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June 2013

June 24, 2013

Successful International PFM Workshop for IFMIS Coordinators at IDB

Posted by Carlos Pimenta[1]

This event, which took place in Washington, DC from May 15-17, discussed the PFM challenges faced in modernizing Integrated Financial Management Information Systems (IFMIS), as they relate to technology, public accounting, treasury and budget. The workshop was attended by about 120 participants, including IFMIS coordinators from 17 countries in Latin America and the Caribbean, private consulting firms, international experts and staff from IDB, IMF and World Bank.

The agenda of the event included topics such as: (1) How to measure progress in efficiency and quality of PFM reforms and systems? (2) The role of IFMIS in cost systems and result-based management, (3) Technological advances in IFMIS development, (4) Budget transparency and accountability, (5) Definitions, techniques and regulatory framework for interoperability and its impact on IFMIS context, (6) Change management and IFMIS implementation, and (7) Service management, maintenance and support for IFMIS.

All presentations, speakers and other information can be reached using the links in the Final Report attached below (in English and Spanish) or here

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June 21, 2013

The Rising Risks of Local Government Finances in Africa

Posted by Camille Karamaga

Recent studies by IMF staff indicate that sub-national governments are a significant source of fiscal risk in European countries, especially since the global financial crisis. One reason is that local governments are responsible for many similar functions and financial transactions as central governments. Depending on the depth of devolution, local governments may borrow, manage off-budget enterprises and engage in opaque transactions with the central government and other sectors. In many cases, unfortunately, their accounting and reporting systems are weaker than those of central government, as are the arrangements for external oversight.

In sub-Saharan Africa (SSA), as decentralization gains momentum, similar issues are arising. Although the overall size of the local government sector is still relatively small—on average around 5-10 percent of the national budget—in some countries the figures are much higher, and are growing from year to year. In Kenya, for example, the new Constitution provides for a minimum allocation of 15 percent of the most recently audited domestic revenues to county governments, and the allocation for the current financial year is around 26 percent. In Tanzania budgetary allocations to local government authorities in FY 2010/11 and FY 2011/12 were 21.2 percent and 25.3 percent of the national budget, respectively. Across the region, the trend in local government spending is on the rise as more governments decide, for largely political reasons, that decentralization promotes both better service delivery and enhanced local accountability.

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June 19, 2013

Post-Crisis PFM Reforms in Mali

Posted by Christian Josz[1]

This is the second article on the blog in a series about the views of IMF area department staff on PFM reforms in “their” country. In this article Fiscal Affairs Department technical assistance advisor, Benoit Taiclet, speaks with  IMF mission chief for Mali, Christian Josz, about the importance of PFM technical assistance in keeping the IMF program on track. 

Josz and Taiclet
What are the challenges of working in Mali at the present time?  How resilient has the country been in the face of the recent political and economic crisis?

Mali ranks among the poorest countries in the world, and has been under a succession of IMF programs for more than two decades. External funding has always played a significant role in the country’s development with grants reaching more than three percent of GDP. More recently, in 2011 the economy traversed a very difficult period when the country was hit by a drought and terrorist attacks. Following the 2012 military coup, fueled by military defeats, persistent corruption and failing institutions, donors suspended or dramatically reduced their support.  By the end of 2012, despite the fiscal austerity measures taken by the government, including the cutting of almost all capital spending, substantial arrears had accumulated, and the country’s debt rose markedly.

Faced with such concerns, the Fund seized the opportunity of last year’s slight recovery to re-settle in the country, with the reinstatement of our Resident Representative’s office in late 2012. We stepped up our involvement in early 2013 when the military situation was resolved with the fielding of an international coalition against rebel separatists and terrorists.

In the first quarter of 2013, the recommitment of IMF support through a rapid credit facility helped trigger the return of a number of donors whose pledges for funding reached US$ 4 billion in May. Now we hope the economy will rebound, as the authorities move to overcome the challenges ahead, and the production of gold and agricultural products increases. But political and security risks still cast a cloud over the nascent recovery.

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June 14, 2013

Time to Overhaul PFM in the UK?

