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Digitalization of Public Finance and Digital Public Infrastructure: Opportunities and Challenges


Countries around the world have been investing increasingly in Digital Public Infrastructure (DPI), particularly during and after the COVID-19 pandemic. These investments have the power to support the achievements of SDG, as well as eventually transform the management of public finances. But what is DPI? The Rockefeller Foundation (2021) defines DPI as digital solutions “that accomplish basic but widely useful functions and that can be used to build new applications for the greater good”. These solutions are generally developed in open-source platforms and have as an aim to support the achievements of the Sustainable Development Goals (SDGs). Such approach builds on recent initiatives to adopt digital solutions across the public sector - such as “government as a platform” and GovTech - and are related to the idea of a step-by-step modular approach to the development of digital solutions.

Broadly defined, DPI comprises interoperable digital “lego” blocks such as digital ID, data sharing solutions and payment systems. India has been leading the way on DPI applications. A well-known DPI solution called Aadhaar, India’s digital identity program, has successfully covered more than 1.3 billion people, providing citizens with greater access to social programs. In addition, India has adopted the vast Unified Payment Interface (UPI), an open protocol for instant money movement. In 2021, UPI processed around 39 billion transactions, totally US$940 billion, equivalent to 31 percent of India’s GDP.


However, the synergies and interactions between the digitalization of public finances and DPI concepts and applications have not yet been sufficiently explored. Based on a recent activities organized by FAD[1], the following issues related to the digitalization of public finances and DPI are as follows:   


[1] 2022 Annual Meetings / New Economy Forum panel on “Transforming Fiscal Policy Through Digital Public Infrastructure” as a well a workshop on DPI on August 2022.

[2] See more details at Costa Rica IMF Country Report No. 22/345, November 2022.

[3] A “ransomware attack” is a type of malicious software (malware) that threatens to publish or block access to data or a computer system, usually by encrypting it, until the victim pays a ransom fee to the attacker.