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May 31, 2011

Conference on Fiscal Consolidation and Budget Institutions in South Asian Countries

Posted by Tej Prakash

The IMF’s Fiscal Affairs Department (FAD) and the Indian National Institute of Public Finance and Policy (NIPFP) recently hosted a joint conference on fiscal consolidation and strengthening of budget institutions in South Asian countries. The main “institutions” discussed were fiscal responsibility frameworks, fiscal councils, and medium term budget frameworks.

The conference took place in New Delhi from April 21-22, 2011. Apart from senior budget officials and policy makers from the central and state governments of India, representatives from Bangladesh, Sri Lanka, Nepal, Bhutan, Afghanistan and Maldives participated in the conference.

Dr. Rangarajan, Chairman of the Council of Economic Advisor to the Prime Minister of India inaugurated the seminar and emphasized the challenges of fiscal consolidation while at the same time meeting the need for greater investment in infrastructure for the participating countries. Mr. Sanjeev Gupta, Deputy Director FAD, put the global need for fiscal consolidation in perspective by analyzing the flows and stocks of public debt and the scale of fiscal consolidation needed in major economies.

Following presentations by Mr. Holger van Eden and Ms. Teresa Curristine of FAD, there was a lively discussion on the appropriateness of Fiscal Councils (FC) in the participating countries. Participants from India (both the center and state) and Maldives thought that establishing FCs  could contribute to fiscal discipline. Participants from other countries, notably Afghanistan and Bangladesh, considered that FC would distract attention from the other and more urgent priorities.

There was greater consensus on establishing fiscal responsibility framework (FRF) through fiscal responsibility legislation. India, both at the federal and state levels, has already experimented with FRFs. Similarly Bangladesh and Sri Lanka have also elements of an FRF in place. Maldives is actively considering it. However, it was recognized that public financial management systems need to be strengthened significantly for a meaningful FRF to be implemented.

A presentation by Mr. van Eden on Medium Term Budget Frameworks (MTBFs) also triggered a lively debate. Most of the participating countries have some kind of medium term budget framework in place. However, the design and implementation of the MTBF needs significant improvements.

The discussion on public private partnerships (PPP), following a presentation by the World Bank, evinced great interest. However, no country other than India, and to some extent Sri Lanka and Bangladesh, had significant experience with PPPs. It was recognized that considering the risks inherent in PPP, significant development of capacity is needed in the public sector to prepare contracts, and projects preparation, evaluation and monitoring of PPP projects.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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Comments

It was informative and interesting conference; I also attended. For the smaller countries in transition to new PFM systems, it was a good opportunity to get the views of the cross-sections, like academia, the provincial government; and IMF resource persons.:)

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