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. 

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.

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

Posted by Rocio Sarmiento[1]

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.

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.

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.

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.  

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.

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.

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.

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).

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 15^th 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.

Managing Public Finances Is Vital to Economic Prosperity

As posted on IMF Survey Online

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.

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.

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?

Turkey’s Successful Modernization of Treasury Operations

 Posted by Yasemin Hurcan[1]

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.

Public Financial Management and Its Emerging Architecture

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.

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.

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.

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…

CARTAC Discusses PFM Reform Strategies and State Enterprises

Posted by Eileen Brown and Matthew Smith

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.

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?

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:

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.

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

Posted by Jack Diamond

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.

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.

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.

ICGFM 2012 Winter Conference

Posted by Sailendra Pattanayak

The International Consortium on Governmental Financial Management (ICGFM) held its Winter Conference on Good Public Financial Management Practices in a Period of Global Adjustment in Washington, DC during December 10–12, 2012. This was co-hosted by the Fiscal Affairs Department (FAD) of the IMF. The Global Initiative for Fiscal Transparency (GIFT) also partnered with the ICGFM for this conference.

The conference was attended by high-level officials from ministries of finance, state audit institutions and other government ministries/agencies, and members of parliament of more than 25 countries, as well as representatives from international organizations, rating agencies, think tanks, the donor community, civil society groups, and academia. The welcome address was delivered by Ms. Linda Fealing, President, ICGFM, followed by opening remarks from Mr. Sanjeev Gupta, FAD Deputy Director. (Download ICGFM conference agenda Dec 2012.)

Towards Better Public Expenditure Management: Experience Across Asia

Posted by Suhas Joshi  and Greg Smith

Despite heavy snowfall, government officials from mostly warm countries landed in Seoul for a high-level conference on how to improve public expenditure management (PEM) in the region. The event convened member nations of the Public Expenditure Management Network in Asia (PEMNA). The network, launched in June 2012 in Bangkok, provides opportunities for practitioners across the region to share knowledge and experiences in implementing PEM reforms. PEMNA is modeled on the PEMPAL network that has been operating successfully in central and eastern Europe for several years.

PEMNA comprises two communities of practice (CoPs). The budget CoP is managed by the World Bank, and the Treasury CoP by the IMF. PEMNA’s Steering Committee provides strategic oversight and governance. The Korea Institute of Public Finance (KIPF), a research and training institute associated with the Korean Ministry of Strategy and Finance, provides the secretariat for PEMNA and the two CoPs, and is supported in its work by development partners including the World Bank, AusAID, the IMF, and the OECD.

The demand-driven nature of the network allows members to focus dialogue on solving practical implementation issues.  By sharing common experiences and benchmarking performance with peers, members are able to deepen their understanding of the reform process. Across the budget and treasury areas members recognize that they cannot rely on theory alone and that the cross-fertilization of ideas is essential for the successful design and implementation of reform.

MTEF: Better Than Sliced Bread?

Posted by Richard Allen

Richard Hemming is a co-author of the World Bank’s recently published Beyond the Annual Budget: Global Experience with Medium-Term Expenditure Frameworks. In this conversation with Richard Allen, he talks about the book, the analytical work carried out, and the policy implications.

RA: You are one of the authors of this book. What was your specific role in preparing it?

RH: The team that worked on the book was large. Jim Brumby was the team leader and I was the lead consultant. We were the only people involved in all aspects of the work for the duration of the project. My main roles were to provide guidance on the overall approaches to the book’s analysis, to contribute to some of the analysis, to coordinate the drafting of the book, and to write a significant part of it. The only two areas in which I was not extensively involved were the detailed econometric analysis, for which we put together a really accomplished team, and the assessment of Bank advice on MTEFs. Overall, the book should be viewed very much as a team effort.

Transforming Internal Audit in East Africa

Posted by Onesmus Ayaya, George Mang’oka and Jesse W Hughes

The IMF’s Regional Technical Assistance Center for East Africa organized a workshop for government internal auditors from the region[1] in Nairobi, Kenya, from November 6-9, 2012.

