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May 2011

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.

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May 27, 2011

Five Years of Sustainable PFM Development in the Pacific

Posted by Suhas Joshi

Vast distances, tiny populations, convoluted flight paths and lots of plastic airline meals —that is what working for the IMF’s Pacific Financial Technical Assistance Center (PFTAC) based in Fiji involves. The assignment has been a great challenge not merely because of the vast distances and the uncertain flight schedules — once going to the small island of Niue the plane circled for 75 minutes but could not land because the landing lights could not be switched on and had to return to our point of departure four hours away. The main issues, however, have been building capacity in a low capacity environment, burdened with continuous emigration of the smartest and the most capable.

I have been the IMF’s PFM Advisor at PTFAC for exactly 4 years, 11 months and 2 days. My terms of reference were broadly formulated promoting PFM reform in the 15 PFTAC member countries. It’s been a great experience for me. Have I had an impact? Yes, I believe I have. Have I had failures? Yes, that certainly is part of capacity building here in the Pacific.

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May 23, 2011

Risk-seeking and the Management of Fiscal Risk

Posted by Tim Irwin

It is common to assume that people are risk-averse—that they are willing to accept a risk only if it brings the reward of a greater expected return. But psychologists have found that people are sometimes risk-seeking—that they are willing to pay to assume a risk. Such behavior creates a problem for the management of fiscal risk, since it involves the government’s paying an expected cost and increasing its exposure to risk. So it’s worth thinking about when governments might be vulnerable to risk-seeking behavior.

According to the psychologists’ research, there are circumstances in which we conform to the assumption of risk-aversion. One is when we are faced with a high probability of winning something. Specifically, an experiment found that, on average, people considered that a 95 percent chance of winning $100, which has an expected value of $95 (the prize times the probability), was worth only $78 (see table). We also tend to be risk-averse when faced with a small probability of a loss. We might be willing, for example, to pay an insurance premium of $8 to avoid a 5 percent chance of losing $100, which has an expected cost of only $5.

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May 20, 2011

The Australian Budget: Getting the Above-the-line Balance Back Above the Line

Posted by Jason Harris[1]

The latest Australian Budget, for the fiscal year beginning on July 1 was released last week amid much fanfare. As in the last couple of years, its focus was squarely on maintaining fiscal discipline, with the budget still on track to return to surplus in 2012 (Chart 1), net debt peaking at 7.2 percent of GDP and no new net spending decisions.

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May 18, 2011

Addressing Challenges in Public Financial Management Reforms in the PEM-PAL Network - January 2011 Plenary Meeting on Managerial Accountability and Budget Execution

Posted by Tomislav Micetic, CAE, CPIA, Head of Internal Audit Service, Ministry of Finance – Republic of Croatia, and Chair of Internal Audit Community of Practice PEM PAL tmicetic@mfin.hr

The PEM PAL (Public Expenditure Management Peer Assisted Learning) network (ww.pempal.org) aims to support reforms in public expenditure and financial management in 21 countries in Central Asia and Central and Eastern Europe by promoting capacity building and exchange of information. PEM PAL is organized around three Communities of Practice (CoPs), for budgeting, treasury, and internal audit, bringing together a number of high-level practitioners. They meet regularly to share experiences among themselves and seek practical solutions for the most pressing issues related to reform implementation. PEM PAL is often cited internationally as a showcase for peer learning, given its innovative approach.

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May 17, 2011

The International Budget Partnership (IBP) has Three Job Opportunities

PROGRAM OFFICER (FRANCOPHONE AFRICA)

The International Budget Partnership (IBP) is based at the Center for Budget and Policy Priorities in Washington, DC. The IBP provides a range of services to help non-profit organizations analyze and influence public budgets in developing and transition countries. The IBP is seeking a Program Officer (Francophone Africa) to provide support to the Open Budget Initiative (OBI) Program. The OBI is a research and advocacy program that seeks to increase public access to budget information and inclusive and accountable budget-making. The Program Officer will report to the OBI Manager, and the Supervisor of IBP’s Open Budget Survey.

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May 16, 2011

How Should Success in Government Be Rewarded?

