Governments usually become committed to PFM reform because they realize they have to. PFM reform is too arduous and complex an exercise for there to be any other decisive motivation. Our role is to help them to develop and maintain a long-term vision based on this motivation. We do so by explaining the significance of the fiscal infrastructure for macroeconomic performance, for the effectiveness of government services and for the efficient use of government resources. We draw their attention to international experience—the aspects of other countries’ PFM systems they could emulate and how countries with similar PFM systems are viewing and tackling their reforms.
We have to be extremely careful in networking within ministries. We have to respect their formal lines of communication with us. Reform processes redistribute influence and income, and while we are expected to support reformers, there is a clear line between an acceptable level of support and interference in internal ministry affairs.
RA: How do you coordinate your work program with the countries concerned and FAD HQ?
JZ: Written annual work programs are agreed with the authorities and FAD. Getting these agreed before the start of FAD’s budget year can be a challenge. Ministries prefer to have commitments from us to provide advice over a number of years, so that they can plan the donor support for their PFM reforms. Usually we can give an indication of our future level and areas of support, and this tends to be sufficient.
Because I am advising on a number of active countries, I have to do a lot of work remotely in executing the work program, as the reform process cannot always wait for my visits to those countries. This requires a solid relationship and good mutual understanding with the authorities, donors and experts. There are, perhaps surprisingly, few problems with the authorities needing advice outside the scope of the agreed work program. This is probably the consequence of settled relationships and well-defined PFM reform agendas.
With FAD, I am in frequent contact with my backstoppers in Washington who co-ordinate my work program from the headquarters’ perspective. FAD has a focus on sustaining dialogue with country counterparts over the medium term, on advice that is wanted and action-orientated, on agreed approaches and on issues that we are able to follow up on a continuing basis. As a result, our work is more focused, has greater depth and produces more and lasting results than would otherwise be the case. The backstopping plays a crucial role in this.
RA: What are the main strengths and weaknesses of PFM systems in the region?
JZ: The countries in the region are relatively strong in PFM areas that can be directly related to the concept of control, which is central to their current PFM thinking There is therefore little debate about such principles as: comprehensive coverage of the general government sector by the Treasury; commitment control; the Treasury Single Account system; cash planning and management; a GFSM 2001-compliant budget classification; a chart of accounts that unifies cash budget accounting and accrual financial accounting for the whole general government sector; and international accounting and reporting standards. The challenge has been to execute PFM reform strategies reflecting these principles. Most Central Asian countries have made or are making consistent, but sometimes slow progress in doing so.
Progress is less consistent in areas that depend on efficiency concepts that are new to their PFM thinking. These include fiscal risk management; the ownership and financial management of state-owned enterprises; medium-term and program budgeting; and modern systems of internal and external audit.
RA: What areas of PFM are you giving priority too, and why?
JZ: We have been giving priority to the areas about which there is little debate on principles and we can help the authorities with execution. We have also focused on these areas because it is essential to strengthen the control framework before fundamental new thinking on PFM—which has the potential to weaken control—becomes pervasive.
RA: How much do the countries differ in the IT systems they use, and the quality of these systems?
JZ: The functionality of IT systems tends to follow the IMF/World Bank Treasury Reference Model. Some countries have installed COTS but there is an increasing tendency to use locally-developed software.
RA: How do you work with the donors?
JZ: Networking with other donors and their experts working on PFM issues in the field, especially the World Bank, is crucial. Information-sharing not only makes their and our work more efficient and effective. It also ensures that there are no direct conflicts in the advice. Differences of emphasis between donors and experts can be handled by ministries, but direct conflict can be extremely damaging and can set back reform for many years. Poor networking with donors and their experts is one of the most controllable sources of failure in PFM reform, and every year I find myself putting more effort into improving the level and quality of coordination.
RA: What are the living conditions like for a PFM Advisor?
JZ: I have lived and worked in the region for the past eight years, so now it is my second home! It is important for any advisor that he or she has a family life that is settled, enjoys good relations with counterparts, and can see meaningful progress in the PFM reform work.
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.