PEFA diagnostic assessment results and external audit reports indicate that reforms of internal audit (IA) have lagged behind. The workshop discussed modalities of strengthening internal audit in relation to the various themes: the legal mandate for IA, the governance structure, coordination with public sector integrity institutions, participation in the work of professional bodies, the contribution to the control environment, and capacity building. The main issues are summarized below.

Two Richards Talk Fiscal Transparency

Posted by Rachel Wang

On November 1, 2012, the IMF’s Fiscal Affairs Department (FAD) published a policy paper entitled, “Fiscal Transparency, Accountability, and Risk”. The paper reviews the progress made in improving fiscal reporting since the late 1990s; considers what the global financial crisis has taught us about the adequacy of prevailing fiscal transparency standards, practices, and monitoring; and makes a series of recommendations for revitalizing the global fiscal transparency effort in the wake of the crisis. Richard Allen, a seasoned advisor on public financial management issues and former deputy division chief in FAD, sat down with Richard Hughes, the new head of FAD’s Public Financial Management Division I and co-author of the paper, to talk about its key insights and implications.

Richard Allen (RA): Can you tell me why it was decided to prepare a new IMF policy paper on fiscal transparency?

Richard Hughes (RH): There were really two motivations.

The first motivation was that the IMF has been in the fiscal transparency business for about 15 years. We started work in earnest in the wake of the Asian Financial Crisis with the development of the Fiscal Transparency Code (Code of Good Practices on Fiscal Transparency) and Manual (Manual on Fiscal Transparency) and the Fiscal ROSC (Reports on the Observance of Standards and Codes). So, 15 years on, we wanted to take stock of how much progress we have made in promoting greater fiscal transparency, review how these fiscal transparency instruments were performing, and look at how much work was left to be done.

Views from the Field No. 8 – West Bank and Gaza

Posted by Pierre Messali

In the latest in the series “Views from the Field”, Richard Allen interviewed Pierre Messali, the World Bank’s Public Sector Expert in West Bank and Gaza, Jerusalem.

RA:  Please describe your new position in Jerusalem and your work priorities in the coming year.

PM:  As the World Bank’s Senior Public Sector Specialist in West Bank and Gaza (WB&G), Jerusalem, I am in charge of supporting the Palestinian Authority (PA) with its Public Financial Management (PFM) and Civil Service Reform (CSR) agendas, as well as broader governance reform issues. A series of major initiatives was launched in these areas during 2008-2011 by my predecessor, Mark Ahern. My primary objective is to keep these multiple agendas alive and to support the PA in their implementation. On the PFM side, the main focus is on strengthening cash forecasting and accounting in order to address the current challenging fiscal/cash situation, and to issue financial statements in line with IPSAS.  Regarding CSR, we plan to help the PA define principles, methodology and modalities for managing human resources, taking account of the constraining fiscal environment. Other important areas of work include support for the implementation of the new public procurement law, especially setting up the High Council for Public Procurement; and testing the PA’s appetite for developing the newly established Anticorruption Commission.

Views from the Field No. 7 – East Asia

Posted by Suhas Joshi

In the latest in the series “Views from the Field”, Richard Alen interviewed Suhas Joshi, FAD’s PFM Advisor in East Asia, who is based in Cambodia.

RA:  What is your experience of working as a PFM advisor around the world?

SJ: Tolstoy starts Anna Karenina with the sentence “Happy families are all alike, unhappy families are unhappy in their own way”. In the same way countries are all alike in their basic PFM requirements and issues but each is unique in its own problems and issues. I have had the privilege of having sat on both sides of the donor table - in India I used to deal with bilateral aid to India and now, for 13 years with the Fund, I have delivered aid to Russia, West African states such as Ghana, Liberia, Sierra Leone and Gambia, then 15 Pacific Island countries, and now to Cambodia, Laos, Vietnam, Nepal, Bangladesh, Bhutan, Indonesia, Sri Lanka, Myanmar and Maldives.

