may also contribute notes to these series.

These notes and manuals aim at raising awareness among practitioners,
officials and academics of contemporary fiscal topics; and improving the dissemination of
FAD's TA advice. In particular, they will allow us to disseminate to a broader audience the advice now included in our TA reports, or provided through other advisory services.

The new WAEMU Directives

Modernizing the legal framework for public financial management in the West African Economic and Monetary Union.

 

Posted by Bacari Koné

In June 2009, the Commission and member States of the West African Economic and Monetary Union (WAEMU) completed the revision of the six directives which constitute the legal framework of public financial management (PFM) in the Union. The adoption of the new, revised directives by the WAEMU Council of Ministers (CM) on June 26, marked the end of a process started in December 2004.

Article 67 of WAEMU’s founding Treaty requires harmonization of budget legislation and procedures, in order to ensure their synchronization with multilateral surveillance procedures. Accordingly, during 1997 to 2000 the WAEMU CM issued six PFM directives to be implemented in its eight member countries.¹ These directives, along with the Union’s 1999 Pact of Convergence, Stability, Growth, and Solidarity, and the directive on tax policy, are essential elements of WAEMU’s emphasis on improving fiscal management and strengthening the basis for a joint monetary policy and a common regional currency.

There are three main objectives of the six new directives, notably to: (1) harmonize the rules for budget preparation, presentation, approval, execution, control and reporting in all member States; (2) promote effective and transparent PFM in all member countries; and (3) enable comparability of public finance data for effective multilateral surveillance of national budgetary policies.

Public Debt Management in Brazil

The Brazilian National Treasury Publishes an Overview of Development and Practice

Posted by Otavio Medeiros[1]

The Brazilian National Treasury, in partnership with the World Bank, launched on August 17th, the book: Public Debt: The Brazilian Experience. The publication aims to facilitate and foster a broader understanding of the topic, presented by professionals with first-hand experience in debt management, mainly staff from Brazil’s National Treasury, authors from the World Bank, other Brazilian federal government institutions and the academic world. The publication also provides a comprehensive discussion of the Brazilian public debt portfolio, describing and analyzing it from various perspectives, including its history since the earliest issuance.

Evaluating PFM Performance at the Sub-National Level

Posted by Franck Bessette

Located in Northern India, Himachal Pradesh (HP) is a small mountainous state, with a population of 6.6 millions, 90 percent of whom reside in rural areas. The government of HP recently decided to publish a report evaluating its PFM performance according to the PEFA Framework. The report was produced with the help of the World Bank and is available here. There is currently a growing interest in sub-national PFM systems, given the increasing importance of sub-national government in resource allocation and service provision. The PEFA Framework, though initially designed to be used at central government level, is sometimes used to evaluate PFM performance at sub-national level. There are various modalities and circumstances in which the Framework has been used so far at this level:

A. The PEFA framework has been used at the state level within federal countries. This is the case for Nigeria, Brazil (Caera, Distrito Federal, Minas Gerais, Pernambuco and four more on-going assessments), Pakistan (Sindh, Punjab, North-West-Frontier-Province), India (Maharashtra, HP) and other countries like Argentina which are following the same path. An interesting and recent example is the Canton of Lucerne’s “analysis of the cantonal financial management using the PEFA Framework” conducted in Switzerland by the Universities of Applied Sciences and Arts of Lucerne and Zurich. The report is not yet public but seems to have triggered a number of interesting discussions among Lucerne Canton’s authorities. This blog will give an account of the assessment as soon as it is publicly available.

IMF Job Offer: Public Financial Management Deputy Division Chief Based in Washington D.C. (Job Number: 0900810)

Reading the PFM blog regularly? You could be working here!

Posted by Marco Cangiano

The International Monetary Fund (IMF) is seeking a senior public financial management expert to fill a Deputy Division Chief position in one of the two Public Financial Management divisions of the Fiscal Affairs Department at the IMF Headquarters in Washington, DC.

Seminar on Strategic Planning and Management for High-Level Tax Administration officials -- Joint African Institute, Tunisia

Posted by the Revenue Administration Division of the IMF's Fiscal Affairs Department.

 

During June 1 - 5, 2009, the Fiscal Affairs Department conducted a seminar at the Joint African Institute (JAI) on strategic planning and management for high-level tax administration officials from 17 Anglophone African countries. The purpose of the seminar was to provide (1) the principles for strategic management in tax administration; (2) a model for incorporating sufficient discipline in the process to ensure that program decisions are strategic and will lead to systematic improvement in tax compliance as determined by improved business performance; (3) practical examples of how specific countries have implemented the principles discussed; and (4) an opportunity for the participants to exchange ideas about the application of strategic management principles with the leaders of other tax administrations. The topics covered the major components of strategic management process, including: mission, vision and values; risk assessment and management; priority setting and resource allocation; business planning; and plan monitoring and execution.

