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July 2011

July 29, 2011

Creative Use of IT Systems in the Budget Office: Collaborative Budget Formulation Systems Show Promise

Posted by Sandeep Saxena

Automation of budget formulation processes has had limited success compared to the strides taken by many countries in computerization of budget execution and accounting functions. There have been fewer successful examples of computerized budget formulation. This anomaly may be partly attributed to the absence of standards in the budget formulation process. Unlike accounting systems that have rather well established processes and standards, the budget formulation process varies from country to country. The country-specific peculiarities mean that in order to succeed, a budget formulation system has to be much more flexible and adaptable to the local requirements.

 A recent study by the IMF’s regional technical assistance center in the Caribbean (CARTAC) explores the potential for use of a content management system (CMS) for operating the budget formulation process. The study, “A Collaborative Budget Formulation System: Concepts and Options,” John Moore, July 2011 (found here) concludes that information management products like Alfresco and MS SharePoint, among others, can offer rapid, flexible development of new business applications, including a budget formulation system, without having to depend on scarce ICT support resources.   

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July 27, 2011

No one ever said it was going to be easy…

Posted by Greg Horman

As economies recover, fitfully, from the global economic and financial crisis, policymakers are facing the challenge of how to accelerate growth. Growth alone will not be enough, however, to restore public finances to a sustainable path. Fiscal consolidation is necessary as well, but the challenges here are even more difficult.

Recent work by the IMF, including the Fiscal Monitor Update in June 2011, finds that the pace of adjustment in advanced countries is uneven. Consolidation is well underway in some places, but has been only modest so far in others. Some countries have yet to begin to address long-run imbalances. Indeed, continual fiscal deficits have characterized public finances in many advanced countries over the past decades. Deficits rose during downturns, but were not reduced sufficiently during years of economic expansion to prevent debt levels from climbing. More than ever, governments are being scrutinized by citizens, markets, and their sovereign peers over their commitment to bring down deficits and debt.

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July 25, 2011

IMF Job Offer: Headquarters-Based Consultant, Expenditure Policy Division, Fiscal Affairs Department

The International Monetary Fund (IMF) seeks to hire a headquarters-based consultant with expertise on public expenditure policy issues for the Expenditure Policy Division (EPD) of its Fiscal Affairs Department (FAD). The EPD undertakes policy development and research and carries out technical assistance to member countries on selected public expenditure policy issues and their macroeconomic implications. Topics covered by the division include public expenditure efficiency and productivity, including options for improvements in the short run; the distributional impact of economic policies; subsidies and subsidy reform; macro-fiscal sustainability of social security systems and pension reform; fiscal risk from public investment and public-private partnerships; expenditure policy issues related to fiscal decentralization; macro-fiscal aspects of health expenditure and long-term expenditure trends; reform of public wages and employment; and fiscal aspects of labor market policies. The selected candidate will also be expected to have a solid grounding in macroeconomics. The selected candidate is expected to participate in technical assistance missions on expenditure policy issues and other IMF mission work, and as well as in the division's policy development work, which includes the preparation of Executive Board papers and of various divisional research projects.

Qualifications

The candidate should have a Ph.D. or equivalent qualifications in Economics. The successful candidate is expected to have a solid background in macroeconomics and public finance, and specific research or operational experience in public expenditure policies, of a minimum of two years.  A proven track record of written publications, papers, reports, or other documents is required. The selected candidate should possess excellent written and oral communication skills in English; an ability to work in Spanish and/or French would be desirable. The selected candidate may be required to travel frequently.

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Chipping Away at Public Debt—What Failed and What Worked in Past Attempts at Fiscal Adjustment

Posted by Mauricio Villafuerte

“A plan is nothing, but planning is everything.”  U.S. President Dwight Eisenhower (1957)

Until recently, developments in public debt and deficits were seldom the stuff of high drama in the world’s advanced economies. However, things have changed dramatically in the aftermath of the “Great Recession” of 2008–09. Public debt and deficits have skyrocketed. Intense negotiations between parties with different views on how to restore public finances to sustainability make front-page news in several of the largest countries on a daily basis. Investors’ concerns about fiscal sustainability in some advanced economies are reflected in major increases in funding costs. Thus, the design and implementation of credible fiscal adjustment plans in advanced economies is critical now and will remain so for many years to come.

