IMF

December 16, 2013

ICGFM Winter Conference 2013

Posted by Carla Sateriale

Icgfm
The IMF’s Fiscal Affairs Department (FAD) hosted this year’s Winter Conference of the International Consortium on Governmental Financial Management (ICGFM) from December 9-11, 2013. Despite the snowfall in Washington, the attendees’ enthusiasm for PFM innovations, which was the theme of the conference, was not dampened. Dozens of officials and PFM professionals from various development organizations, governments and NGOs convened for discussions on a variety of topics related to PFM, from accrual accounting to climate change.

IMF Division Chief Richard Hughes’s opening remarks highlighted worldwide innovations in financial management, including the trend of independent fiscal councils being established, the increasing number of sovereign wealth funds around the world, and the growing adoption of accrual accounting. Major events during the conference included a presentation by Harvard’s Matt Andrews on the role of governance in development, Xavier Debrun’s exposition of FAD research of the efficacy of fiscal councils, and a discussion panel on PFM innovations headed by Richard Hughes and the World Bank’s William Dorotinsky.

The next ICGFM event will be its annual training course, from May 18-23, 2014 in Miami, Florida. The theme of it will be “Good Public Financial Management Practices in a Period of Global Adjustment.”

Download ICGFM Winter Conference 2013 Program

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. 

December 09, 2013

Workshop on Fiscal Reporting and Transparency in West Africa

Posted by Yasemin Hurcan and Florence Kuteesa

Workshop
A workshop on strengthening fiscal reporting and transparency within Anglophone West Africa took place on September 23-25 in Accra, Ghana.[1] The 30 participants in the workshop were exposed to the latest developments and international standards of fiscal reporting and transparency including the IMF’s proposed new Fiscal Transparency Assessment (FTA) Code, which will be launched in the spring of 2014. They also examined the practices and gaps in the region and suggested measures to enhance the attainment of basic practices as articulated in the FTA Code.

The Deputy Minister for Finance of Ghana, Hon. Cassiel Ato Forson, underscored the critical role of fiscal reporting and transparency in sustaining economic growth within the region and strengthening fiscal institutions. He welcomed the IMF’s strong leadership in driving the reform agenda. In addition, the IMF resident representative, Mr. Samir Jahjah, and Dr. Nelson Magbagbeola, from the Economic Community of West African States (ECOWAS) Secretariat in Abuja, Nigeria, emphasized the need to strengthen fiscal reporting practices as a prerequisite for the successful harmonization of public financial management within the region.

Continue reading "Workshop on Fiscal Reporting and Transparency in West Africa" »

December 05, 2013

The Late-Twentieth-Century Revolution in Fiscal Transparency

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Posted by Tim Irwin 

The nineteenth century saw a revolution in the publication of fiscal information and other government data. As Ian Hacking has observed, “If there is a contrast in point of official statistics between the eighteenth and nineteenth centuries, it is that the former feared to reveal, while the latter loved to publish” (p. 20). Yet some governments today make their nineteenth-century counterparts seem like shrinking violets—the new openness being symbolized by the remodeled German parliament shown above, whose glass cupola was designed to show that parliament was “transparent, its activities open to view” (see Alasdair Roberts, Blacked Out, p. xii).

The earlier revolution was discussed in two previous posts on this blog (here and here). This post investigates the changes of the late twentieth century.

The early years of this revolution are nicely illustrated in the episode “Open Government” of the British TV series Yes Minister,[1] which screened in 1980 when the UK government published its budget and accounts, but was not nearly as open as it is now. A new government has just been elected and the incoming Minister of Administrative Affairs meets the Permanent Secretary of his department. It transpires that they have met before when the Minister, in opposition, gave the PS “a grilling over the Estimates in the Public Accounts Committee.”

Continue reading "The Late-Twentieth-Century Revolution in Fiscal Transparency" »

December 02, 2013

Is There a “New Consensus” on PFM Reform?

Posted by Richard Allen

Odi logo
The Overseas Development Institute’s annual CAPE Conference (the eighth in the series) on Budgeting in the Real World took place in London from November 13–14, 2013. The Conference attracted an impressive group of 110 national and international public servants, consultants and academics who work on budget institutions. For many practitioners, CAPE is the definitive PFM event of the year. The keynote speech, which was featured in a recent blog post, was given by Antoinette Sayeh, Director of the IMF’s Africa Department. Other notable presentations were made by Matt Andrews of the Harvard Kennedy School, and Allen Schick of the Brookings Institution and University of Maryland.

The Conference included sessions on the form and functionality of budget systems, what constitutes a capable ministry of finance, how reform can deliver change in the budget process, and how improved budget systems impact on development outcomes. Much of this is familiar ground and there was a sense of déjà vu in some of the presentations. One participant asked rhetorically why there were no feedback loops in our profession, why the same messages kept on being repeated from one year to the next, and why PFM practitioners appeared to learn so little and did not change their attitudes or behavior. Nevertheless, while the agenda had a familiar look on the surface, there were encouraging signs that an important if uncomfortable truth about the nature of budget reform is beginning to sink in to the collective mind of the PFM community. Indeed, the Conference may prove to be a watershed in the development of thinking on PFM reform, though much work remains to be done to flesh out the details of the new approach—an emerging “New PFM Consensus”—and put it into practice.

Continue reading "Is There a “New Consensus” on PFM Reform?" »

November 26, 2013

New Blood for FAD

Torben Hansen (below left), formerly the Deputy Permanent Secretary responsible for the budget at the Ministry of Finance in Denmark, has recently joined the Fiscal Affairs Department of the IMF as a Deputy Division Chief responsible for public financial management. Torben was interviewed by the PFM Blog about his career and what he expects to bring to the new position.

  Torben 2  Richard 2

Q: Why did you decide to join FAD? You have had a varied career working in the Danish finance ministry and elsewhere. What skills, experience and ideas do you expect to bring to the new job?

After working more than 20 years in the Danish finance ministry, the decision to join FAD is a unique opportunity to move my career forward in an international setting. I felt the time was right to seek new challenges, and the new position is a perfect match in terms of both my competencies and professional interests. What I can bring to the new job is first and foremost the practical experience of working with politicians and senior officials in a finance ministry and being at the core of the decision-making processes of government. Setting up the right procedures, institutions and incentives are crucial elements in maintaining a well functioning PFM system. I also hope to bring some knowledge and understanding of change management processes, and not least how difficult these are. At the end of the day, change is about people. And governmental organizations are world champions in avoiding, even opposing, change. Finance ministries have to learn how to work around these obstacles.

Continue reading "New Blood for FAD" »

November 21, 2013

Budgeting in the Real World - What Do We Know? What Should We Do?

This is the keynote speech given last week, November 13th, by Antoinette Sayeh, Director of the IMF’s African Department at the UK’s Overseas Development Institute’s annual CAPE Conference in London on why PFM matters, why reforms are difficult, and what we know to make them successful…..