Posted by David Gentry

Much has been written about how best to consider program performance, or the results of expenditure programs, when allocating resources in the public sector.  Many writers are committed advocates of this seemingly common sense approach to budgeting, while others are deeply skeptical after looking at implementation issues. One way to contribute to this debate is to look at the experience in the private sector with a close conceptual cousin, Management by Objectives.

Management by Objectives (MBO) was first promoted in the 1950’s. Peter Drucker is credited with coining the term and promoting the practice in his 1954 book entitled The Practice of Management.  The idea was further refined by George Odiorne in his influential 1965 book entitled Management by Objectives: A System of Managerial Leadership, and in a large number of publications by various authors over the years exploring the application of MBO.

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May 13, 2011

Financial Management Information Systems: 25 Years of World Bank Experience on What Works and What Doesn’t

Posted by Cem Dener, Joanna Watkins, and Bill Dorotinsky

The World Bank Study "Financial Management Information Systems: 25 Years of World Bank Experience on What Works and What Doesn’t" (completed in December 2010) is now publicly available from the World Bank external web site.

The study seeks to identify trends in the design and implementation of Financial Management Information Systems (FMIS) solutions in World Bank funded projects in 51 countries since 1984, and share observed/reported achievements, challenges, and lessons learned with interested parties to assist in improving the performance of related Public Financial Management (PFM) programs. The study includes an analysis of project scope, cost, duration, design, objectives, and solutions. It also examines how such projects have performed over time and considers the key factors that contribute to the success and failure of projects. This study also suggests a methodology for the design and implementation of future FMIS projects, following a systematic approach to problem solving. This approach is expected to help clarify key ‘design parameters’ through a simple questionnaire and identify ‘which solution fits which problem in what situation’ during project design. If applied, such an approach may improve the quality and reliability of next generation FMIS solutions.

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May 11, 2011

IMF Fiscal Affairs e-Newsletter: May 2011

Fiscal Affairs : May 2011

 

 

Fiscal Addairs e-Newsletter

May 2011

Fiscal Affairs Department (FAD) of the International Monetary Fund

  Publication Updates

  IMF Publications

·         Investing in Growth

·         Political and Fiscal Risk Determinants of Sovereign Debt in Emerging Markets

·         Macro-Fiscal Implication of Health Care Reforms in Advance and Emerging Economies and associated Case Studies: Advanced and Emerging Economies

·         Healing Health Care Finances

·         A History of World Debt, Finance and Development

   more...

  IMF Staff Discussion   Notes

·         A Fiscal Indicator for Assessing First and Second Pillar Pension Reforms

·         Healing Health Care Finances

  IMF Working Papers

·         Fiscal Expectations Under the Stability and Growth Pact: Evidence from Survey Data

·         The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations

   more...

  External Publications

·         An Applied Analysis of ACE and CBIT reforms in the EU

·         Should African Monetary Unions Be Expanded? An Empirical Investigation of the Scope for Monetary

·         Integration in sub-Saharan Africa

·         Riding the Roller Coaster: Fiscal Policies of Non-Renewable Resources Exporters in Latin America and the Caribbean

   more...

  Technical Notes
  and Manuals

·         Tax Policy: Designing and Drafting a Domestic Law to Implement a Tax Treaty

·         When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances

   more...

 

Fiscal Monitor: Shifting Gears—Tackling Challenges on the Road to Fiscal Adjustment

Cover_Fiscal_Monitor_UpdateThe April 2011 issue of the IMF’s Fiscal Monitor highlights that many advanced countries, with the important exception of the United States and Japan, have taken important measures toward fiscal consolidation, but fiscal sustainability risks remain elevated in most advanced economies, with rising debt ratios and financing needs at historical highs. The fiscal outlook for emerging economies is more favorable, but this reflects in part the tail winds of high asset and commodity prices, low interest rates, and strong capital inflows. Low-income countries will have to balance spending priorities—in the context of higher food and energy prices—with fiscal sustainability.

