A New IMF Fiscal Affairs Department's Publication: the Technical Notes and Manuals

Posted by Michel Lazare and Richard Allen.

The IMF has just launched a new series called: Technical Notes and Manuals.The first three issues have been authored by the IMF's Fiscal Affairs Department.

They deal with:

1. A Basic Model of Performance-Based Budgeting by Marc Robinson and Duncan Last  Download FAD Technical Manual 1
2. Transition to Accrual Accounting by by Abdul Khan and Stephen Mayes                     Download FAD Technical Manual 2
3. Modernizing Cash Management by Ian Lienert                                                              Download FAD Technical Manual 3

Earlier versions of these Technical Notes and Manuals were previously issued as part of a series of technical notes on our PFM blog.

Future issues will include topics in revenue administration, tax and expenditure
policy, and public financial management. Other IMF departments may also contribute notes to these series.

These notes and manuals aim at raising awareness among practitioners,
officials and academics of contemporary fiscal topics; and improving the dissemination of
FAD's TA advice. In particular, they will allow us to disseminate to a broader audience the advice now included in our TA reports, or provided through other advisory services.

Use of Country Systems―A “Courageous” Policy?

Posted by Richard Allen

The World Bank is planning to increase the use of country’s own systems of public financial management for its investment lending operations, rather than its traditional ring-fenced funding arrangements. Several African countries―Benin, Burkina Faso, Ghana, Mali, Mozambique, and Uganda―are already targeted, and others may follow. Sir Humphrey, of “Yes, Minister” fame (http://en.wikipedia.org/wiki/Sir_Humphrey_Appleby), might have described such a policy as “courageous”, thus indicating skepticism about its fundamental soundness. Is such skepticism justified? Does the decision reflect the ascendancy of the Bank’s developmental culture over classic fiduciary concerns?

Certainly, the new policy conforms with prevailing international approaches on the effective use of international aid, as reflected in the Paris Declaration (2005), and the subsequent Accra Agenda for Action (AAA). These agreements are putting pressure on donors to channel their lending through budget support operations, and similarly to use country systems for aid and investment lending operations.

The strongest argument for using country systems is that the large number of ring-fenced arrangements used by the Bank and other donors is complex and inefficient. In principle, streamlining the current arrangements into a single system would lead to efficiencies both for donors and national authorities. However, this assumes that all donors agree to use country systems. Moreover, using country systems does not mean that investment funds will be adequately safeguarded and will not be misappropriated for unintended and sometimes illegal purposes.

The Challenge of Reforming Budgetary Institutions in Developing Countries

Richard Allen was recently interviewed by the PFM Blog about his recent IMF Working Paper―”The Challenge of Reforming Budgetary Institutions in Developing Countries,” WP/09/96. The full text of Richard Allen's working paper is available by clicking on the following link: Download Wp0996[1]

Question:  What are the main conclusions of your analysis?

RA:  First, reforming public financial management is a frustratingly slow business. In developing countries, the progress of modernizing budgetary institutions needs to be measured in small steps. Major reforms such as introducing a new treasury system or a medium-term budget framework can take a decade or longer. Second, governments, donors and multilateral institutions―including the IMF, I would admit―almost always underestimate the difficulties and challenges, and overestimate the capacity of government to deliver reforms. They fail to learn from the lessons of the past.  Third, countries that are now advanced went through similar experiences when they were in the developing phase.  Some PFM reforms in these countries have taken up to two centuries to evolve from where many developing countries find themselves today, to where the developed countries are today.

1 year, 176 posts and 128244 visitors

Posted by Eivind Tandberg

The PFM blog was launched in September 2007. 2008 was our first full year of operations, and we wanted to give you a little overview of what has been happening on the blog during the year. We will provide some statistics about the use of the blog. We will also identify which articles were most popular among the readers, which PFM categories were most popular among our contributors and who were the most active contributors.

IMF Fiscal Affairs Department: an Update of Activities for the 2008 Annual Meetings

Posted by Michel Lazare

The attached 4-page flyer (Download FAD-new.pdf ), which has been prepared to provide an update of FAD's activities in 2008 to the participants to the 2008 Annual Meetings of the IMF (to be held in Washington on October 11-13, 2008), contains an overview of FAD's key responsibilities and outputs.