Sayeh

I am delighted to have the opportunity to deliver this keynote address and would like to thank Messrs. Ed Hedger, Kevin Watkins, and Philip Krause for inviting me to this important conference and for that generous introduction.

Let me start by saying that from the IMF’s perspective, good governance is important for countries at all stages of development. Transparent government accounts and effective public resource management are preconditions for sustained economic growth and prosperity. Indeed, budget formulation, implementation, and oversight lie at the core of good economic governance. Strong budget institutions are essential for countries to achieve sound fiscal policies and effective expenditure programs. Budgets can only be spent once. Getting the priorities right all the way from formulation to execution, and being efficient at it, is all the more important. Transparency and fairness are most important in ensuring that expenditures are aligned with broadly agreed priorities, and in securing society’s buy-in. While most can agree to the underlying principles, the hard part is to have systems and capacity in place that actually ensure that they are respected all along the process chain. As so often, the devil is in the detail. 

Continue reading "Budgeting in the Real World - What Do We Know? What Should We Do?" »

November 20, 2013

Crowd Sourcing Request: A List of All International Comparative PFM Data!

Posted by David Gentry

Database
Public Financial Management (PFM) data sources are rapidly increasing in number and quality. In the last dozen years several new major data sets have been established, such as the PEFA (Public Expenditure and Financial Accountability) Secretariat’s listing of country assessments, the Open Budget Initiative’s Open Budget Survey results, and the IMF’s Fiscal Rules Dataset. Data sets increasingly are well defined, standardized, updated regularly, and often aligned with key analytical issues. They cover at least a large subset of countries worldwide.

An initial list of PFM data sources is shown below. Readers of the PFM Blog are invited to suggest additions, keeping in mind the criteria of useful data described in the opening paragraph above. An updated list, based on reader submissions, will appear in the Blog in the near future.  

Continue reading "Crowd Sourcing Request: A List of All International Comparative PFM Data!" »

November 13, 2013

How Long Does it Take to Achieve Fiscal Transparency?

Posted by Tim Irwin


In many developing and emerging economies today there are demands for more fiscal transparency, to stop the misuse of public funds. How long might it take for these demands to translate into the kind of transparency achieved in countries like France, Sweden, and the United Kingdom? (The Open Budget Survey has information on fiscal transparency in these three countries and many others.) This new working paper on the history of fiscal transparency in Western Europe (see earlier blog) doesn’t aim to answer questions about developing and emerging economies, but it may provoke some thoughts on the subject.

The evidence it presents can be read in two different ways. On the one hand, there were debates about fiscal transparency in Europe two hundred years ago, which suggests that the transition from secrecy to transparency could be a long one. To illustrate, it’s perhaps worth quoting three advocates of transparency who, for reasons of space, didn’t get discussed in the working paper.

Continue reading "How Long Does it Take to Achieve Fiscal Transparency?" »

November 11, 2013

Online PFM Conference: ODI Event Being Streamed Live this Week

Posted by Ryan Flynn

ODI-CAPE
The Overseas Development Institute (ODI) is one of the UK's leading independent think tanks on international development and humanitarian issues. It is organizing a major conference this week: the 2013 CAPE Conference: budgeting in the real world. CAPE stands for Centre for Aid and Public Expenditure, which is hosted by ODI. It aims to shape and drive the agenda for international development assistance, as well as efficient and effective public spending for development at the country level.

The conference will focus on PFM and budgeting in developing countries. The whole two-days (13 & 14 November) will be streamed live online, and questions fielded through social media (#CAPE2013) will be answered by speakers and panellist. You can register to attend here.

Continue reading "Online PFM Conference: ODI Event Being Streamed Live this Week " »

November 08, 2013

Update on Sukuk Financing

Posted by Yasemin Hurcan

In a speech in the World Islamic Economic Forum on October 29, 2013, UK Prime Minister David Cameron announced that the UK would like to become the first country outside of the Islamic world to issue an Islamic bond. He stated that the Treasury was working on the practicalities of issuing a bond-like sukuk instrument worth around £200 million, which it is hoped to launch as early as next year.

In addition, the London Stock Exchange is creating a new way of identifying Islamic finance opportunities by launching a world-leading Islamic Market Index. As was discussed in the blog posted on May 30, 2013, this development suggests that the use of sukuk instruments for sovereign borrowing is likely to increase in coming years. It supports the case for developing international norms on the accounting and reporting of sukuk-related transactions in PFM.

Continue reading "Update on Sukuk Financing" »

November 06, 2013

Book Review: The International Handbook of Public Financial Management[1]

Posted by Philip Joyce and Juan Pablo Martinez Guzman[2]

PFM handbook
Over the last two decades, public financial management (PFM) has been at the core of many government reforms around the world.  As a subject with many moving parts, the field has become distinctively broad and diverse, with a great array of topics that are strongly linked with each other. For that reason, creating a comprehensive book that covers most, if not all, of the PFM related topics, is a daunting (some might say impossible) task. Richard Allen, Richard Hemming and Barry Potter, three former staff members of the Fiscal Affairs Department of the IMF, however, have managed to accomplish such an objective with the publication of the new International Handbook of Public Financial Management.  The book’s length (more than 900 pages) is itself a testament to the breadth of the field.

In addition to the broad range of topics that make this book almost inarguably the most comprehensive PFM publication to date, it is important to describe two overarching characteristics that make it unique. First, it provides an extraordinary combination of academic knowledge and empirical evidence. Thus, every topic covered is analyzed both through the lens of how ideal PFM systems should be designed and how they are to be implemented given specific country scenarios. Each chapter of the book combines evidence from developed and developing countries; emphasizing institutional arrangements, political economy constraints, and the interrelations between systems. This makes this book an excellent guide for policymakers, practitioners, and academics. Second, this book benefits from the views of the different authors, many of whom are the leading experts on the topics covered by the many chapters. Readers will benefit greatly not just from learning about the topics, but by learning about them from these world-reckoned experts.

Continue reading "Book Review: The International Handbook of Public Financial Management[1]" »

October 29, 2013

History of Fiscal Transparency and Fiscal Secrecy

Posted by Tim Irwin

Working paper logo
What encourages governments to publish information about their finances? A new IMF working paper, “Revealing the Mysteries of State: The Origins of Fiscal Transparency in Western Europe” aims to shed light on this question by examining the history of European fiscal transparency. It was inspired by the Fund’s work on promoting fiscal transparency (see this policy paper and the new draft Fiscal Transparency Code).

The working paper looks back as far as Athens in the fifth-century BC and notes a few of the developments of the last two decades, but it concentrates on the fiscal secrecy of the age of absolutism, in which governments used spies to uncover the accounts of other states, and on the efforts of eighteenth- and nineteenth-century reformers to get the accounts published.