Although the fiscal challenges facing policymakers today are greater than in the past, there is much to be learned from previous experience with large fiscal adjustment plans, including both those that achieved their objectives and those that ended up wide of the mark. This motivates a new book from the IMF’s Fiscal Affairs Department (FAD): Chipping Away at Public Debt—Sources of Failure and Keys to Success in Fiscal Adjustment, edited by Paolo Mauro, with a foreword by FAD’s Director, Carlo Cottarelli; published by Wiley; available in hardback and e-book.

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July 22, 2011

Whole of Government Accounts, Batman!

By Richard Hughes

After 10 years of preparation, pilots and dry-run processes, last week the UK Treasury finally published the first set of Whole of Government Accounts (WGA) for financial year 2009-10. While a long-time in the making, the publication of Britain’s first ever consolidated government income statement and balance sheet represents a major milestone in UK fiscal reporting and public sector accounting practice in general.

From the Bottom to the Top of the Accounting Class

While the UK Office of National Statistics (ONS) has published consolidated fiscal statistics for the whole public sector for decades, the UK has lagged behind most countries in the world in the preparation of consolidated end-of-year accounts. Indeed, up until last week, the UK did not even produce consolidated, audited accounts for central government. The only audited government financial statements that existed were for individual government departments, local governments, and other public entities.

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Call for Papers: Symposium on Sub-sovereign Debt

The journal of Public Finance and Management calls for submissions for a special issue on the topic of sub-sovereign debt.

Sub-sovereign debt refers to liabilities owed by different levels of sub-national governments and guarantees for quasi-public agencies and corporations controlled by sub-national governments. The past decade has seen a significant growth of sub-national debt in many countries. For instance, in the United States, total debt outstanding on the municipal bond market has almost doubled in the past ten years. In China, where sub-national governments are prohibited from borrowing by its Budget Law, the transmuted debts through various government controlled investment corporations have mounted to approximately $2.19 trillion (about 37% of GDP) at the end of 2010.

The purpose of this symposium is to help enhance our understanding of sub-sovereign debt, debt management, and financial markets for sub-national borrowing.

We invite submissions on a range of topics within the aforementioned scope. We are especially interested in studies examining national, international and comparative levels, as well as studies that focus on solely one country or one sub-national government. Methodology and geographical area are open.

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July 20, 2011

Program or Performance: What Comes First?

Posted by Holger van Eden

Inspired by the success of the PEFA diagnostic tool, staff from the Fiscal Affairs Department (FAD) and their counterparts from World Bank and EC, have been having a creative debate/not seeing eye-to eye/duking it out (all depending on one’s perspective of course) on how PEFA indicator scores should impact PFM reform programs in countries. Is there a one on one relationship between PEFA score and design of reform programs? This interesting question is not the topic of this post, however. The answer on how best to integrate PEFA in reform design is still pending. Interesting work has been done recently by Jack Diamond, Daniel Tomassi, and Ron Quist on the issue, and there seems to be some consensus at least that PEFA scores can help identify which of the “basic” PFM capacities in a country need upgrading. But this still leaves questions on optimal strategy and sequencing unanswered.

PEFA in any case says very little about the sequencing of advanced budget reforms such as MTEF and performance budgeting, as the indicators deal mostly with the basic functionality of PFM systems. One of the interesting questions in sequencing of advanced reforms is how the introduction of performance oriented budgeting should be handled. In recent years, the standard answer by many in the profession has been that program budgeting, including a fully defined program classification, has to be introduced first. Once program budgeting has become the core of the budget management system, then gradually performance indicators, first output and then outcome indicators, can be attached to the program structure. At that point, voila, one has performance budgeting.  How effective the program is in achieving policy objectives can be measured by setting targets for outcomes, and the efficiency of programs can be assessed by measuring costs of outputs relative to, for example, some benchmark, or over time.

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July 15, 2011

Center of Excellence in Finance in Ljubljana, Slovenia Celebrates its 10th Anniversary

Posted by Brian Olden and Tina Zagar 1/

CEF 
The Center of Excellence in Finance (CEF), the regional training center for public sector officials in South East Europe this year celebrated its 10th anniversary with a series of events that took place in Ljubljana between June 20 and 24, 2011. The CEF was established in January 2001 by the Slovenian Government in close cooperation with ministries of finance of other countries in South East Europe. The initiative to establish the CEF was framed in the context of the Stability Pact for South East Europe. The CEF’s main objective is to assist in development of public financial management and central banking capacity through provision of training and other capacity development initiatives for countries in the region.