Cover of Fiscal MonitorRevenue Mobilization and Development Conferences (Washington, D.C. and Nairobi)

More than 200 participants from 90 countries gathered in Washington, D.C. (April 17-19) at the IMF conference on Revenue Mobilization and Development, which was opened by IMF Managing Director, Mr. Strauss-Khan. This addressed the key challenge that developing countries face in not just raising more revenue, but doing so in ways that are more efficient, fairer, and better promote good governance. Participants comprised ministers of finance, tax commissioners, senior tax policy officials, CSOs, donors, academics, and representatives of international organizations. This followed an earlier IMF conference on Revenue Mobilization in sub-Saharan Africa in Nairobi on March 21-22, hosted by the Kenyan government and with the participation of senior tax officials from all sub-Saharan countries. These major conferences marked the launch of two trust funds to support Fund's technical assistance on taxation. The policy dialogue responds to the G20's recent request to international organizations in the area of domestic resource mobilization. Both conferences drew on the recent FAD Board paper on the subject.

FAD In The News

The April issue of the Fiscal Monitor was widely covered by news agencies and media, including among others Dow Jones, Bloomberg, Xinhua, BBC, AFP, AGI, Reuters, Globe and Mail, El Pais, ABC (Spain), EFE, ANSA, Le Figaro, Le Parisien, and Financial Times.

 

Carlo Cottarelli’s blog The Long and the Short of It—Government Debt Plans in 2011 and Beyond, was echoed by other blogs and on-line services: Huffington Post, Roubini’s Global Economics, The Economic Populist, Finance Blog, Bullfax, Hedgehogs, The Forex Blog, Lockwood, Talk Finance, and Profit.

 

Bloomberg and Reuters broadcast interviews with Carlo Cottarelli on analyses contained in the Fiscal Monitor and U.S. fiscal policy.

Fiscal Forum Tokyo Seminar

The Second Fiscal Forum took place on April 14 at IMF headquarters in Washington, D.C.  The forum discussed fiscal adjustment and risks and was opened by IMF Managing Director Mr. Dominique Strauss-Kahn. The focus was on the urgent need for fiscal consolidation in key advanced economies, socially-inclusive adjustment, structural and institutional reforms to strengthen fiscal frameworks, and fiscal risks. Professor Larry Summers (Harvard and former US Treasury secretary) delivered the keynote speech and the event concluded with a lively panel discussion, moderated by Ms. Zanny Minton Beddoes (The Economist). The panel included Jaime Caruana (BIS), Carlo Cottarelli (FAD Director), Kemal Dervis (Brookings), Doug Elmendorf (US CBO), and Simon Johnson (MIT). The Panel emphasized the risks posed by mounting debt levels in advanced countries, policy pressures arising from an asymmetric global recovery, and as-yet unresolved fiscal risks from large, undercapitalized financial institutions.

Asian Regional Seminar:  Promoting Fiscal Sustainability by Improving Public Spending

In March 2011, the Malaysian Ministry of Finance and FAD jointly organized in Kuala Lumpur an Asian Regional Seminar on Promoting Fiscal Sustainability through Improving the Efficiency and Effectiveness of Public Spending. More than 60 senior budget officials representing 22 countries attended the conference. The central theme of the seminar was how budget reforms, such as medium-term expenditure frameworks, performance budgeting, and spending reviews can promote fiscal sustainability through improving public spending. Reform practitioners from Asian and some OECD countries presented and discussed their experiences.

Workshop on Tax-Induced Debt BiasConference-on-Large-Fiscal-Adjustments

What does the financial crisis teach us about tax-induced debt bias? And what is the best policy response to it? On March 4, 2011 FAD organized an expert workshop in Washington, D.C. on these issues. FAD Director Carlo Cottarelli delivered the opening address and experts from Europe and the United States with backgrounds in public finance, tax law, and corporate finance presented their recent work and discussed preliminary FAD research. The views and discussions offered input for an IMF Working Paper and a forthcoming Staff Discussion Note.

The 2nd Annual Regional Seminar of the Latin American TreasurersLong Term Trends in Public Finances in the G-7 Economies

The Seminar was organized jointly by the IMF, World Bank and IDB and it was held in Mexico City during March 16-18, 2011. The seminar discussed active debt management; operational risk management and business continuity planning; the relationship between the Treasury, the Central Bank, and commercial banks; and the remuneration of transaction services and government balances at the Treasury Single Account. During the seminar the treasurers created a permanent Forum and elected their first president, Mrs. Cantellano, head of the Mexican Treasury. Colombia was selected as the venue for the next seminar.