Capacity Development in PFM: It is Key to Train…Donors

Posted by Laura Leyser (Austrian Development Agency)

In line with the Paris Declaration and the Accra Agenda for Action, most donor agencies are implementing more and more of their aid programmes through country systems. This entails new challenges – also for donor staff.

Many donor agencies, multilateral as well as bilateral, are confronted with an increased need for PFM expertise in their own ranks. While one option is to hire additional PFM experts, this is usually not sufficient and might result often in a zero sum game (experts going from one agency to the next). In light of the newer aid modalities such as budget support, at least some basic PFM know-how is needed at various levels and areas of expertise, including programme and country officers, evaluators, auditors, lawyers, etc. Extensive capacity development through training is consequently the main solution.

South-East European Seminar, Washington, D.C.

Posted by the Revenue Administration Division of the IMF's Fiscal Affairs Department

Southeast Europe has been impacted significantly by the economic crisis with many countries facing the prospects of lower growth, lower absorption and imports and, therefore, quite likely, lower tax-to-GDP ratios over the medium term. The crisis has also given rise to a number of common tax compliance risks that hinders revenue collection in the region. Several of the countries have entered into (or are considering entering into) Fund programs and most are receiving (modest) amounts of FAD TA in tax administration.

Government Capital Project Appraisal - No Room for Optimism

Posted by Davina Jacobs

In recent months many countries have stepped up their government capital investment programs as part of fiscal stimulus packages to address the slowdown in their economies. An overview of stimulus measures can be found in a recent FAD publication, the Fiscal Monitor. Most developed countries (and several developing countries) have had largely effective capital project appraisal procedures for decades. There are, however, some marked differences in the implementation and success of capital project appraisal procedures in these countries. Based on an initial FAD note, “Government Capital Project Appraisal—What Does Really Work?" [attached below], this posting aims to stimulate a discussion on the effectiveness of different capital project appraisal procedures, starting by highlighting the methodologies used in the UK to address the so-called “Optimism Bias” in capital project appraisal.[1]

What is Capital Project Appraisal (CPA)?
Capital project appraisal (CPA) centers on a comparison of a potentially wide range of investment options. In contrast, project evaluation of projects compares a narrower range of options, one of which will eventually be executed.[2] Examples of types of appraisal necessary for capital projects might include: (i) quantify potential demand and define the level and type and standard of service the new asset is to provide; (ii) assess new versus replacement capital projects - such as whether or not to undertake a project; whether to undertake it now, or later, and on what scale and in what location; and to determine the degree of private sector involvement; and (iii) assess use or disposal of existing assets - such as whether to sell, or replace existing facilities by new ones, or relocate facilities or operations elsewhere; or to contract out, or market test, operations.

The New Constitutional Deficit Rule for Germany: a New Model Governing Deficit and Debt

Posted by Guilhem Blondy

Dr. Christian Kastrop, from the German Federal Finance Ministry, was invited to present the new constitutional German fiscal rule and its implications for Public Financial Management at an informal meeting organized by the Fiscal Affairs Department of the IMF September 3, 2009.

The new constitutional fiscal rule limits the structural deficit of the Federation at 0.35 percent of GDP and requires structurally balanced budgets for the regions (Lander). The annual maximum permissible net borrowing is calculated every year by adding this structural component the expected balance of financial transactions and a cyclical component based on the output gap used as hypothesis for the preparation of the budget. Structural deviations from the allowed limit at the execution stage will be recorded in a control account and will have to be compensated by reductions of the net borrowing in the following years. Exceptions are only allowed in two cases (natural catastrophes and extraordinary emergencies necessitating special financing needs) and debt accumulated under these exceptions will have to be redeemed through a binding amortization plan. The rule will be fully applicable after a transition period until 2015 for the federation and 2019 for the Lander.

Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships

Posted by Luc Leruth

 

This IMF Working Paper (jointly written with André de Palma and Guillaume Prunier, two co-authors from the “Ecole Polytechnique” in France) uses the Principal-Agent framework and the theory of incentives to derive a typology of risks in public-private partnerships (PPPs or P3s). We analyze the significant increase in the demand for the provision of public services through instruments combining public and private money (such as PPPs). We describe these arrangements and discuss the implications of our approach in terms of identifying risks that are often overlooked before turning to the optimal risk-sharing between the public and private partners, in particular with respect to information asymmetries in risk perceptions. This allows us to propose a typology of risks where both internal risks (the risks associated with the contract) and external risks (those associated with the project) are considered.