In addition to its annual Advisory and Supervisory Board meetings, representing donor partner institutions and member countries respectively, other events celebrating CEF’s 10th anniversary included an IMF seminar on Building Fiscal Institutions to Meet Post Crisis Challenges sponsored by the Japanese government and a Roundtable Discussion on the Economic Outlook and the Role of Public Finances in the South East Europe (SEE).2/ The celebrations culminated with the CEF’s 10th Anniversary Reception on June 23rd, followed by a Regional Policy Forum on ‘Growth Strategies after the Crisis’ the next day.

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July 13, 2011

The First 2011 Issue of the International Journal of Governmental Financial Management Is Now Available for Free Download

Posted by Andy Wynne, Editor

In the first paper of this issue, David Hall makes the case for public spending. He notes the long-term steady rise in public spending in all countries and demonstrates a powerful link between public spending and economic and social development. Public spending, he argues is essential for financing infrastructure, including roads, electricity, and water. It provides the health and education services necessary for modern economies more efficiently and effectively than the market ever can. By redistributing money to those on low incomes, public spending redresses the inequality of income created by the market. Three-quarters of the global effort to counter climate change will come from public finance. As a result, David Hall argues, globally, public spending is virtually certain to continue rising, as the role of the state continues to grow in developing countries.

In the second paper, Harika Masud reviews the findings from the Open Budget Survey, 2010. This is the third biennial international survey undertaken by the Open Budget Partnership. The survey confirms that the overall state of budget transparency around the world is poor. However, it also finds that budget transparency is on a positive trajectory. To support this development, the Open Budget Partnership is developing global norms on budget transparency and participation to establish the following three guarantees:

  • public access to information on budget processes, policies, and results;
  • opportunities to participate meaningfully in the budget process; and
  • domestic and international implementation mechanisms.

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July 11, 2011

Kazakhstan Hosts a Regional Workshop on Macro-Fiscal Forecasting and Medium-Term Budgeting

Posted by John Zohrab, FAD regional PFM advisor for Central Asia

The IMF’s Fiscal Affairs Department (FAD) and the Kazakhstan Ministry of Economic Development and Trade (MEDT) recently jointly hosted a regional workshop on macro-fiscal forecasting and medium-term budgeting issues. It was co-financed by the Government of Japan, through its technical assistance program Safeguarding Financial Resources in Central Asian Countries (JSA Program), and the MEDT.

The workshop took place in Almaty May 26-27, 2011. Representatives from Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Russia, Tajikistan, Turkmenistan and Uzbekistan participated in the workshop. They were mainly department and division chiefs from ministries of finance, ministries of economy, and economic research institutes under the ministries.

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July 08, 2011

IMF Seminar Held at the Center of Excellence in Finance in Ljubljana, Slovenia to Help Address Underlying Weaknesses in Fiscal Institutions in South East European Countries[1]

Posted by Brian Olden and Urska Zrinski[2]

Brian 
The global crisis has impacted on the economies of South Eastern Europe (SEE) to a greater or lesser degree. To address the problems caused by the crisis, countries have designed different strategies to facilitate an orderly exit in extremely volatile global economic conditions. Some countries initially introduced fiscal stimulus measures, where sufficient fiscal space was available while others, facing immediate threats to fiscal sustainability and solvency, needed to introduce a more immediate fiscal consolidation process.

Irrespective of the fiscal stance adopted at the start of the crisis, medium-term fiscal policy in SEE countries now needs to focus on ensuring long-term fiscal sustainability, bearing in mind the fragile nature of the economic recovery and the need to implement key structural reforms to mitigate against the effects of longer-term fiscal challenges. These include, inter alia, demographic changes and increased healthcare costs. The April 2011 IMF Fiscal Monitor also indicated that even those economies experiencing a rebound in revenues need to rebuild fiscal space rather than to increase spending in the near term and that they should make progress on structural reforms to enhance growth and equity and strengthen fiscal institutions and transparency.

The rationale behind strengthening fiscal institutions is very clear. Consolidation planning needs to be supported by clearly articulated fiscal objectives, comprehensive and binding medium-term budget frameworks, greater independent scrutiny, and a stronger focus on performance. Many of these elements are absent or, at best, underdeveloped in SEE countries (it should also be stated that these weaknesses are not confined to this region alone).

Continue reading "IMF Seminar Held at the Center of Excellence in Finance in Ljubljana, Slovenia to Help Address Underlying Weaknesses in Fiscal Institutions in South East European Countries[1]" »

July 06, 2011

Performance Monitoring and Evaluation System in India

Posted by Tej Prakash

Dr. Prajapati Trivedi, Secretary to the Government of India in the Cabinet Secretariat, gave a presentation, for FAD, on Performance Monitoring and Evaluation System (PMES) in India. Dr. Trivedi heads this initiative.