One factor encouraging transparency identified by the paper is the strength of governments’ need to raise money from skeptical lenders and taxpayers. Its influence can be seen at work on many occasions, including medieval Spain and seventeenth-century England, but it was particularly evident during the French Revolution.

Continue reading "History of Fiscal Transparency and Fiscal Secrecy" »

October 15, 2013

A PFM View of the New French “Loi Organique”

Posted by Benoit Chevauchez[1]

France is now equipped with a fiscal rule. The organic budget law adopted last December[2] was the French government’s response to the obligations set out in the European Treaty on Stability, Coordination and Governance (TSCG) signed in March 2012. The Treaty resulted from a process initiated in December 2011 by the European Council, in the wake of the euro crisis. The basic idea of the Treaty is that “Euro zone countries” should adopt national fiscal rules in order to integrate in their own legislation the Maastricht principles of fiscal discipline that are set out in the European treaties.

Before the new treaty was ratified, the French national budget law did not address issues of fiscal sustainability. The French Constitution of 1958 was silent in this regard, even if an amendment adopted in 2008 had introduced the concept of “budget balance over the medium term”, but only as a theoretical principle without any operational impact. Similarly, the 2001 LOLF (loi organique relative aux lois de finances), and its predecessor the 1959 Organic Ordinance, wholly ignored sustainability issues.

In practice, France has had a rather modest record in terms of fiscal sustainability: its EU stability programs have seldom been respected, its macroeconomic assumptions have been frequently optimistic, and its debt level has steadily increased up to 90 percent of GDP. Thus, for France, the adoption of the new organic law (OL) is an important initiative, that might also mark a turning point in its fiscal tradition.

Continue reading "A PFM View of the New French “Loi Organique”" »

October 10, 2013

Annual Meetings Kicks Off with Talks on Fiscal Transparency

Posted by Rachel F. Wang

Many of the key players committed to promoting greater fiscal transparency met on Tuesday for one of the first events of the 2013 IMF-World Bank Annual Meetings.

The Joint IMF-World Bank Seminar entitled “Strengthening Fiscal Transparency and Government Accounting” brought together representatives from international organizations, national governments, think tanks, professional organizations, and civil society to discuss how to promote greater fiscal openness and improve the information base for fiscal decision-making.

The event was kicked off with a welcome address from Bertrand Badré, Managing Director and World Bank Group Chief Financial Officer, and included two panel discussions on

  • Strengthening fiscal transparency standards and practices chaired by Richard Hughes, Division Chief in the IMF’s Fiscal Affairs Department), and
  • Improving government accounting chaired by Chuck McDonough, Vice President and Controller at the World Bank). 

Panelists included Moritz Kramer from Standard & Poor’s, Phil Sinnett from the PEFA Secretariat, Vivek Ramkumar from the International Budget Partnership, Jo Marie Griesgraber from New Rules for Global Finance Coalition, Devantri Kaur Santa Sigh from the Malaysian Ministry of Finance, Gerhard Steger from the Austrian Ministry of Finance, Fayez Choudhury from IFAC, and Ron Salole from IPSAS board.

Discussions ranged over a variety of areas, including the revision of the IMF’s fiscal transparency code and new fiscal transparency assessment; how fiscal transparency feeds into credit ratings and vice versa; the harmonization of different transparency-related norms and standards; the role that civil society has played in promoting greater fiscal openness by governments; and the opportunities and challenges in moving from cash to accrual accounting.

The keynote address, given by Gerd Schwartz, Deputy Director of the IMF Fiscal Affairs Department set the tone for the morning’s discussion.  The text of his speech is provided below:

I would like to use this opportunity to talk about the importance of fiscal transparency for fiscal sustainability and discuss the work underway to improve both standards and practices.  More specifically, there are four issues I would like to cover:

  • First, I would like to highlight the progress made in promoting greater fiscal transparency over the past decade, thanks to collective efforts of many of the organizations represented in this room.
  • Second, I would like to discuss some of the lessons of the economic crisis regarding the adequacy of existing fiscal transparency standards and practices.
  • Third,  I would like to provide you with an update of the IMF’s ongoing work on strengthening its evaluation tools in the fiscal transparency area; and
  • Finally, I would like to review the broader agenda on fiscal transparency and government financial disclosure.

Continue reading "Annual Meetings Kicks Off with Talks on Fiscal Transparency" »

September 23, 2013

Training the Trainers Program Builds Capacity in Bangladesh

Posted by Chita Marzan

With the objective of building capacity in macro-fiscal analysis and cash management in Bangladesh, a training program was conducted by the IMF Fiscal Affairs Department (FAD) and the Bangladesh Ministry of Finance from July 27 to August 5, 2013 in Dhaka. Two training modules were delivered. The module on Macro-fiscal Analysis included topics such as budget and revenue forecasting, fiscal balance and stabilization, debt dynamics, and the use of a statistical software called Econometric Views (E-Views). The Cash Management module included concepts of cash forecasting and the treasury single account, and their application to debt management and budget management.

The course was the second to take place in the country since 2012. A year ago, a first batch of Bangladesh officials mainly from the Ministry of Finance were trained jointly by FAD and the Singapore Training Institute (STI) on similar topics. Following the success of this initiative, the authorities expressed enthusiasm to train more staff in the Ministry, the Bangladesh Central Bank and the Planning Commission.

Continue reading "Training the Trainers Program Builds Capacity in Bangladesh" »

September 17, 2013

FOTEGAL: Sharing Experiences of Treasury Management in Latin America

Posted by Israel Fainboim

Latin American budget officials are members of an association (Asociacion Internacional de Presupuesto Público—ASIP) which delivers an annual international seminar and regional seminars and publishes its own journal. Recently, the countries of the region together with two multilateral donors (the Inter American Development Bank and the World Bank) joined forces with the Fiscal Affairs Department (FAD) of the IMF to set up a similar organization for state treasurers.

That is how the Government Treasury Forum of Latin American (FOTEGAL) was born in 2010. The organization was formalized in a document named the Lima Declaration and through the approval of its own statutes. A total of 16 countries are currently members of FOTEGAL (Argentina, Bolivia, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay) and an invitation has been extended to Brazil to join (this country has participated in several of the annual seminars). The Government of Japan (JSA) has also been a key financial supporter of the activities of FOTEGAL. In addition, the IDB is supporting the development of FOTEGAL’s website. A link to this network and many of the documents and presentations made for FOTEGAL already exists within the website of one of the government treasuries, and a separate web page is under construction.