Policy Paper on Health Care Reform

The policy paper Macro-Fiscal Implications of Health Care Reform in Advanced and Emerging Economies analyzes developments in public health spending over the past 40 years and provides projections for 50 advanced and emerging countries over 2011–50. The paper discusses the effects of specific health reforms on public health spending in advanced economies and examines the challenges facing emerging economies as they seek to expand coverage of health care in a fiscally sustainable manner

Staff Discussion Note

A Fiscal Indicator for Assessing First and Second Pillar Pension Reforms,” by M. Soto, B. Clements, and F. Eich. This note, discussed in the iMFdirect Blog, argues that traditional deficit and debt indicators reflect the health of public finances today but fail to capture the future fiscal impact of pension reforms. Thus, they could create incentives to delay or even reverse pension reforms. The note proposes a new fiscal indicator—the “pension-adjusted” budget balance—which provides a level playing field for the evaluation of a country’s pension policies.

Technical Notes and Manuals

Tax Policy: Designing and Drafting a Domestic Law to Implement a Tax Treaty,” by K. Nakayama is addressed to tax policy departments in emerging and developing economies that are expanding their tax treaty network. It discusses the design and drafting of domestic law to implement tax treaties, and the role of domestic laws to counter “tax treaty shopping” practices.

When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances,” by F. Bornhorst, G. Dobrescu, A. Fedelino, J. Gottschalk, and T. Nakata discusses the adjustment of fiscal balances to take account of a broad range of factors such as asset and commodity prices and output composition effects. It also provides software codes for this purpose.

Technical Assistance Activities

During January–April 2011, FAD provided 75 technical assistance missions to IMF member countries and multi-country organizations.

Career Opportunities

FAD seeks talented and dedicated professionals with a background in different areas of public finance, to work on macro-fiscal policy issues and to provide technical assistance advice to IMF member countries on public financial management, tax policy reform, revenue administration, and different expenditure policy issues. Vacancies in FAD for staff and long-term expert positions are posted on http://www.imf.org/jobs. FAD also seeks experts who are interested in occasional short-term (2–3 week) assignments; interested candidates may send their CVs to FADexperts@imf.org

 

 

May 09, 2011

Transparency Versus Effectiveness in Public Financial Management

Posted by Sailendra Pattanayak

In recent years, there has been a resurgence of initiatives to promote transparency in fiscal policy decision making and implementation. Openness and clarity about the government’s policy intentions, policy formulation and implementation have been recognized as key elements of good governance. Comprehensive disclosure in a timely and systematic manner of all relevant information on management of public resources—their collection and use through a country’s public financial management (PFM) system to pursue policy goals—are seen as key to ensuring accountability.

Alongside transparency, the effectiveness of PFM systems and processes, including budget management methodologies and tools, is also important to manage public finances in a cost-effective manner. Budget reforms such as MTEF, program/performance budgeting, activity-based budgeting, cost accounting, etc. are primarily motivated to enhance the efficiency and effectiveness of allocating and managing public resources.

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May 06, 2011

L’indépendance des inspections générales de l’État par rapport à celle des cours des comptes

Publié par Andy Wynne, www.idilmat.com

Dans sa déclaration de Mexico, l'Organisation internationale des Institutions supérieures de contrôle des finances publiques (INTOSAI) présente des bonnes pratiques en matière d’indépendance de ces institutions. Cependant, comme dans beaucoup de régions du monde, cet idéal n’est pas atteint dans bon nombre de pays d’Afrique subsaharienne, anglophones ou francophones.

En outre, les systèmes judiciaires et en fait les parlements des pays d’Afrique subsaharienne n’ont ni l’indépendance ni les capacités de ceux de bon nombre de pays de l’OCDE. Par exemple, le rapport du Mécanisme africain d'évaluation par les pairs (African Peer Review Mechanism) (2008: 120) sur le Burkina Faso conclut que :

Le pouvoir exécutif est dominant et n’est guère limité par le parlement et le pouvoir judiciaire, dont le rôle est déficient en ce qui concerne l’équilibre des pouvoirs.