The Government of India has made major investments in social services in recent years. These include a rural employment guarantee scheme, a health for all program and a major initiative in literacy and education. At the same time, more schemes are being considered for implementation including a very ambitious ‘food security’ scheme. Most of these schemes have been designed with an input oriented approach, with weak performance management systems.

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July 04, 2011

METAC Workshop on Expenditures Control and Internal Audit: A Good Example of Donor Coordination

Posted by Pierre Messali

As part of its work program in the area of public financial management, METAC organized a regional workshop in Cairo, Egypt from May 30 to June 1. The objectives of the workshop were to review the systems of expenditure control and internal audit in the Middle East and North Africa (MENA) region and to come up with reasonable and practical recommendations for reform and modernization. The event was very successful and gathered a large number of officials from the METAC and Gulf Cooperation Council (GCC) countries (some 50 participants).

This was a collaborative effort of METAC[1], the Ministry of Finance of Egypt, and donors. These included the European Union (EU), jointly with the SIGMA-OECD program[2], the USAID, jointly with the Egypt Competitiveness Project (ECP) program[3], the World Bank[4]  (HQ and Cairo and Beirut offices), and ADETEF[5], affiliated to the Ministry of Finance of France. 

The workshop exemplified a high degree of collaboration between donors and it should set a precedent for future activities. Such cooperation: (i) avoids duplication of efforts and waste of resources; (ii) gives more consistent messages to recipient countries; and (iii) benefits   participants from exchanging experiences with donors and making full use of respective comparative advantages. This is also in line with the Paris Declaration on aid effectiveness which calls for donors to harmonize their actions and to work together to reduce duplication of work and promote joint training to share lessons learnt and build a community of practice.

Following the workshop, USAID issued a newsletter highlighting the success of the workshop (attached). Other collaborators, the EU and the WB and ADETEF have also expressed a great deal of satisfaction with the workshop and agreed on further cooperation.

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July 01, 2011

PEFA: Le Rapport de suivi 2010 et l’analyse des évaluations répétées

Affiché par Frans Ronsholt et Phil Sinnett

Pefa logo 
Le quatrième rapport de suivi du déploiement du Cadre PEFA a été préparé par le Secrétariat. Le Rapport de suivi 2010 analyse les évaluations répétées et notamment l’évolution de la performance des systèmes de GFP mesurée au moyen des indicateurs PEFA.

Le Rapport de suivi 2010 avait pour principal objectif de déterminer si le Cadre PEFA permet d'obtenir des mesures fiables de l'évolution de la performance depuis les évaluations précédentes ; une évaluation répétée examine les changements particuliers intervenus dans la performance d'un système en vérifiant ce qui a changé et dans quelle mesure. Le nombre d’évaluations répétées s’accroît nettement car beaucoup d’évaluations de référence ont été menées il y a trois à six ans. Entre le lancement du Cadre PEFA en juin 2005 et le bilan des évaluations effectué en octobre 2010, 45 évaluations répétées ont été menées dans 38 pays. 

Le Rapport de suivi 2010 cherche des réponses aux questions suivantes : i) quelle est la fréquence des évaluations répétées et pour quelles raisons sont-elles réalisées ? ii) le Cadre permet-il réellement de mesurer les changements intervenus et serait-il possible de mesurer ces changements par des méthodes plus valides et plus fiables ? et iii) quelles sont les évolutions de la performance de la GFP qui ressortent des évaluations répétées ?

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PEFA: Monitoring Report 2010 on Repeat Assessments

Posted by Frans Ronsholt and Phil Sinnett

Pefa logo 
The fourth monitoring report on the roll-out of the PEFA Framework has been prepared by the Secretariat. The Monitoring Report 2010 (MR 10) analyzed repeat assessments including changes in PFM systems performance measured by means of PEFA indicators.

The main purpose of the MR10 was to assess if the PEFA framework is able to provide reliable measurement of performance changes over time. One of the objectives of a repeat assessment (RA) is to measure performance since the previous assessment (PA); a RA looks at the specific changes in system performance by verifying what has changed and by how much. RAs are emerging in significant numbers as many baseline assessments took place 3-6 years ago. Between the launch of the PEFA Framework in June 2005 and a stocktake in October 2010, forty five RAs have been carried out in 38 countries.

The MR10 seek answers to the following questions: (i) what are the frequency of and drivers behind the repeat assessments, (ii) does the Framework effectively enable measuring changes and could changes be measured with better validity and reliability and (iii) what trends in PFM Performance do repeat assessments reveal?

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