In his Theban plays Sophocles says “There is nothing new under the sun”. In the same vein, I see in all the countries where I have worked certain fundamental PFM issues that remain the same. Yet diversity in location, size and capacity makes each country and its problems different. This creates a challenge for practitioners at the implementation stage - indeed a philosophical one. Often we tend to believe that we, as TA providers, are guiding the reform process. But, as the Gita tells us, we are not the “doers” – we are at best catalysts in the reform process. As I saw from my experience in India, the main “doers” of reform are the ministers and government officials in any country. They are busy performing the routine functions of government about 90% of their time, failing which they will lose their jobs. This leaves about 10% of their time to engage in the reform process. If government officials have to implement several reforms at the same time, their resources are further stretched, resulting in slow implementation. Factor in a bureaucracy that is often either de-motivated or ambivalent, then none of our efforts will bear fruit!

In sum, we need to be realistic in our hopes and recognize that unless we have a high level champion to provide motivation and guidance, the reform process will be slower than expected, if indeed it will be implemented at all. Reform needs to be combined with sustainable capacity development so that the “doers” can do things themselves, and correctly, while we support them in meaningful ways.

Views from the Field No. 6 – The Caribbean

Posted by Eileen Browne

Richard Allen interviewed Eileen Browne, FAD’s PFM Advisor in the Caribbean Regional Technical Assistance Center (CARTAC) for the latest in the series “Views from the Field”.

RA:  What makes the technical assistance CARTAC offers different?

EZB:  Two things:  the people, culture and institutions of the Caribbean region and CARTAC’s focus on member-driven TA efforts.

The Caribbean is a constellation of small islands and coastal nations and CARTAC serves 20 English-speaking ones, many of which celebrated their 50^th anniversary of independence this year.  Jamaica is the largest island with 3 million inhabitants; Trinidad and Tobago is the second in size with 1.2 million; Barbados is the third with 0.25 million and the rest of the nations are smaller.  Eight of them have formed a currency union. The Caribbean enjoys middle-income status yet shares many institutional deficits with much poorer countries. 

Seeing Our Way Through The Crisis: Why We Need Fiscal Transparency

Posted by Carlo Cottarelli and previously published on iMFdirect

Without good fiscal information, governments can’t understand the fiscal risks they face or make good budget decisions. And unless that information is made public, citizens and their legislatures can’t hold governments accountable for those decisions.

Fiscal transparency—the public availability of timely, reliable, and relevant data on the past, present, and future state of the public finances—is thus to the foundation of effective fiscal management.

A new paper from the IMF on fiscal transparency, accountability, and risk considers the progress we have made in opening up the “black box” of fiscal policymaking over the past decade, the lessons of the recent crisis for current fiscal reporting standards and practices, and the steps we need to take to revitalize the global fiscal transparency effort.

Views from the Field No. 5 – Nepal

Posted by Udaya Pant

Richard Allen interviewed Udaya Pant, FAD’s PFM Advisor in Nepal for the latest in the series “Views from the Field”.  For the first time on the Blog, the interview includes a Poem on PFM, written by Udaya Pant!

RA:  What have been the challenges you experienced in moving to Nepal? How have you dealt with these challenges?

UP:  I first came to Nepal in August 2009, primarily to implement the treasury single account (TSA), using a TSA implementation study report by FAD.  I took a break of about six months from December 2011 and rejoined in June 2012 with a broadened mandate covering almost all aspects of PFM.

Nepal suffers from political uncertainty and turmoil much of the time.  This creates a problem of continuity.  The present Government (in a caretaker role for the past six months) is the fourth one in the last three years. The budget cycle is not respected.  Civil servants have to rotate after every two years. The capacity to implement reforms is low and fiduciary risk in the country very high. I have seen four Prime Ministers, no regular Auditor General, and eight Financial Comptroller Generals (FCGs).  Another problem is that all government business is conducted in the Nepali language and few officials speak English.

Views from the Field No. 4 – Francophone West Africa

Posted by Jean-Gustave Sanon and Bruno Imbert

For the latest in our series of “views from the field” Richard Allen interviewed Jean-Gustave Sanon and Bruno Imbert, FAD’s regional PFM advisors in the IMF’s regional technical assistance center for Western Africa (AFW) based in Abidjan (Côte d’Ivoire). The AFW Center covers ten countries in Francophone West Africa: Benin, Burkina Faso, Côte d’Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal and Togo.