FAD provides services to the IMF's member countries through a number of channels and products:

• Fiscal policy analysis and advice, in connection with Fund surveillance and financial assistance, aimed at fostering stability and sustainable growth.
• Technical assistance and capacity building, through on-site missions from Fund headquarters or regional TA centers (RTACs). FAD undertakes about 500 TA missions and expert visits annually.
• Policy development and research on traditional and emerging fiscal policy issues and trends, and
• Outreach, targeted seminars, and training events.

The 2008 flyer indicates in each of the key fiscal topics (macro-fiscal analysis, tax policy, revenue administration, public financial management, expenditure policy, decentralization, and fiscal transparency) what have been in the recent past the main focus of FAD's activities.

For instance, the flyer indicates in the Public Financial Management area that:

"Strong PFM systems are key to ensuring effective delivery of intended budget policies. FAD provides PFM advice through HQ review, TA missions, and resident and short-term experts. These cover:

• Diagnostic assessment of the efficiency, effectiveness, and transparency of PFM systems.
• Strategic advice on the development, sequencing, and prioritization of PFM reform programs.
• Advice on legal design and drafting, including budget system and fiscal responsibility laws.
• Advice on “first generation” reforms, such as budget preparation, expenditure and revenue classification, ac­counting and fiscal reporting, cash management, treasury systems, and internal control and audit.
• Advice on “second generation” reforms, such as medium-term budgeting, performance budgeting, accrual accounting, and fiscal risk assessments.
• Advice on restructuring ministries of finance, state treasuries, and debt management offices."

This Annual Meetings flyer also lists FAD research activities:

• IMF Board papers: Globalization, Financial Markets and Fiscal Policy; Food and Fuel Prices—Recent Developments, Macroeconomic Impact, and Policy Responses and Update; Fuel and Food Price Subsidies—Issues and Reform Options; Fiscal Implications of Climate Change; Fiscal Risks—Sources, Disclosure and Management. Public enterprises and Fiscal Risks—lessons from the Country Studies.
• Selected Issues Papers (SIPs): SIPs, which are policy-oriented papers elaborated usually in the context of Article IV consultations with member countries, were prepared for a wide range of developing, emerging, and industrial countries. Over the past year, SIPs were prepared for a range of developing, emerging market, and industrial countries and covered a broad spectrum of topics, including: assessments of tax and pension reforms, creating fiscal space, improving fiscal coverage, strengthening fiscal policy frameworks, reforming fiscal regimes for mining, and reviewing options for decentralization, fiscal rules, and prudent levels of fiscal reserves and public debt
• IMF Working Papers: Topics have included the cyclical behavior and interactions of monetary and fiscal policy, government size and output volatility, the contribution of tax administration reforms to fiscal adjustment, tax amnesties, natural resource endowments and the domestic revenue effort, corruption and tax revenues, investment incentives and effective tax rates in Southeast Asia, capital budgeting practices, policy challenges of aging populations, and the effect of early retirement provisions on youth unemployment.
• FAD staff also staff contributed journal articles and conference papers on a range of topics, including revenue mobilization and globalization in sub-Saharan Africa, tax competition, economic integration and the relationship between profit and wage taxes, small business taxation, financing social pensions, the role of budget advisors, independent fiscal agencies, fiscal rules, climate change, the fiscal-financial nexus. Finally, in addition to the books on PPPs and PSIA, a book on performance budgeting was published by FAD, and a handbook on the experience of selected countries in developing medium-term expenditure frameworks is being prepared.

Our PFM Blog's "about" tab on top of this page also contains some general information about FAD's role.

You can also consult our last November post for FAD activities in 2007.

FAD provides services to the IMF's member countries through a number of channels and products:

Bridging HIPC and PEFA: Progress in PFM Reforms in 15 Countries, 2001-2006

Posted by Paolo de Renzio

In two previous blog posts of December 10, 2007 and April 21, 2008, Bill Dorotinsky explored the background, rationale and results of the joint World Bank-IMF HIPC AAP (Assessment and Action Plan) instrument, and provided a brief history of the origins of the Public Expenditure and Financial Accountability (PEFA) approach.

The two approaches are clearly linked to each other (the PEFA Performance Measurement Framework draws and builds on many of the HIPC AAP indicators), and share the common objective of providing a reference framework for assessing the quality of PFM systems in developing countries. While the PEFA framework has now come to be generally accepted as the overall assessment tool for this purpose, therefore replacing the HIPC AAP instrument, comparing the two and bringing together their complementary information can shed light on progress in PFM reforms across countries while the PEFA framework is still being rolled out.

