Public Investment

July 01, 2010

A Proposal for Sustainable Management of Hydroelectric Revenues in Paraguay

Prepared by Teresa Dabán 

Paraguay’s budget highly depends on the revenues derived from the hydroelectric, bi-national power plant, Itaipú. The management of these revenues poses important macroeconomic, intergenerational, and political economy challenges. Addressing these challenges is especially important given the temporary nature of the forthcoming windfall related to the recent agreement with Brazil and the projected decline of Itaipú revenues over time. This post draws on the IMF Country Report No.10/170 on Paraguay.

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December 05, 2007

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."

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November 30, 2007

7th IMF Debt Management Forum

Posted by Brian Olden

Debt The 7th IMF Debt Managers Forum, hosted by the IMF’s Monetary and Capital Markets Department, was held in the IMF’s HQ building in Washington D.C. between November 5th and 6th. This two day event was attended by leading public debt managers from advanced and emerging market economies, participants from the financial markets, including leading investment banks and hedge funds and other international financial institutions. 

Many interesting topics were discussed including the effects of the recent credit crunch on sovereign debt management and issuance strategies, trends in the composition of public debt portfolios, use of derivatives to assist in the implementation of debt management strategies, asset and liability management strategies and the issue of sub-national and public enterprise debt management.

The involvement of private sector financial market participants was useful as they were able to provide some commentary on the credit crises and their take on how this would affect , issuance spreads for sovereign issuers over the short to medium-term. Most of the participants were relatively optimistic about the prospects for emerging markets but perhaps less so about the more advanced economies. The most interesting message from the Forum was the view that, for once, this was a crisis that had originated in the advanced economies and that the affect on emerging markets was proving much less severe than has been the case in other international financial crises of recent years.  Lack of exposure of domestic financial institutions to the sub-prime mortgage market and the improvement in the fiscal management of emerging markets has insulated these economies from the worst effects and this has been reflected in the relatively mild reaction of investors to EM sovereign debt as evidenced by the relatively mild widening of spreads in binds issued by these countries. 

The attached note highlights the main areas of discussion in more detail. [Download highlight_7th_imf_debt_forum_2007.DOC]

November 21, 2007

From Line-item to Program Budgeting - Opening the 'black-box' of spending

Posted by Bill Dorotinsky

Lineitem2_3 A perennial question of annual public budgeting for Ministries of Finance and legislatures, and the general public, is "What are we getting for the money?" It is the proverbial "black box" of annual spending, where funds are allocated by traditional line-item budgets to agencies, but there is no sense of what the money actually achieves. While under line-item budgeting, budget offices know what inputs are being purchased, there is no clear indication of what activities, purposes, or objectives -- or ultimately outputs or outcomes -- are being purchased, or how government policies translate into spending. A common first step for many countries towards opening the black box of spending is to adopt a program classification of spending, and introduce program budgeting. A program classification is often thought of as a first step in introducing a performance orientation into the budget process.

While sounding like a very dry, technical exercise, the reality of successful introduction of program budgeting is more complex, involving elements of change management across government. Various governments across the globe have been introducing program budgets over many decades, including within the past decade in Russia, Brazil, and more recently, the Republic of Korea (RoK). A recent book by the Korean Institute of Public Finance and the World Bank, From Line-item to Program Budgeting (John Kim, Editor; Seoul, 2007), summarizes some key lessons from the global experience, and offers practical advice to countries embarking on this journey.

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October 11, 2007

Public Investment: Good Project Management is an Issue of ...Capital Importance

"Unexpected changes to payment schedules related to capital projects can create significant difficulties for finance officers responsible for cash management" remarks Steven R. Kreklow (*) in his short article ("Capital Project Cash Flow Management") of the August 2007 issue of the Government Finance Review, the membership magazine of the US-based Government Finance Officers Association.

This adverse impact on cash management and more generally budget execution can be mitigated by good budget and project management techniques described in Steven R. Krelow's article.

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