RA: What are the main challenges of PFM in the region?

JGS/BI: All of the countries are engaged in relatively “advanced” PFM reforms including multi-year budgeting, performance-based budgets and accrual accounting. Such reforms are obviously a huge challenge for countries that are frequently cited as lacking basic tools and methods of PFM. The Republic of Guinea has recently adopted a new by-law on public finance and soon Mauritania will start working on a new financial constitution as well, with FAD and AFW support. Developments in the Western African Economic and Monetary Union (WAEMU), which includes all the AFW countries except Guinea and Mauritania, are a major driver of PFM reform across the region. In 2009, the Council of Ministers of WAEMU passed six regional by-laws (directives) which have to be transposed by the member states into their own legal framework and will substantially affect the way their PFM systems operate.

What Lies Beneath: Issues in Debt Statistics

Posted by Robert Dippelsman

Most key macroeconomic indicators such as GDP, the consumer price index (CPI), data on monetary aggregates, or balance of payments follow internationally accepted definitions. In contrast, public debt data can have different meanings. This problem is discussed in the recently released Staff Discussion Note What Lies Beneath: Statistical Definitions of Public Debt by Robert Dippelsman, Claudia Dziobek, and Carlos Gutiérrez Mangas of the IMF Statistics Department.  

The discussion note shows that the failure to adopt global standards can lead to important misunderstandings because of the potentially large magnitudes involved. However, international guidelines on the compilation of public sector debt are well established and set out in the recently published Public Sector Debt Statistics Guide: Guide for Compilers and Users (Debt Guide). The note identifies some key dimensions of public sector debt that need to be considered:

Views from the Field No. 3 – Liberia

Posted by Kubai Khasiani

For the third in our series of “Views from the Field” Richard Allen interviewed Kubai Khasiani, FAD’s PFM Advisor at the Ministry of Finance in Liberia. Kubai was formerly a senior budget official in the Kenyan government.

RA: What have been the challenges you experienced in moving to the new position? How have you dealt with these challenges?

KK: I took over in 2011 from a PFM Advisor who had been in the position for three years, so there were already established channels of communication with the Minister and senior management which I inherited.  Many important changes in PFM had already taken place, or were in process. The country achieved the post-HIPC completion point in 2010; a Poverty Reduction Strategy (PRS) and a PFM Act were being implemented; and a PFM Strategy and Action Plan had recently been approved by the government. Development partners already in post were very accommodating, making it easy for me to adapt.

Job Offer: Technical Assistance Advisor - Public Financial Management (IMF Job Number: 1200765)

The Fiscal Affairs Department (FAD) of the IMF is looking for well-qualified technical assistance (TA) advisors to fill headquarters-based (in Washington, D.C.) contractual positions in the Public Financial Management 2 Division. The advisor's appointment term would be for a period of two years, on a renewable basis, subject to satisfactory performance.

The selected candidates will provide technical assistance (TA) on PFM matters to IMF member countries, and will also supervise the technical assistance work of experts based in member countries and/or at the IMF's Regional Technical Assistance Centers. The work programs may cover all PFM areas: the legal and regulatory framework; budget preparation (including budget classification, medium-term budgetary frameworks, performance-oriented budgeting); budget execution (including expenditure control, treasury operations, cash management, accounting, fiscal reporting, and financial management information system); and internal control and audit. The TA advisor will be required to travel overseas.

Job Offer: Public Financial Management Advisor for Myanmar Based in Thailand (IMF Job Number: 1200764)

The Fiscal Affairs Department (FAD) of the International Monetary Fund is looking for a well-qualified expert to fill a Public Financial Management (PFM) Advisor position for Myanmar. The advisor will be based in Bangkok, Thailand. The Advisor's appointment term would be for a period of one year, on a renewable basis, subject to satisfactory performance.

