Posted by Moulay El Omari, Felipe Bardella, and Gerardo Uña[1]
Digital technologies are transforming economies and human behavior around the world. The public sector in general, and public finances especially, have been involved in this revolution but governments need to accelerate their efforts.
The COVID-19 crisis has shown how digital solutions are relevant for governments to rapidly implement policy measures to support businesses and protect the lives and wellbeing of vulnerable households. Digital solutions rolled out during the pandemic have benefited core PFM functions such as budgeting, cash management, accounting, and financial reporting. They have also helped deliver public services to remote areas and large populations via digital cash-transfers. And they have promoted greater financial inclusion by shifting from cash payments to electronic payments. But there are huge opportunities for improvement.
As the world starts to recover from the pandemic, many governments in developing countries have concluded that digitalizing their PFM systems is a necessity if they are to keep pace with technological innovations and better manage their economies and public finances. Countries with weak digital platforms have failed the stress-test imposed by the pandemic, were hit hardest economically, and will face more challenges for a strong recovery.
However, improving and implementing new technological solutions is not a panacea. Digital innovations need to be coupled with structural reforms such as modernizing legal frameworks, organizational structures, institutional incentives, and business processes.
In April 2021, the IMF’s Regional Technical Assistance Center for Southern Africa organized jointly with the Fiscal Affairs Department a virtual regional workshop on digitalization and transparency in public finance for 14 countries in Southern Africa and the Western Indian Ocean Region.[2] Participants discussed how to strengthen their countries’ PFM capacity to keep pace with innovations in digital transformation and disruptive technologies from which the private sector is already benefitting. The workshop was the first of a series of similar events that the IMF plans to deliver in sub-Saharan Africa, in collaboration with its Africa Training Institute.
The workshop revolved around four main themes: (i) progress in applying digital solutions to public finance; (ii) modern approaches to designing Financial Management Information Systems (FMIS); (iii) using digital solutions to implement emergency responses, with examples from the COVID-19 pandemic; and (iv) the application of advanced digital tools/innovations to improve fiscal transparency and reporting.
The event also provided participating countries with a platform to share experiences on how their existing digital systems have responded to the COVID-19 crisis. Some countries in the region (e.g., South Africa, Rwanda, and Kenya) have led the response by adapting their legal frameworks, FMIS and digital payment systems, other countries (e.g., Botswana and Comoros) have made less progress.
Participating countries and speakers highlighted the key role played by digital solutions in enhancing fiscal transparency and fighting corruption, and how their accountability institutions such as external auditors, legislators and civil society organizations had contributed to this effort.
There was also a broad consensus on the three prizes of going digital in PFM: rethinking business processes, implementing new technologies, and digitalizing operations to improve service delivery for citizens.
[1] Moulay El Omari is the Resident PFM Advisor at the IMF’s Regional Technical Assistance Center for Southern Africa (AFRITAC-South). Felipe Bardella and Gerardo Uña are Senior Economists at the Fund’s Fiscal Affairs Department.
[2] Participating countries included Angola, Botswana, Lesotho, Madagascar, Mauritius, Mozambique, Seychelles, South Africa, Zambia, Zimbabwe, Kenya, Malawi, Rwanda, and Tanzania.
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.