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How Does the Independence of General State Inspectorates Compare with that of Courts of Accounts?

Posted by Andy Wynne, www.idilmat.com

Intosai1 
The INTOSAI Mexico Declaration provides a summary of good practice for the independence of government auditors.  However, as in many parts of the world, this ideal is not achieved in many Sub-Saharan African countries.  This includes both the English and the French speaking countries. 

In addition, the judiciary and indeed parliaments in Sub-Saharan Africa do not have the independence nor capacity achieved in many OECD countries, for example, the African Peer Review Mechanism (2008: 120) report on Burkina Faso concluded that:

the Executive is dominant and is hardly limited by the legislature and the judiciary, both of which are weak as regards checks and balances.

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May 04, 2011

Promises, Promises. Better Measuring the Effect of Pension Reform

Posted by Benedict Clements and originally published on iMFdirect

We all hope to retire one day. Our pensions hold the promise of that.

But when that promise is a public pension, it’s also a lot like debt the government has to pay at some point in the future.

Good fiscal policy means thinking about how policy decisions—especially ones that involve long-term promises, such as pensions—affect government finances both today and in the future.

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May 03, 2011

IMF Job Offer: Public Financial Management Resident Advisor, Based in Mali (Job Number: 1100352)

Description 

The Fiscal Affairs Department (FAD) of the International Monetary Fund is looking for a well-qualified expert to fill a Public Financial Management (PFM) Resident Advisor position at the West African Regional Technical Assistance Center (West AFRITAC), established in 2003 and based in Bamako, Mali. The Advisor's appointment term would be for a period of one year, on a renewable basis, subject to satisfactory performance.

The Advisor will provide technical assistance (TA) on a range of PFM areas to the ten (10) countries covered by West AFRITAC, namely Benin, Burkina Faso, Côte d'Ivoire, Guinea, Guinea Bissau, Mali, Mauritania, Niger, Senegal, and Togo. The Advisor's work program will cover all PFM areas: legal and regulatory framework; budget preparation (including budget classification, medium-term budgetary frameworks, performance-oriented budgeting); budget execution (including expenditure control, treasury operations, cash management, accounting, fiscal reporting, and financial management information system), internal control and internal audit.

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May 02, 2011

Une tentative pour trouver le juste milieu entre l’auto-contrainte et la flexibilité : la proposition de nouveau cadre budgétaire à moyen terme en France

Affiché par Guilhem Blondy

Le 16 mars 2011, le gouvernement français a soumis un projet de loi amendant la Constitution au Parlement. Le projet introduit trois changements dans la gouvernance qui concernent respectivement: (i) la transmission des programmes de stabilité au Parlement national avant leur soumission à la Commission européenne, (ii) le monopole des lois de finances en matière fiscale, iii) la portée juridique des cadres budgétaires à moyen terme (CBMT).

La transmission des programmes de stabilité au Parlement avant leur soumission à la Commission européenne était une demande forte des législateurs français depuis une décennie. Cependant, l’impact de la nouvelle procédure sur la substance des programmes pourrait rester limité, dans la mesure où le Parlement ne sera toujours pas autorisé à amender les programmes de stabilité.

Continue reading "Une tentative pour trouver le juste milieu entre l’auto-contrainte et la flexibilité : la proposition de nouveau cadre budgétaire à moyen terme en France" »

Trying to Find the Right Balance Between Self-constraint and Flexibility: The Proposal for a New Medium-term Budget Framework in France

Posted by Guilhem Blondy

On March 16, 2011, the French government submitted a bill amending the Constitution to the parliament. The bill introduces three changes in fiscal governance regarding respectively: (i) the transmittal of stability programs to the national parliament before their submission to the European Commission, (ii) the monopoly of budget laws in tax matters, iii) the legal force of the medium-term budget frameworks (MTBFs).

The transmittal of the stability programs to the parliament before their submission to the European Commission was for a decade strongly demanded by French lawmakers. However, the impact of the new procedure on the substance of the programs might remain limited, as the legislature will still not be authorized to amend the stability programs.

Continue reading "Trying to Find the Right Balance Between Self-constraint and Flexibility: The Proposal for a New Medium-term Budget Framework in France" »

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