The Advisor's tasks will be focused on modernization of the treasury function in the Ministry of Finance in NayPyitaw. His work program is expected to cover budget execution, including expenditure control, treasury operations, cash management, debt management, accounting, fiscal reporting, financial management information systems and internal control issues. He will also  provide ongoing strategic guidance to the authorities on the overall PFM reform process. A limited part of the Advisor's time may be devoted to technical assistance in one of the other South-East Asian countries. Coordination with donors and other providers of technical assistance to Myanmar will be an important feature of the Advisor's role.

Views from the Field No. 2 – Regional PFM Advisor for Central Asia

Posted by John Zohrab

For the second in our series of “Views from the Field” Richard Allen interviewed John Zohrab, FAD’s regional PFM advisor for Armenia, Georgia, Tajikistan, Kazakhstan, Kyrgyz Republic, and Uzbekistan.  John, who is a New Zealand citizen, is based in Tashkent, Uzbekistan. 

RA:  What have been the challenges you have experienced in working in the countries of Central Asia?

JZ:  The main challenge has been to convince governments in the region that we will make a valuable contribution to their work. This is not just a technical issue, but also one of trust. Accepting a “man from the IMF” as an advisor is not an easy decision for any ministry, as ministries are concerned that we will try to direct rather than advise them. Meeting the challenge of convincing ministries that our contribution has a unique, high value and that we can be trusted requires us to demonstrate our skill and sincerity every day in everything we do.

New FAD Brochure Explains It All

Posted by the Fiscal Affairs Department of the IMF

The casual reader of the PFM Blog may have wondered what part of the IMF is actually responsible for the posts on this website. The website is maintained by the two PFM Divisions in the Fiscal Affairs Department (FAD), one of the functional (in contrast to geographic) departments of the IMF. For the upcoming Annual Meetings of IMF and World Bank Group in Tokyo from October 9-14 the attached brochure has been produced. It should be clear that FAD is much more than PFM alone! 

Download FAD Brochure 2012

Views from the Field No. 1 – AFRITAC South

Posted by Vijay Ramachandran and Jean-Luc Helis

The PFM blog is launching a new series of “Views from the Field”, aimed at presenting the experience and views of PFM advisors and government officials working in developing countries and regions. We anticipate that the series will be of special interest to practitioners in the field.  The first post in the series is written by the two resident PFM Advisors in AFRITAC South (AFS): Vijay Ramachandran (VR) and Jean-Luc Helis (JLH).  AFS, based in Mauritius, is the IMF’s regional technical assistance center (RTAC) covering 12 countries in Southern Africa.  The countries use three different official languages—English, French, and Portuguese—which adds to the practical challenges of working in the region but also to the variety and richness of the working environment.

Vijay and Jean-Luc were interviewed recently by FAD’s Richard Allen (RA).

RA:  What are the main strengths and challenges of PFM in the region?

VR/JLH:  The region has focal points of excellence like South Africa and Mauritius which provide opportunities for peer-to-peer exchanges. AFS member countries are able to provide regular updates on rudimentary cash based revenue and expenditure information. Member countries are also able to appropriate annual budgets in accordance with constitutional provisions.  The main PFM challenges being addressed in the region are risks related to mineral and customs union revenues; legal frameworks that require updating; weak medium-term policy perspectives; obsolete and non-functional IT systems; fluctuating ownership of reforms;  and weak capacity for implementing reforms.

Government Accounting Tricks Designed to Conceal Rather Than Reveal

Posted by Tim Irwin

It’s well known that governments sometimes use accounting devices to make their reported deficits smaller than, in some sense, they really are. But how do these devices work? And how can they be revealed?  A new IMF working paper by FAD’s Tim Irwin—Some Algebra of Fiscal Transparency: How Accounting Devices Work and How to Reveal Them—discusses these issues.  

One way to answer the questions is to consider future deficits. Deficit devices, unlike genuine changes in fiscal policy, reduce this year’s deficit only at the expense of future ones. And their use can therefore be revealed if governments also produce good fiscal forecasts.