Continue reading "FOTEGAL: Sharing Experiences of Treasury Management in Latin America" »

September 06, 2013

PFM Innovations: ICGFM Issues Call for Speakers at its Upcoming Conferences

Posted by David Nummy, ICGFM Vice-President for Programs

ICGFM
One outcome of the global financial crisis has been recognition that Public Financial Management is critical to management of the fallout as well as to prevent future crises.   With greater attention, new approaches to the core elements of the PFM cycle have been employed and interest has grown in the experience of countries around the world in meeting the challenges of effectively managing resources in a manner that is transparent.   ICGFM will explore the innovations in PFM that have emerged as well as practices that are recognized as effective.

The International Consortium on Governmental Financial Management (ICGFM) has issued a call for speakers, panels, and presentations that address good practices in public financial management. As this topic will cover both of its upcoming conferences, proposals are solicited for both the winter conference in Washington, DC from December 9-11, 2013, and the 28th Annual International Training Conference in Miami in May 2014.  The Winter Conference will be held at the International Monetary Fund and is conducted in partnership with the Fiscal Affairs Department (FAD).

Continue reading "PFM Innovations: ICGFM Issues Call for Speakers at its Upcoming Conferences" »

August 21, 2013

Guinea – A Decade of Public Financial Management Reforms

Posted By Abdoul Wane[1]

In this latest in the series of blog posts by IMF area department country teams, IMF Resident Representative Abdul Wane reviews the mixed progress of PFM reform in Guinea.

Against the backdrop of economic fragility and fiscal challenges, Guinea’s medium-term programs supported by Fund arrangements over the last decade aimed to reduce financial imbalances. The growth objectives were predicated on greater fiscal discipline and an improved quality of public spending. Fiscal consolidation was to be supported by tax policy and tax administration reforms and a gradual shift in budget allocations toward priority spending, including investment. To address these challenges structural measures in Fund programs – as well as program conditionality - focused largely on PFM reforms (Figure 1 below). The 2001 PRGF request included three structural performance criteria (PC) of which two were on PFM reforms. Likewise, the 2007 PRGF request included six PCs on PFM out of a total of nine PCs.

However, since Guinea never implemented fully a program supported by the IMF, several measures had to be reprogrammed in successor programs. The sluggish implementation of reforms partly reflects Guinea’s political and institutional fragility. Vested interests stalled the reform agendas, in the absence of checks and balances. Important structural measures could not be implemented fully or were reversed because of insufficient political support, and control systems were bypassed under the watch of the political leadership. As a result, overall performance in PFM reforms has been feeble as periods of regression followed episodes of progress.

Continue reading "Guinea – A Decade of Public Financial Management Reforms" »

August 15, 2013

The Long and Winding……..Fight Against Corruption

Posted by Chris Iles

Corruption is a global scourge.  In the public sector it can be defined as the diversion of public resources or the misuse of public authority for personal gain. It threatens political, social and economic stability, and undermines economic growth and development by distorting the delivery of public goods and services. Transparency International calls it one of the major threats facing society and has worked hard to focus international attention on reducing corruption in the public sphere. Preventing corruption has become a key policy priority for donors, especially in fragile or conflict-affected countries.

A recent paper[1] by Norway’s U4 Anti-corruption Resource Centre reviews how much we know about the effectiveness of different anti-corruption interventions.  The answer seems to be “not much”.  The paper reviews the fairly scant literature on the impact on corruption of various reforms such as direct budgetary support, PFM technical assistance, using donor systems and applying international norms. Evidence presented by the reviewed literature suggests that most anti-corruption measures are of disputable benefit.

The notable outlier seems to be PFM reform; there is, according to the study, (relatively) strong evidence that PFM reforms have a substantial anti-corruption impact. This is gratifying for PFM practitioners but also somewhat surprising since reducing corruption is not the explicit goal of PFM reform.

Continue reading "The Long and Winding……..Fight Against Corruption" »

August 03, 2013

PPPs on the Balance Sheet, Please!

Posted by Tim Irwin

Public-private partnerships create a practical problem for public financial management, because their fiscal costs are deferred. Instead of paying for a project during its construction, the government starts to pay only when construction is complete, which may be four or five years after any deal is signed. That means that the main tool of public financial management—budget scrutiny—can’t be used to ensure that PPPs are affordable and a better use of public money than the alternatives. For PPPs with long construction periods, even the analysis of medium-term spending plans doesn’t help.

So what can be done to ensure that the budgetary implications of PPPs are properly considered?

The World Bank Group has just published an Operational Note on managing fiscal commitments from PPPs that helps answer this question. It looks at how these fiscal commitments can be assessed and monitored, whether they are commitments to pay for the availability of a service or to protect a PPP company from certain risks. The Note gives examples of the tasks that can be carried out by different government agencies, such as budget departments, debt-management offices, and PPP units. And it considers the kinds of rules that can be put in legislation to help ensure that the right assessment and monitoring occurs.

However, the Operational Note does not take a position on whether or not PPPs should be put on the government’s balance sheet. Budgeting and Reporting for Public-Private Partnerships by Katja Funke, Isabel Rial, and me argues that they typically should be.

Continue reading "PPPs on the Balance Sheet, Please!" »

July 08, 2013

Keeping Reform in the DRC on Track

Posted by Oscar Melhado Orellana

In this third article on the blog in which IMF area department staff express their views on PFM reforms in “their” country, Fiscal Affairs Department technical assistance advisor, Jean Pierre Nguenang, speaks with IMF Resident Representative for the Democratic Republic of Congo (DRC), Oscar Melhado Orellana, about the importance of PFM technical assistance in keeping the IMF program on track.

Photo
What contribution are reforms of PFM, revenue administration and tax policy expected to make to improved economic and fiscal performance in the DRC?

The DRC is one of the poorest countries in the world in terms of nominal GDP, despite being considered one of the richest countries in terms of natural resources. It has more than 30 percent of the world’s diamond reserves and 70 percent of the world’s coltan. The DRC is also one of the lowest-ranked countries in the international Corruption Perception Index. The government is still struggling to bring order to the eastern part of the country where recurrent attacks on citizens are perpetrated by armed groups opposed to the regime.

Continue reading "Keeping Reform in the DRC on Track" »

July 03, 2013

A New PFM Reform Strategy for Cyprus

Posted by George Panteli[1]

The government of Cyprus recently launched a radical reform plan for modernizing the country’s public financial management (PFM) system. The reforms are crucial to the implementation of the economic and financial recovery program on which we are now engaged with the help of the European Union, the European Central Bank and the International Monetary Fund. It will enable Cyprus to bring its budget process into line with best practice in the EU region, and enforce the fiscal rules and financial discipline that are necessary to comply with our Treaty obligations. At the same time, it will create an opportunity for line ministries to enjoy a new-found flexibility in managing their staff and other resources and to focus efforts on improving the quality of education, health and other public services that in many cases lag behind out counterparts in Europe. The strategy encompasses both traditional aspects of the budget system and emerging topics such as project evaluation processes, the management of fiscal risks including public-private partnerships (PPPs) and the future development of a sovereign wealth fund.  