A recent paper, "Tracking Progress in the Quality of PFM Systems in HIPCs: An update on past assessments using PEFA data", supported by the PEFA Secretariat has attempted to do just that, bridging the two approaches in order to track progress in the quality of PFM systems in poor countries. Using the original HIPC indicators as a basis, information contained in PEFA assessment reports was "retro-fitted" onto 11 of the 16 indicators, for the 15 countries for which both HIPC AAP assessments in 2001 and 2004 were carried out, followed by a PEFA assessment in the period between 2005 and 2007 (Benin, Burkina Faso, Ghana, Guinea, Guyana, Honduras, Madagascar, Malawi, Mali, Mozambique, Nicaragua, Sao Tome and Principe, Tanzania, Uganda and Zambia). The results are provided by country either in terms of benchmarks met or of underlying raw scores, which permit a more detailed analysis.

Exchanging experiences and learning from others: PEM PAL approach

Posted by Urska Zrinski, CEF PEMPAL Secretariat

PEM PAL, the Public Expenditure Management - Peer-Assisted Learning (PEM-PAL) network, is a network of public expenditure management professionals from countries in Central and Eastern Europe (CEE), and Central Asia. The initiative, which was conceptualized in 2005 by the World Bank and the United Kingdom’s Department for International Development, represents an effort to develop capacity and share reform experiences among countries in CEE and Central Asia. At the beginning of 2008, the PEM PAL secretariat has been moved from the World Bank’s headquarters in Washington DC to the Center of Excellence in Finance, Slovenia, thus bringing the network closer to the region. (See a January 25, 2008 blog post for more on the Center.)

PFM Blog Got an Award!

Posted by Michel Lazare

The PFM Blog team is pleased to let you know that our blog received an award!

The Bayesian Heresy blog recently published its "BH Economics Blog Awards 2008" and ranked our PFM Blog second in its "Best Multilateral Agency Blog."

Best Multilateral Agency Blog
1- IMF Research Blog
2- PFM Blog
3- End Poverty in South Asia (from World Bank)

African Parliamentarians Discuss Ways to Promote Good Governance in the Management of Public Finance

Posted by Lubin Doe

The training center known as the Joint Africa Institute (JAI), created by the World Bank, the IMF and the African Development Bank (ADB), organized a five-day seminar in Tunis on the “Role of Parliamentarians in Promoting Good Public Financial Management (PFM) and Accountability.”

The seminar regrouped 26 legislators and officials from 8 English-speaking African countries (Ethiopia, Ghana, Liberia, Malawi, Mauritius, Rwanda, Sudan, Tanzania and Uganda). The team of presenters included Messrs Mitchell O’Brien (World Bank), Lubin Doe (IMF), Per Eldar Sovik (ADB), Augustine Ruzindana (African Parliamentarians Network Against Corruption), Adams Fusheni (Canada Parliamentary Center) and Niall Johnston (parliamentary consultant).

Germany: Ministry of Finance's Task Force Recommends Introduction of Performance Budgeting and Accrual Accounting

Posted by Michel Lazare

A few days ago, our FAD colleague and PFM Blog author Marc Robinson published a short article in IMFSurvey Magazine titled "Major Reforms for German Budget System." Here is a summary of the key points; the full text of the article is accessible by clicking here.

The German Ministry of Finance's Budget and Accounting Reform Task Force, who was assisted by staff of FAD, recently recommended "the introduction of product budgets--often known elsewhere as programs. The intention is to focus greater attention in the budget formulation stage on choices about how much money is allocated to" various outputs.

"Under the task force's proposals, the product budgets would not in the first instance be used for parliamentary budget appropriations. The idea is that they would initially be used [...] in formulating the budget. The logical next step would, however, be to shift the annual budget law also onto programmatic basis."

IMF Fiscal Affairs Department: an Update of Activities in 2007

Posted by Michel Lazare

For a long time you have suffered from a burning desire to know what the IMF's Fiscal Affairs Department (FAD) is up to. You never dared to ask? Well...this posting is made for you!

Already, our PFM Blog's "about" tag on top of this page contains some general information about what is FAD's role.

The attached 4-page flyer (Download fad_flyer1.pdf), which was prepared to provide an update of FAD's activities in 2007 to the participants to the 2007 Annual Meeting of the IMF in October contains an overview of FAD key responsibilities and outputs.

Welcome to the New IMF Public Financial Management Blog

Welcome to the Public Financial Management Blog of the IMF Fiscal Affairs Department (FAD).

As the first IMF external blog and, to the best of our knowledge, the first PFM blog ever, my FAD colleagues and myself are thrilled to be breaking new ground.