This paper takes a different approach. It starts by defining the deficit as the decline in the government’s net worth and then shows how deficit devices can be analyzed as transactions involving assets and liabilities that are not recognized on the government’s balance sheet. For example, many governments do not include nonfinancial assets such as land and buildings on their balance sheets, so they can reduce their reported deficit by selling these assets, even though this doesn’t really improve their finances. It would seem, then, that accounting devices can be prevented by ensuring that all assets and liabilities are recognized on the balance sheet.

Performance Budgeting: Facing Up to the Hard Questions

Posted by Dirk Kraan[1]

The IMF’s new resident advisor for South Eastern Europe, Dirk Kraan challenges the practicality of performance budgeting, one of the favourite innovations of New Public Management. Has performance information on a government program provided by a line ministry ever provided a critical assessment of its success? Are Ministries of Finance really interested in performance, let alone equipped to deal with it? Some of the hard questions that will be discussed in this post.....  

The history of performance budgeting now stretches over forty years. Arriving at the Dutch Ministry of Finance in 1980, I well remember how we tried to cope with the article of the Budget Code introduced in the early 1970s prescribing that the budget documentation had to provide “performance information”.  Around the same time  the ideas of the Planning,  Programming, Budgeting, System (PBBS) and Management by Objectives (MBO) had been blown over the ocean and been adapted to European conditions in the form of “Rationalisation des Choix Budgétaires” (France), Program Budgeting and Review (UK), and “Policy Analysis” (the Netherlands). The latest attempts to implement these reforms were still very much alive in 1980.

Fiscal Rules and Councils: Most Effective When Used Together

Posted by Elif C. Arbatli [1]

Adopting numerical fiscal rules has been an integral part of the policy response to the medium-term fiscal consolidation challenge posed by the global financial crisis. According to Schaechter et. al. (2012), since 2009, at least 16 countries have adopted new national fiscal rules and many others are in the pipeline. The crisis has also revealed the need for reforming supranational rules, such as the Stability and Growth Pact of the EU and as a result new structural budget balance rules will be adopted in almost all of the EU member states as part of the “fiscal compact.” A recent paper by Charles Wyplosz titled “Fiscal Rules: Theoretical Issues and Historical Experiences,” is a timely review of the theoretical underpinnings of fiscal indiscipline and how numerical fiscal rules can help. Wyplosz argues that fiscal rules are neither necessary nor sufficient to achieve fiscal discipline; but that thoughtfully designed fiscal rules can be effective when supplemented with fiscal institutions (and in particular fiscal councils) that are tailored to the political institutions of the country.[2]

The paper first looks at the theoretical underpinnings of fiscal indiscipline, known as the “common pool problem”. The common pool problem arises when the beneficiaries of public spending or tax policies do not take into account the externalities that these policies impose on other groups (within a population, across different generations, among different levels of government or different states within a monetary union). Fiscal rules can in principle reduce these externalities by imposing explicit principles for fiscal behavior and thereby lowering the scope for deficit bias. According to Wyplosz, there are two key challenges: 1) fiscal rules cannot be fully contingent and hence they are subject to the “time-inconsistency problem” and 2) fiscal rules cannot be fully binding since they can be manipulated, changed or simply ignored. He argues that fiscal institutions (in particular, fiscal councils or other arrangements that give authority to an independent body to interpret rules) can help overcome these challenges.

Au Revoir, Michel!

Posted by Greg Horman

Michel Lazare, the founder and chief editor of the PFM Blog, recently moved position from the Public Financial Management Division II in the Fiscal Affairs Department, where he managed the delivery of PFM technical assistance to countries in Asia and the Pacific, Latin America and the Caribbean, and French- and Portuguese-speaking Africa. Now in the African Department, Michel is involved in the Fund’s relationship with four post-crisis countries: Côte d’Ivoire, Guinea, Liberia, and Sierra Leone. Greg Horman reflects with Michel on the place of PFM in the Fund’s TA and surveillance activities and how reform efforts can be supported.

Greg: You are returning to your macroeconomic roots at the Fund after eight years in FAD. How has the Fund’s interest in PFM evolved during that time?