The reform plan is challenging and a realistic timeline is required since the plan will take several years to implement. What are the plan’s main components?  

Continue reading "A New PFM Reform Strategy for Cyprus" »

July 01, 2013

IMF Strengthens Fiscal Transparency Code

Previously published on IMF Survey online

Following an initial consultation early in 2013, the IMF has released a draft of its revised Fiscal Transparency Code for further public consultation. The revised Code will be the basis for a renewed push for greater fiscal transparency.

Information on public finances is sometimes reported by governments in ways that do not provide a full and reliable picture of their financial position, outlook, and risks. Greater fiscal transparency helps to ensure governments make informed economic decisions and allows legislatures and citizens to hold governments accountable for their use of public resources.

The revised Code aims to strengthen fiscal reporting standards to reflect the lessons of the recent economic crisis, identify and eliminate gaps in published fiscal information, and promote greater fiscal transparency in countries at all income levels. The changes are designed to ensure that policymakers, legislators, citizens, and markets have a more complete picture of the state of public finances.

Continue reading "IMF Strengthens Fiscal Transparency Code" »

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

Continue reading "Successful International PFM Workshop for IFMIS Coordinators at IDB" »

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.

Continue reading "The Rising Risks of Local Government Finances in Africa" »

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.

Continue reading "Post-Crisis PFM Reforms in Mali" »

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.

Continue reading "Japan Approves Continued Funding for IMF Technical Assistance to South Eastern Europe" »

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.

Continue reading "Kenya’s Bold Course in PFM Reform" »

May 30, 2013

Who Never Talks about Money and Religion...?

Posted by Yasemin Hurcan and Gregory Horman

Sukuk[1] is an Arabic word that is used to define borrowing instruments issued in line with Islamic norms, the sharia. Sukuk are not limited to private sector borrowers. Increasingly, these instruments are being issued by governments to finance the public sector. Although there is already a sizeable body of literature on the capital market aspects of sovereign sukuk issuance, the public financial management (PFM) dimension of sukuk has not been widely discussed. The implications for areas such as budgeting, reporting, and accounting are not insignificant.

Malaysia is recognized as one of the pioneers of sovereign sukuk issuance, and these instruments make up a significant share of the total public sector debt. Qatar and Bahrain are also notable issuers of sukuk, and in recent years Pakistan has added sukuk to its borrowing mix. In October 2012, Turkey, too, joined the group of countries issuing sovereign sukuk. Although sovereign sukuk issuances have so far been made only by countries where sharia is the governing law, or the population is predominantly Muslim, other countries have investigated sukuk as an opportunity to broaden their sources of financing. In 2008, for example, the UK Debt Management Office consulted with the market to find out the possibility of issuing sukuk as an additional borrowing instrument. These developments suggest that the use of sukuk instruments for sovereign borrowing is likely to increase in the coming years.  

Continue reading "Who Never Talks about Money and Religion...?" »

May 28, 2013

PFM Law Reforms: Balancing Legislative and Executive Powers

Posted by Kubai Khasiani and Florence Kuteesa

A growing number of Parliaments in Commonwealth African countries are casting off their Westminster inheritance and demanding a greater role of parliaments in budget decision-making. The last decade has seen restive backbenchers in some of  these countries bring forward Private Member’s Bills which look to enhancing the legislature’s powers over the public purse at the expense of the executive. This approach has sometimes been fiercely contested or not fully supported, and the product of this struggle between the branches of government leaves many unresolved issues and, in some cases, an outcome that is fiscally challenging to the country.

For almost half a century after achieving their independence, former British colonies in Africa implemented a budget preparation system that enshrined a weak legislature and a strong executive in the decision-making process. Ian Lienert examined the British influence on budget systems in Tanzania, as an example, and noted that the  parliament was engaged only very late in the budget preparation process, had limited powers to alter the government budget after it was presented, and was often not consulted about changes made by the government during the budget execution phase. As a result, parliaments seldom had a significant impact on the size or distribution of government revenue or expenditure.

Continue reading "PFM Law Reforms: Balancing Legislative and Executive Powers" »

May 22, 2013

Can an “Independent” Public Body be Truly Independent?

Posted by Richard Allen

Independent central banks in many countries are under threat from governments that want to bring them under a tighter rein. Independent fiscal councils have been abolished by governments that see their independence as an unacceptable threat. Independent auditors are having their autonomy and remits curtailed by governments that are concerned about opening themselves up to scrutiny. Does this signal that governments, while paying lip service to the ideas of transparency and accountability, only accept these ideas on their own terms, and suitably diluted for public consumption? What are the failures of the executive branch—inadequate public accountability, for example—that independent public entities are deemed to fill? How well have the entities concerned filled these perceived gaps?

These are legitimate and complex questions but are the subject of several research studies, including an ongoing study of fiscal councils by FAD. In this article we focus on a narrower question: what do we mean when we say that a public sector entity is “independent” and how can we measure its degree of independence? It seems fair to say that, for entities operating in the public sector such as central banks, audit institutions, accounting standards boards, and fiscal councils, there can be no absolute standard or guarantee of independence. “Independence” is a relative term, and one that depends for its legitimacy on the quality of political institutions and public perceptions, as well as legal and financial considerations. It is possible nevertheless to set out the conditions that make it more likely that an institution such as a fiscal council or an accounting standards board is able to operate independently of the government.

Continue reading "Can an “Independent” Public Body be Truly Independent?" »

May 15, 2013

FMIS Choice: the Dangers of In-House Development in Low-Capacity Countries

Posted by Lewis Murara and Christopher Iles[i]

A major decision faced by many countries is what sort of Financial Management Information System (FMIS) they should develop to support their PFM reform efforts. The decision is more difficult in low-capacity countries where implementing an FMIS can have a disproportionate impact on management, operations, and operating costs.

There are three general FMIS options that governments can consider:

  • Bespoke, i.e. own developed software solutions
  • Customized “enterprise resource planning” (ERP) systems
  • Non-customized COTS systems

In making the decision, recent studies[1] have demonstrated that there is no single best solution. Over a decade or so, the tendency in many Latin American countries has been for in-house development of their FMIS, while Africa has preferred commercial off-the-shelf solutions (COTS) and developed countries have tended to favor customized ERPs.

Continue reading "FMIS Choice: the Dangers of In-House Development in Low-Capacity Countries" »

May 09, 2013

What To Do When Disaster Strikes: Business Continuity Plans in Latin America

Posted by Almudena Fernandez[1]

The governments’ treasury system is a core part of the public financial infrastructure and that of the broader economy. If government cash payments went off line, due to say a fire in the Ministry of Finance, it would cause a disruptive ripple effect across broad swathes of the economy. For example, think about the impact of the loss of public sector wages, non-payment of seniors’ pensions, or cash shortages for key government suppliers.