Posted by Tom Josephs

Should the public sector aim to follow the approach to financial control used in the private sector?  In 2011 the UK government took a step in this direction by publishing the first Whole of Government Accounts (WGA) which consolidate the financial accounts of over 1,500 organizations across the public sector on a similar basis to commercial accounting.  Two recent papers[1] suggest that the UK government should build on this initiative—following the introduction of accrual-based accounting and budgeting ten years earlier—by developing better financial control structures which mirror those used in the private sector. The ideas put forward provide a useful contribution to this debate.

WGA is based on the system of accounts used internationally by the private sector, adapted where appropriate for the public sector, and uses a similar presentation to private sector accounts. It is the first time a consolidated set of accounts has been published for the UK public sector. Because it follows commercial accounting practices it should open up the public sector finances to wider external scrutiny by accounting professionals. While WGA’s contribution to increased transparency has been widely recognized it has yet to find a role in policy-making.  Partly this reflects the fact that it is a relatively new innovation. It is unfamiliar to policy-makers and there is no historical series and few international comparators against which to benchmark the current position.  There are significant differences between the key measures of the public sector deficit and net liability position found in WGA compared to the equivalent National Accounts measures produced by the UK’s national statistical agency which are currently used in fiscal policy-making.

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June 07, 2013

Treasury Community of Practice Debates Internal Control Issues in Kiev

Posted by Mark Silins

The Treasury Community of Practice (TCOP) of PEMPAL[1] conducted a highly participative three-day workshop entitled “Internal Control and the Role of a Modern Treasury” from April 24–26, 2013.  Over 60 officials, including treasury managers and specialists from 18 TCOP-member countries, as well as representatives of the Ministries of Finance of the Netherlands and Ireland, took part in the workshop held in Kiev, Ukraine. The workshop was also supported by experts from the World Bank, OECD, and the Slovenian Centre of Excellence in Finance.

The general objective of the Kiev event was to provide an opportunity for TCOP members to exchange experiences and take stock of the steps taken to date in implementing internal controls in each country and what, if any, steps remained. The workshop discussed both the role of a treasury in terms of managing internal controls within its own operations along with the broader role of the treasury as a key player within the overall public internal control framework in government. Prior to the workshop, participant countries responded to a 40-question survey to ascertain the status of their internal controls in relation to both of these two roles. Responses to the surveys proved extremely useful in designing an agenda relevant to participating countries.

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June 05, 2013

Japan Approves Continued Funding for IMF Technical Assistance to South Eastern Europe

Posted by Rocio Sarmiento[1]

JSA
Since 2009, the Fiscal Affairs Department (FAD) of the IMF has been providing considerable technical assistance (TA) to South East European (SEE) countries through a Regional Program that is sponsored by the Japanese Government, and is implemented in close cooperation with the Center for Excellence in Finance (CEF), based in Ljubljana, Slovenia. The overarching objective of the Program is to strengthen fiscal management capacity to ensure that all SEE countries—EU member and non-EU member countries alike—have the necessary capacity to design and implement measures to support fiscal consolidation and long-term fiscal sustainability.

The fiscal consolidation efforts of SEE governments have been supported by strengthening fiscal controls, improving the allocation of budgetary resources and more cost-effective service delivery, while efforts to protect revenue through more efficient revenue administration have focused on facilitating reform efforts that over time should bring the region’s tax administrations on par with modern European counterparts, and achieve consistency in the application of tax administration practices throughout the region.

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June 03, 2013

Kenya’s Bold Course in PFM Reform

Posted by Ragnar Gudmundsson[1]

Note: This is the first in a new series of articles on the blog about PFM reforms in selected countries. Each article will be written by the IMF’s mission chief or resident representative in the country concerned, thus casting a fresh light on the reforms and their relationship to the Fund’s surveillance work.

Gudmundsson
Kenya is going through a huge set of political reforms, including a new Constitution.  What issues in public finance and PFM has this created? 

Kenya’s ambitious new Constitution was promulgated in August 2010, and one of its eighteen chapters is devoted to Public Finance. Key provisions in this chapter relate to devolution and the process of fiscal decentralization to the 47 newly created counties. Devolution was considered by the drafters of the Constitution as a way to promote political stability by ensuring adequate representation and the participation of all Kenyans in the running of the country. In this context, fiscal decentralization was perceived as a mechanism to enhance the delivery of social services on the ground and to promote enhanced accountability from State Officers. Moreover, a central objective of the Constitution is to promote good governance in PFM through the establishment of a sound institutional and regulatory environment at both national and county level.

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