Michel: Traditionally, the Fund’s focus was narrowly on monetary and fiscal policy. Nowadays, PFM is recognized as having macroeconomic and macro-fiscal implications. Over the years, the Fund has realized how PFM tools and institutions, including formal rules and bodies, contribute to facilitating and maintaining fiscal sustainability. Commitment controls, for instance, are now better understood as a mechanism for maintaining fiscal discipline, ensuring that spending is in line with the budget and helping to achieve the government’s fiscal objectives.

New PFM Newsletter in Khmer

Posted by Chita Marzan

The IMF Technical Note and Manual on Modernizing Cash Management has recently been translated into Khmer (attached below), and more such translations are now underway. An article on this technical note and manual (TNM) was featured in the first PFM Newsletter in Cambodia (also below) which was launched in May 2012. This newsletter is a joint effort of Mr. Suhas Joshi, PFM Regional Advisor for Southeast Asia of the IMF Fiscal Affairs Department (FAD), and Mr. Seng Sreng, Director of the Economics and Finance Institute (EFI) of Cambodia. Another article focused on gender-budgeting describing the practices in Pacific Island countries.

The PFM Newsletter evolved from an idea to set up a knowledge exchange group which would connect all the participants of joint IMF/EFI lectures on PFM by email and also through a quarterly newsletter. The newsletter is expected to cover developments in the field of PFM and to bring to the recipients improvements in this field from across the world and in Cambodia itself. The newsletter is to be sent out every quarter jointly with the EFI and also aims to establish a forum for PFM practitioners in Cambodia to exchange ideas and knowledge, and to widen the dissemination of available materials that are relevant for the improvement of PFM in the country. Improving cash management is one of the key objectives of the PFM Reform Program (PFMRP) of the Royal Government of Cambodia. The newsletter is available both in Khmer and in English so that country officials have greater access to international developments in the PFM area.

Tackling The Jobs Crisis: What’s To Be Done?

by Gerd Schwartz and Ruud de Mooij and previously published on iMFdirect

Faced with a jobs crisis, policymakers the world over are digging deep into their policy toolkits to generate more employment. A recent study by the IMF’s Fiscal Affairs Department argues that reforms of tax and expenditure policies offer great promise in helping countries confront the jobs crisis, including in the short term.

The study argues that improving employment outcomes, over and above what could be achieved through policies aimed at supporting the demand for goods and services by consumers and investors, requires actively supporting labor demand, strengthening incentives (or reducing disincentives) to work, and expanding training and job assistance, while preserving equity objectives.

A New Dataset on Numerical Fiscal Rules

Posted by Andrea Schaechter

Strengthening fiscal frameworks, in particular fiscal rules, has emerged as a key response to the fiscal legacy of the global economic crisis. Fiscal rules are defined as long-lasting constraints on key budgetary aggregates through numerical limits on deficits, debt, expenditures, or revenue. A new IMF working paper[1] takes stock of fiscal rules in use around the world, compiles a dataset—covering national and supranational fiscal rules, in 81 countries from 1985 to end-March 2012—and presents details about the rules’ key design elements.

Signs of Fiscal Progress: Will It Be Enough?

Posted by Carlo Cottarelli and previously published on iMFdirect

We’ve just updated our latest assessment of the state of government finances, debts, and deficits in advanced and emerging economies.

Fiscal adjustment is continuing in the advanced economies at a speed that is broadly appropriate, and roughly what we projected three months ago. In emerging economies there’s a pause in fiscal adjustment this year and next, but this too is generally appropriate, given that many of these countries have low debt and deficits.

The improvement in fiscal conditions in many advanced economies is welcome, but it’s going to take more than lower deficits to get countries under market pressure out of the crosshairs.

Signs of Progress

There are clear signs of fiscal progress in advanced economies. The deficit will decline in about three quarters of advanced economies this year, and in almost 90 percent of them next year. Debt ratios are also starting to come down: we project one-third of advanced economies to have a declining debt ratio this year and half of them to do so next year.

The progress in deficit-cutting in Europe means less fiscal tightening will be needed in the future, reducing the fiscal drag on growth: in 2011–12 the fiscal tightening in the euro area will amount to a cumulative 2½ percentage points of GDP, while in 2013–14 it is projected to be one third of this, which is good news for growth.