Therefore, it is important that governments have contingency plans in place should the worst happen, so as to keep the cash flowing and the government operating.

Most Latin American treasuries have done an impressive job of improving their institutions over recent years. For example, the majority of the countries of the region have unified the structure of government bank accounts enabling consolidation and a better utilization of government cash resources through a Treasury Single Account. Now, they are turning their focus to strengthening their Business Continuity Plans (BCP).

Continue reading "What To Do When Disaster Strikes: Business Continuity Plans in Latin America" »

April 23, 2013

Revitalizing the Fiscal Transparency Agenda

Posted by Min Zhu, Deputy Managing Director, IMF

The first public event of this year’s IMF-World Bank Spring Meetings was a seminar organized by the IMF’s Fiscal Affairs Department on the morning of Monday April 15th which brought together experts from governments, academia, civil society, and international organizations to discuss how to work together to revitalize the fiscal transparency agenda in the wake of the recent crisis.

The timing of last Monday’s Fiscal Transparency Seminar at the start of a week of seminars, panels, roundtables, and other events underscores the importance that the IMF attaches to the issue of fiscal transparency. The number of people who turned up to listen to and participate in the discussion highlighted the breadth and depth of public interest in this topic. The need to improve government financial disclosure was a recurring theme in many of the discussions which I attended during the past very busy week. 

For those of you who could not join us at last week’s seminar, I would like to use this article to share with you the IMF’s latest thinking on fiscal transparency and present our work program in this critical area. In particular, I want to focus on three issues:

  • first, I want to highlight the progress that has been made in promoting greater fiscal transparency over the past decade, thanks to the collective efforts of governments, civil society, academics, think tanks, international organizations, and others;
  • second, I want to review some of the lessons that the recent crisis has taught us about the adequacy of existing fiscal transparency standards and practices; and
  • finally, I’d like to outline the key elements of a revitalized fiscal transparency agenda, and how the Fund plans to support that agenda.

Continue reading "Revitalizing the Fiscal Transparency Agenda" »

April 18, 2013

Managing Public Finances Is Vital to Economic Prosperity

As posted on IMF Survey Online

PFM_Book_Cover
Across the world many countries are now grappling with restoring sound and sustainable public finances: the way governments manage their budgets today will have profound economic effects in the years ahead. A new book by the IMF looks at reforms introduced by governments over the past two decades to improve management of public finances. These innovative ideas and reforms are changing the landscape of public finances and eventually aim to fundamentally change the way governments manage the public’s money.

The global financial and economic crisis highlighted the importance of sound public financial management in ensuring that well-designed fiscal policies are implemented effectively. Sound management of public finances means maintaining a sustainable fiscal position, allocating resources efficiently, and delivering public goods and services effectively.

The book looks at how reforms to public financial management make use of new information, processes, and rules to change the behavior of politicians and public servants to counter the ongoing challenges of managing government’s money. As identified in the book, too often the tendency for policy makers is to spend rather than save in good times; to focus on the short term; and to ignore the future costs of new policies, underlying fiscal risk, and the true state of public finances.

“The global crisis has highlighted that reforming governments’ management of public finances is no longer an option but a necessity. There is no ‘one-size-fits-all’ solution—reforms need to be tailored to countries’ individual circumstances,” said IMF Deputy Managing Director, Min Zhu, who addressed officials, journalists, and academics gathered at a special seminar to discuss the findings in the book.

Continue reading "Managing Public Finances Is Vital to Economic Prosperity" »

April 11, 2013

Austria – From an Incremental Improver to a Comprehensive Reformer

Posted by Johann Seiwald[1]

From the mid 1990s on, Austria has steadily improved its framework for fiscal policy and budgeting. With Austria’s accession to the European Union and the corresponding need to meet the Maastricht debt and deficit requirements, in 1996 a top-down approach replaced a “demand-driven” budgeting model in which fiscal discipline was not enforced and line ministries had little incentives for structural changes. Since 2000, the use of lump-sum budgets and performance budgeting has been piloted in more than 20 government agencies, including prisons, a printing office and the police academy. The implementation of a new cost accounting system for all federal ministries, as well as projects aimed at improving performance management, and introducing product definitions for public services and performance indicators in several line ministries, has steadily enriched the financial management framework.

Continue reading "Austria – From an Incremental Improver to a Comprehensive Reformer" »

April 08, 2013

Reforming PFM in Developing Countries

Posted by Richard Allen[i]

I recently had the pleasure of discussing PFM reform issues with senior officials of the Ministry of Finance in Jamaica and, a few days later, at a workshop in Trinidad for the member countries of the IMF’s Caribbean Technical Assistance Centre (CARTAC) which was attended by several Finance Secretaries from the region. In Jamaica, reform of the public sector is high on the government’s agenda as a result of the negative impact of the global financial crisis, high levels of indebtedness and a weak economy. Finance officials in other parts of the region are trying to reconcile the need to make important structural reforms with the day-to-day pressures of managing the budget and dealing with myriad other financial contingencies. 

What are the main messages that came out of these various interesting conversations?

Continue reading "Reforming PFM in Developing Countries" »

April 05, 2013

Turkey’s Successful Modernization of Treasury Operations

 Posted by Yasemin Hurcan[1]

Turkey book
In ten years that followed the 2001 economic crisis in the country, Turkey managed to halve its debt to GDP ratio. As a result, Turkey was selected as a benchmark country for debt reduction in the World Bank’s 2012 report “Golden Growth: Restoring the Lustre of the European Economic Model”. A recently published book[2] entitled “Treasury Operations in Turkey and Contemporary Sovereign Treasury Management” discusses how the Turkish Treasury managed to decrease its debt by, amongst other things, restructuring the Treasury’s operations and management. The publication is available as an e-book.

Continue reading "Turkey’s Successful Modernization of Treasury Operations" »

March 22, 2013

Public Financial Management and Its Emerging Architecture

PFM_Book_Cover
Public financial management (PFM)—the fine art of budgeting, spending, and managing public monies—has seen an influx of innovations and reforms over the last two decades.

This book poses critical questions about these reforms, which include fiscal rules, fiscal responsibility legislation, medium-term budget frameworks, fiscal councils, performance budgeting, and accrual accounting. The authors evaluate what these reforms have accomplished and the issues and challenges that have been encountered, including those from the global financial and economic crisis. It draws lessons to help guide reformers in their pursuit of the next generation of PFM reforms. Public Financial Management and Its Emerging Architecture is available in print and e-book formats.

This event is open to the public, and those wishing to attend are asked to RSVP by sending an e-mail to FADM2AST@imf.org with the following details: full name, affiliation or employer name, and daytime phone number. Please RSVP by 3:00 p.m. on April 10. IMF and World Bank personnel are also welcome, and they need only their ID cards to enter.

