Corruption and Tax Revenue Generating Capacity Draft Paper

Posted by Davina Jacobs

A draft paper by Davina Jacobs and Patrick Imam, "Effect of Corruption on Tax Revenues in the Middle East" focusing on the impact of corruption on tax revenue performance was discussed at the International Institute of Public Finance (IIPF) 63rd Congress, in Warwick, U.K. (see October 10 blog post) This is the first study that estimates the impact of corruption on the revenue generating capacity of different taxes in the Middle East. We find that the low revenue collection as a share of GDP in the Middle East compared to other middle-income regions is due in part to corruption.

Expenditure Commitment Controls, the essence of fiscal discipline – IMF Technical Guidance Note

Posted by Dimitar Radev and Pokar Khemani

Fiscal discipline, one of the key objectives of good public financial management (PFM), requires a well developed expenditure control framework, including at the commitment level, to prevent accumulation of payment arrears. A July 2006 IMF FAD Technical Guidance Note, "Commitment Controls," by FAD staff members Dimitar Radev and Pokar Khemani, provides technical advice on a number of areas related to commitment controls, including objectives, preconditions for successful implementation, and institutional design. These guidelines are intended to apply primarily to IMF operational work and technical assistance but have also implications for the relevant government departments and agencies within national, provincial/state and local jurisdictions.

Extrabudgetary Funds - Threat or Opportunity?

In a recent article in the OECD's Journal of Budgeting (Richard Allen and Dimitar Radev, "Managing and Controlling Extrabudgetary Funds", OECD Journal of Budgeting, Vol. 6, No. 4, 2006), FAD staff analyze the current status of, and policy regarding, extrabudgetary funds (EBFs). EBFs account for about half of central government expenditures in developed countries, and some 40 percent in developing countries. About two-thirds of these totals represent the activities of social security funds, which are the most important single category of EBF. Other EBFs represent, in many countries, a heterogeneous group of government entities and accounts that include natural resource stabilization and savings funds, sovereign wealth funds, and road maintenance funds.

Transitioning to accrual -- IFAC resource

Posted by Bill Dorotinsky

As a follow-up to our October 15 blog "Transition to Accrual Accounting," a reader suggested we also highlight the International Federation of Accountants(IFAC) International Public Sector Accounting Standards (IPSAS) research paper Study 14 "Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities (second edition)" (December 2003). This authoritative, 268-page guide covers issues of managing the process of change, skills assessment and training, financial reporting issues, as well as coverage of specific topics such as treatment of cash and intangible assets. This guide is available for free electronic download at the IFAC web bookstore link above.

World Freedom Atlas: A Nice-Looking Tool to Visualize Good Governance Indexes

Posted by Michel Lazare

The time-series dataset (1990-2006) put together by the Quality of Government Institute of the Göteborg University (Sweden) is now available as an interactive mapping application in the World Freedom Atlas.

This data set is a very rich one. It contains dozens of data series and over 300 variables originating from a large variety of sources: World Bank, UNDP, NGOs, academia, etc. These data series cover not only good governance issues but also freedom, human rights, and democracy. Some of them relate to issues faced when reforming PFM systems (e.g., bureaucratic compensation) or could show, over time, the impact of PFM reforms (e.g., government effectiveness).

Budget practices and procedures — everything you'd want to know about OECD countries

Posted by Bill Dorotinsky

Ever lay sleepless at night, wondering how far in advance of the new fiscal year OECD country legislatures receive the budget from the executive? Or if ministers in OECD countries are allowed to reallocate/vire funds between line items within their responsibility? For PFM specialists and country PFM officials, these can be important guideposts for reform directions.

Well, wonder no more, and sleep peacefully. The OECD just released publicly their Budget Process and Procedures database for 2007, featuring 30 OECD and 8 non-OECD countries. As the OECD web page itself says: "The purpose ... is to provide budget practitioners and academics the opportunity to compare and contrast national budgeting and financial management practices with a view to share experiences and best practices. It is a unique, comprehensive and free resource that covers the entire budget cycle: preparation, approval, execution, accounting and audit, and performance information."

Transparency Guides -- links on how to access publications

Posted by Bill Dorotinsky

For those interested in ordering the IMF FAD Guide on Resource Revenue Transparency (2007) (see October 19 blog post), please click here. Note that the full text is available for free on-line.

For those interested in ordering the IMF FAD Manual on Fiscal Transparency (2007) (see October 18 blog post), please click here. The full text of this publication is also available for free on-line.

Drafting Budget System Laws -- IMF Technical Guidance Note

Posted by Ian Lienert

Law is a dry subject. Budgeting is as well. Would happiness be attained if the two subjects were to be married? Denmark sees no need for such a marriage: it has never adopted a formal law to govern the budget system. At the other extreme, the United States believes in this marriage: it has adopted many laws relating to the budget system—both a federal and State level. Most countries lie between the extremes of these two countries.

A new IMF FAD Technical Guidance Note on Budget Systems Laws, prepared by Ian Lienert and Israel Fainboim of the Fiscal Affairs Department, explores the variations, and provides principles to guide countries seeking to draft new budget laws or to amend existing laws.

Dr. Allen Schick on Budget Tools and Rules

Posted by Richard Allen

Professor Allen Schick led an FAD-seminar on "Analytic  Tools Versus Decision Rules for Fiscal Policy" on September 19, 2007.  Many analytic concepts can  be formulated into rules that guide or constrain decisions on the budget  or fiscal policy. Alternatively, analytic tools can be used  to inform decisions, but not to dictate how governments allocate resources.