Continue reading "Public Financial Management and Its Emerging Architecture" »

March 21, 2013

Offre d'emploi: Conseiller résident en Gestion des finances publiques (basé en Côte d’Ivoire)

Description

Le Département des finances publiques (FAD) du FMI recherche un(e)  expert(e)  hautement qualifié pour occuper un poste de Conseiller résident en gestion des finances publiques (GFP) au sein du Centre régional d’assistance technique pour l’Afrique de l’Ouest (AFRITAC de l’Ouest) créé en 2003 et basé à Abidjan, en Côte d’Ivoire. La durée du contrat proposé est d’un an, renouvelable sous réserve de satisfaire aux performances attendues.

Tâches

Le Conseiller apportera, dans plusieurs domaines de la GFP, une assistance technique (AT) aux dix (10) pays que couvre l’AFRITAC de l’Ouest, à savoir le Bénin, le Burkina Faso, la Côte d’Ivoire, la Guinée, la Guinée-Bissau, le Mali, la Mauritanie, le Niger, le Sénégal et le Togo. Le programme de travail du Conseiller couvrira l’ensemble des aspects de la GFP : cadre légal et règlementaire, budget, contrôle et audit financiers – avec une attention particulière sur l’exécution du budget (y inclus contrôle des dépenses, opérations du trésor, gestion de trésorerie, comptabilité, reporting budgétaire et comptable, et systèmes d’information financière),.

Le Conseiller sera placé(e) sous l’autorité du Coordonnateur de l’AFRITAC de l’Ouest pour les aspects généraux de ses activités et il/elle relèvera du Département de finances publiques du FMI à Washington D.C. pour les questions particulières liées à son domaine d’expertise. Il est attendu de lui/elle une grande mobilité dans la région couverte par l’AFRITAC de l’Ouest. Le/la candidat(e) retenu(e)  pour le poste travaillera en étroite collaboration avec l’autre Conseiller pour la GFP, actuellement en poste à l’AFRITAC de l’Ouest.

Continue reading "Offre d'emploi: Conseiller résident en Gestion des finances publiques (basé en Côte d’Ivoire)" »

Job Offer: Public Financial Management Resident Advisor Based in Abidjan, Cote d'Ivoire (IMF Job Number: 1300267)

Description

The Fiscal Affairs Department (FAD) of the IMF 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 Abidjan, Côte d'Ivoire. The Advisor's appointment term, starting on July 2013, 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 the whole range of PFM areas: legal and regulatory framework; budget, financial control and audit with a focus on budget execution (including expenditure control and tracking, treasury operations, cash management, accounting, fiscal reporting, and financial management information system).

The Advisor will work under the general direction of the Coordinator of West AFRITAC while, on substantive issues, he/she will report to FAD staff in Washington, D.C. Extensive travel within the West AFRITAC region should be expected. The successful candidates will work closely with the other PFM Resident Advisor assigned to the Center.

Continue reading "Job Offer: Public Financial Management Resident Advisor Based in Abidjan, Cote d'Ivoire (IMF Job Number: 1300267)" »

March 20, 2013

Mountains of Debt: The Cliffs, Slopes and Uncharted Territories of Today’s Public Finances in Advanced Economies

Posted by Carlo Cottarelli

This speech by Carlo Cottarelli, Director of the IMF’s Fiscal Affairs Department, was given as part of the International Economic Policy and Political Economy seminar series, organized by the Dept. of Economics, Boston College on February 18, 2013.

Thank you very much for inviting me here. Today, as the title of my presentation suggests, I will give you a guided tour of the land of public debt in advanced economies. It is not a pretty land. The fiscal accounts of many advanced countries are in their weakest state since… well one could say they have never been so bad. By the same token, it is a land that is not well known (we have never been there) and the risks in crossing it are difficult to evaluate. And, of course, in giving you this guided tour, I will also present the views of the IMF on how best to cross this dangerously unchartered territory.

Let me start with what happened in 2008…

Continue reading "Mountains of Debt: The Cliffs, Slopes and Uncharted Territories of Today’s Public Finances in Advanced Economies" »

March 15, 2013

CARTAC Discusses PFM Reform Strategies and State Enterprises

Posted by Eileen Brown and Matthew Smith

Cartac
Senior finance officials from several CARTAC countries participated in a lively CARTAC workshop in Trinidad from February 25-27 with international experts Richard Allen and David Shand. The workshop discussed how to best structure finance ministries to meet demands to sustain economic growth; how to design their PFM reform strategies and get the most from technical assistance; and how to manage the fiscal risks of state-owned enterprises (SOEs). The countries represented were Antigua, British Virgin Islands, Cayman Islands, Dominica, Haiti, Jamaica, Nevis, St Lucia, St Vincent and Suriname. There were 22 participants as well as the two presenters and two facilitators.

“This workshop really worked for me,” said Devon Rowe, Jamaica’s Financial Secretary (FS) “because it verified some options I was considering and it opened me up to new ideas based on what worked for my Caribbean colleagues.  Mostly it persuaded me that we all benefit when we share experiences. There are mistakes that we will not have to repeat because Dominica, St. Lucia, Antigua and BVI have shared their missteps as well as their successes with us.”

“Dominica always learns something and I am gratified we were able to share so much of what we learned with others” said FS Rosamund Edwards.

“I could write a book of do’s and do not’s in reform,” said Deputy FS John Edwards.  “I like the structure of this workshop – experts tell us about new thinking and world experience, and then respond constructively when we tell them what obtains in the region.”  Antigua and Barbuda had enjoyed a wealth of technical assistance funding and worked hard to properly sequence it.

Continue reading "CARTAC Discusses PFM Reform Strategies and State Enterprises" »

March 05, 2013

Can Arab Countries Improve Fiscal Transparency?

Posted by Manal Fouad

When people took to the streets in several Middle Eastern and North African (MENA) countries in early 2011, it was not only about social justice, but also to demand accountability from their governments. This means more information about how public resources are allocated, spent, and audited. Unfortunately, according to a recent publication by the International Budget Partnership, the MENA region records by far the lowest scores on transparency in the Open Budget Index, and most countries are still classified among those with scantest information about their budgets (only Jordan had a relatively good score of 57 in 2012, while Tunisia, Egypt, Algeria, Yemen are all in the bottom range of 0-20). Even more troublesome, Egypt has seen a significant worsening in its rating from 49 in 2010 to only 13 in 2012.

Yet, many of the demands from the youth who led the Arab revolutions were for increased fiscal transparency. These demands range from disclosure of very simple figures to more complicated issues. Such disclosures would answer many questions that are vibrantly present in the public debate. How much does the debt contracted by previous regimes cost in the budget? Are these levels of debt more or less than the government’s spending on health and education? Are the high levels of public subsidy provided on commodities such as food and fuel appropriate? Do these subsidies reach their intended beneficiaries? How much is the military apparatus spending on its wages, pensions and equipment? How much do loss-making public enterprises cost the budget? Is the government paying its salaries and bills to public and private suppliers on time? And more fundamentally: what is the government’s medium-term vision and objectives for the country? Does the budget reflect the country’s and society’s priorities? Is the budget constructed on the basis of realistic assumptions on the availability of resources and costs of programs, and does it include contingencies for unexpected economic conditions or uncertain events? Is public debt sustainable?

Continue reading "Can Arab Countries Improve Fiscal Transparency?" »

February 08, 2013

New FAD Technical Note and Manual: Cash Management and the Relationship Between Treasury and Central Bank

Posted by Renaud Duplay

Cash management is one of the main issues when reforming PFM systems in developing countries. Bad cash management is costly because it hampers budget execution, causes arrears and increases funding costs. For this reason the Fiscal Affairs Department (FAD) has already released two Technical Notes and Manuals (TNMs) on this subject and is now releasing further guidance material. A new TNM, prepared by Mario Pessoa and Mike Williams, expands the review of cash management issues by specifically addressing the relationship between the treasury and the central bank.  

The note was prepared at the request of the Latin American Treasurers' Forum (FOTEGAL) and addresses both institutional and technical issues and is particularly relevant to developing countries. Based on international experience, the TNM describes the modern framework of a formalized relationship between both institutions standing on two key principles:

Continue reading "New FAD Technical Note and Manual: Cash Management and the Relationship Between Treasury and Central Bank" »

February 06, 2013

Job Offer: Regional PFM Advisor Based in Barbados (IMF Job Number: 1300098)

The Fiscal Affairs Department (FAD) of the IMF is seeking a highly-qualified expert to fill one of the two Regional Public Financial Management (PFM) Advisor positions at the Caribbean Regional Technical Assistance Center (CARTAC), based in Barbados. The Advisor’s appointment term would be for an initial period of one year, on a renewable basis, subject to satisfactory performance.

The Advisor will provide direct technical assistance (TA) on a range of PFM areas to the countries covered by CARTAC (Anguilla, Antigua & Barbuda, The Bahamas, Barbados , Belize, Bermuda, British Virgin Islands, Cayman Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago, and Turks & Caicos Islands). The work programs 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, and cash management) debt management, government accounting, fiscal reporting, financial management information systems, and internal audit. The Advisor will also supervise the technical assistance work of short-term PFM experts financed by CARTAC. The Advisor will work under the general direction of the CARTAC Center Coordinator while on substantive issues, they will report to FAD staff in Washington D.C. Extensive travel within the countries covered by CARTAC should be expected.

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January 30, 2013

Good Practice Note on Sequencing PFM Reforms – Taking on Board Comments Received

Posted by Jack Diamond

PEFA-Logo_NEW

Following the posting of a  draft Guidance Note on Sequencing PFM Reforms on the PEFA website  and on this blog (along with two Background Papers by Messrs. Tommasi and Diamond), the PEFA Steering Committee met on 15 November, 2012 to review the response to a number of comments received. Comments came both from development partners (such as SECO, DFID, the Inter-American Development Bank), as well as PFM experts in the field. Most of the comments dealt with specific issues, and were generally aimed at ensuring greater clarity in the text. Accordingly, the majority of these comments were easily accommodated in revised drafts of the Guidance Note and Background Papers, 1 and 2. There were, however, a number of general issues raised that were more thoroughly discussed by the Steering Committee, which are summarized in this blog.

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January 16, 2013

Are We Entering a New Era in PFM: “Rule of the Accountants”?

Posted by Renaud Duplay[1]

Accountants—especially at parties—may sometimes feel like no one is paying attention to what they have to say. A recent research paper by Jens Heiling, a Technical Manager with the International Public Sector Accounting Standards Board (IPSAS), and James Chan, Professor Emeritus of Accounting at the University of Illinois, should reassure them.

Based on individual experiences from different countries, the authors draw a pattern of the evolving relationship between accounting and budgeting in the public sector. Their findings describe a five-stage process of development during which accountants exert an increasingly strong influence on the budgeting process in addition to their traditional responsibilities for government accounting systems and financial reporting.

In stage 1, budgeting and accounting live in separate worlds. The authors assume that in this stage accounting information would generally be poor, inaccurate or take too long to produce. In stage 2, accounting supplements budgeting by providing up-to-date information on revenues and spending that allows internal budgetary control within the fiscal year. However, complete data on budget execution that can be matched to the original budget are often still lacking. This is provided at stage 3, where financial reporting appears but still follows the rules and standards, essentially cash-based, on which the budget is prepared. It is only at stage 4 that accounting starts to develop the own accrual-based standards that provide a broader picture of public finances, but the budget continues to be prepared and presented on a cash basis. At this point, accountants (and the external auditor) may start criticizing the methods used to prepare the budget, and press the government to provide a reconciliation of cash-based budget execution data and accrual-based financial reports. This process is extended in stage 5 where both the budget and financial reports are prepared on an accrual basis, and the budget includes comprehensive information on the government’s operating statement and cash flow, as well as its assets and liabilities.

Continue reading "Are We Entering a New Era in PFM: “Rule of the Accountants”?" »

January 03, 2013

Simplifying Budget Documents – Time for an International Standard?

Posted by Camille Karamaga

Improving the quality of budget documentation lies at the heart of many reforms aimed at enhancing understanding of the content of the budget estimates as well as fostering transparency and accountability. Some budget laws prescribe a minimum set of documents to accompany the budget estimates. These may include, for example, reports on: (i) the medium-term macroeconomic forecast; (ii) fiscal policies and public expenditure trends; (ii) medium-term forecasts of government revenues, expenditures, debt, and the fiscal balance; (iii) medium-term resource ceilings; (iv) government guarantees, contingent liabilities and other fiscal risks; (v) spending on expenditure programs and projects by sector; and (vi) projections of donor aid flows. In countries with a Westminster tradition, the budget speech includes much of this information, but additional documents may be presented to the parliament.

Improving the content and quantity of fiscal information is not the same, however, as improving its quality or transparency. More does not always mean better or clearer. Indeed, it often means the reverse. Governments tend to respond to demands for information from the parliament, financial markets, NGOs and ordinary citizens by producing more and more data, often in unprocessed form. This may get them off the hook of public “accountability”, but places them squarely on another hook, accusations of information overload and obfuscation.

The design of a strategic planning framework, medium-term budget frameworks and program budgets has led to a proliferation of detailed information, performance indicators, and monitoring and evaluation reports. Mountains of annual budget books are produced with separate estimates volumes being prepared by each line ministry. The excessive detail contained in the budget estimates weakens their usefulness as raw material for discussion by parliamentary committees. Nor are they meaningful to the general public. In short, much of the  information produced by the government easily becomes a “data cemetery” which contributes little to the decision-making process or enlightened public debate.

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