Illuminating Resource Revenue Transparency - A New Guide

Posted by Jon Shields

Available today (October 19) for the first time in hard print, the revised IMF Guide on Resource Revenue Transparency is a comprehensive handbook on good transparency practices for countries with substantial revenues from extractive industries. For governments, it provides detailed advice on  the information they need to make good decisions about the collection and use of these revenues - from the design of tax regimes to the management of resource funds. For citizens and other stakeholders, the Guide gives examples of good practice around the world and what can realistically be expected to be shared with them.

The Guide supplements the revised IMF Manual on Fiscal Transparency (see yesterday's Oct 18 blog). It applies the principles of the revised IMF Code of Good Practices on Fiscal Transparency to the unique set of transparency problems faced by countries that derive a significant share of their revenues from natural resources. The Guide has been revised to reflect the new Code and to provide more recent examples of good practice by individual countries. It provides a framework for assessing resource-specific issues within broader fiscal transparency assessments (including so-called ‘fiscal ROSCs’). Since its initial release in 2005, the Guide has been used by the governments and legislatures of resource rich countries, civil societies, the Extractive Industries Transparency Initiative (EITI), providers of technical support and interested academics and observers.

Central American MTEF Workshop

Central American countries, Panama, and the Dominican Republic sponsored a workshop on medium-term expenditure frameworks (MTEFs) for Vice-Ministers, Budget Directors and Treasurers on October 8-9, 2007. The workshop was hosted by the Honduran Ministry of Finance in Tegucigalpa, and was organized and delivered by the IMF Fiscal Affairs and Western Hemisphere Departments, with the support of the World Bank and InterAmerican Development Bank, and participation of speakers from Colombia and Spain.

Shedding light on fiscal transparency

All the do’s and don’ts for governments keen to let in the light on their management of the nation’s books. That's the motivation for the revised edition of the Fiscal Transparency Manual, published in hard print on October 18 by the Fiscal Affairs Department. It's more than just a guidebook for countries undertaking a voluntary assessment of fiscal transparency by the IMF under the Reports on Standards and Codes initiative. Inside the revised Manual are detailed explanations and country examples for all 44 good practices of the revised Fiscal Transparency Code. Like its predecessor, published in 2001, the Manual is set to be a major source book for PFM practitioners, academics, parliamentarians and civil society.

Four guiding principles of fiscal transparency shape both the Code and Manual: clarity of roles and responsibilities; open budget processes; public availability of information; and assurances of integrity. In delving into these requirements, the Manual also reveals many crucial aspects of good financial stewardship including public financial management, classification of the public sector, accounting issues, poverty impact assessments, approaches to freedom of information, and ethical standards. The Manual is published on (www.imf.org).

A factsheet: how does the IMF encourage greater fiscal transparency?

Posted by Jon Shields

Program and Performance Budgeting Enthusiasm in India -- IMF Training Course

  An IMF training course in Pune for senior civil servants from India and around the region went into the varied experiences with this “second generation” budget reform. Making program and performance budgeting (PPB) work in the context of capacity constraints and politicians familiar only with traditional line item budgeting led to lively discussions with the 29 participants from India’s central and state governments, and invited representatives of other countries' ministries of finance.

Transition to Accrual Accounting -- IMF Technical Guidance Note

Accrual accounting is a hot topic these days, with many countries expressing interest in adopting accruals. A July 2006 IMF FAD Technical Guidance Note by FAD staff members Abdul Khan and Stephen Mayes provides advice on the design, planning, and implementation of an accrual-based accounting regime. The guidelines address a number of issues associated with the implementation of accrual-based accounting, and are intended to provide broad guidance on the preconditions necessary for the successful transition to accrual accounting, the appropriate sequencing of the reform steps, and the milestones which could serve as yardsticks of progress.

Sweden’s New Fiscal Council – helping assure credible fiscal policy

A lively debate about the government’s fiscal policies and the state of public finances puts pressure on transparency and the credibility of budget documents. On August 1, 2007, the Swedish Government set up a Fiscal Council (Finanspolitiska rådet) to provide an independent scrutiny of fiscal policy, promote active public debate, and strengthen the credibility of fiscal policy. The case for strengthening independent review of economic forecasts and fiscal policy has received increasing attention in the past years, and the Swedish initiative may with time provide valuable insight to the effectiveness of such institutions.

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.

Global Public Goods (and PFM?) ---- August International Institute of Public Finance Conference

The International Institute of Public Finance's 63rd annual congress, held Aug 27-30, 2007 in Warwick, UK, was themed “Global Public Goods and Commons: Theoretical and Policy Challenges for a Changing World.” A number of sessions at the conference focused on expenditure policy and management-related issues, including corruption and global public goods.

Good Financial Governance in Africa - Insights into G-8 GTZ Effort

The G-8 Action Plan for Good Financial Governance in Africa was adopted by the G-8 earlier this year in Potsdam (Germany), and was one of the signature German efforts during their G-8 presidency.  GTZ, one of the German Development Agencies, in their latest Newsletter (September 2007, No. 9), focuses on the origins of the Action Plan concept.

Making Performance Budgeting Work: New IMF Book

Member countries will find valuable advice on how to reform their budgeting practices to improve the effectiveness and efficiency of public expenditure in a major new work on performance budgeting produced by the Fiscal Affairs Department. The book, Performance Budgeting: Linking Funding and Results (500pp), came off the presses of the top UK publisher Palgrave Macmillan in September.

Low-Income Countries' Public Financial Management Systems Need Upgrading to Enhance the Benefits of Scaled-Up Aid

A September 2007, IMF Survey article, and associated staff working paper, examines the challenges facing low-income countries in upgrading their public financial management (PFM) systems, and their implications for international development assistance. The article notes that PFM systems in most low-income countries (LICs) need strengthening if these countries are to fully benefit from scaled-up aid. Weaknesses in PFM can undermine budgetary planning, execution and reporting, reduce fiscal transparency, and result in leakage of scarce resources.