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November 2007

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 28, 2007

More on IMF Annual Meetings Performance Budgeting Seminar

Posted by Marc Robinson

The Fiscal Affairs Department organized a seminar on performance budgeting at the IMF/World Bank Annual Meetings. The seminar, on 20 October, focused on international experience with performance budgeting, including the key features and variants of performance budgeting, key success factors and preconditions, and its appropriateness for countries at various stages of development. It was chaired by Teresa Ter-Minassian, FAD Director. Speakers were Sri Mulyani Indrawati, Minister of Finance, Indonesia; Robert J. Shea, Associate Director for Management, Office of Management and Budget, USA; and Marc Robinson, FAD Senior Economist. 

This Blog posted a summary of remarks by Sri Mulyani Indrawati, Minister of Finance, Indonesia, on November 9, 2007. This posting summarizes other portions of th seminar.

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November 26, 2007

PFM Reforms and Public Expenditure Efficiency: Key PFM Reforms Playing a Role in Effectively Controlling Public Expenditure

Posted by Michel Lazare

There are seven key institutional arrangements for budgeting that play a key role in effectively controlling public expenditures in OECD countries.

This is at least the view presented in 2005 by Jon Blondal (the then Acting Head of the Budgeting and Management Division of the OECD) on the occasion of the 7th Banca d'Italia Workshop on Public Finance. In Jon Blöndal's view, there are three major determinants of the fiscal outcomes of OECD member countries: (1) the general performance of the economy (which is the main driver), (2) the political commitment to fiscal discipline, and (3) the institutional arrangements for budgeting. The presence of the two first factors being insufficient to experience a successful fiscal outcome.

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Comparative Budget Law study released in French

Posted by Ian Lienert

In PFM, there is often a dearth of comparative studies. This was especially the case for the legal framework of budget systems. Given different legal traditions and the varying importance of law across countries, budget-related laws are more different than budget systems themselves. Two years ago, the dearth in this subject was plugged when OECD published an English version of The Legal Framework for Budget Systems: An International Comparison, which includes in-depth studies of 13 OECD countries.

More recently this study has been made available in French [hard copy only at this time]. The original English version is available electronically (PDF format) at the OECD Journal of Budgeting site.

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November 23, 2007

IMF Fiscal Affairs Department: an Update of Activities in 2007

Snap1_2 Posted by Michel Lazare

For a long time you have suffered from a burning desire to know what the IMF's Fiscal Affairs Department (FAD) is up to. You never dared to ask? Well...this posting is made for you!

Already, our PFM Blog's "about" tag on top of this page contains some general information about what is FAD's role.

The attached 4-page flyer (Download fad_flyer1.pdf), which was prepared to provide an update of FAD's activities in 2007 to the participants to the 2007 Annual Meeting of the IMF in October contains an overview of FAD key responsibilities and outputs.

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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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November 19, 2007

Public Finance Reference Reading: Revisiting the Classics — Schick's Contemporary Approach to PEM (1998)

Posted by Bill Dorotinsky

As public finance professionals, we are frequently asked for useful background reading to better understand public financial mangement systems. Thankfully, there are a number of classic works still highly relevant and 'must reads' for anyone interested in the topic. Occasionally, we will post references to these documents as a service to our readers.

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November 16, 2007

New Danish Accrual Budgeting System

Posted by Marc Robinsonp>

Denmark Denmark has this year introduced an accrual budgeting system, and in doing so has joined the ranks of a very small group of countries with such systems (including the UK, Australia, and New Zealand). The core feature of the new Danish system is that government agencies receive a budget appropriation for the expenses – i.e. operating costs as measured using accrual accounting – they will incur in the financial year. No longer do they receive a budget limiting the expenditure (payments) that they may make.

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November 14, 2007

Better Meeting Country Needs -- IMF Regional PFM Technical Assistance Centers

Posted by Christian Schiller

Country PFM technical assistance needs range from strategic advice on feasible PFM reform paths to very short-term advice solving specific, practical PFM problems. To meet these differing needs, the IMF has multiple ways of delivering technical assistance (for an overview, see the blog post of November 7). One specific development is the regional technical assistance center (RTAC), of which there are six at present.

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November 12, 2007

Implementing a 'Spending Review' -- Italy Seeks to Improve the Quality of Public Expenditure

Posted by Justin Tyson

Italy As indicated in various recent official pronouncements, there is a growing recognition among Italian policy makers, and in the society at large, of the need to substantially improve the effectiveness and cost efficiency of public spending programs. This is clearly the case from a macro-economic perspective (to create “fiscal space” to attend to new spending priorities, while further reducing the general government deficit and debt and moderating the already relatively high tax burden). But it is also the case from the standpoints of increasing the transparency of allocation of budgetary resources, and the value citizens receive from their taxes through public goods, services, and transfers.

The "Public Spending Green Book" (in Italian), sets out the authorities' intent and approach in terms of improving the quality of public spending in Italy. It was prepared by the recently formed public finance commission (Commissione tecnica per la finanza pubblica) and is intended to provide a comprehensive framework for both the public spending reforms and also the annual budget process (Legge Finanziaria). The first chapter discusses the public expenditure context, the second reviews in more detail expenditure in selected sectors, whilst the third analyzes recent efforts, and outlines future reforms, to improve the quality of public expenditure. The Green Book builds on: (i) several initiatives already begun by the Italian authorities; (ii) international experience in implementing spending reviews; and, (iii) a recent report on the subject requested by the Italian authorities from the IMF's Fiscal Affairs Department.

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November 09, 2007

Indonesia – The Challenges of Implementing a Performance-based Budget System

Posted by Ian Lienert

Small_flag_of_indonesia At the 2007 Annual Meeting of the IMF and World Bank, while some delegates were escaping from the high-security barriers and benefiting from a walk during the wonderful October weather of Washington, D.C., other delegates were spending their Saturday afternoon crammed into a conference room to learn more of the challenges of implementing a Performance-based Budget System (PBS).

Mrs. Sri Mulyani Indrawati, Indonesia's Minister of Finance, had kindly taken time from her hectic schedule to accept an invitation from the IMF to participate in a seminar, brief delegates of the progress so far in changing budget practices in her country and outline the challenges ahead for implementing a PBS.

Continue reading "Indonesia – The Challenges of Implementing a Performance-based Budget System" »

November 07, 2007

IMF public financial management technical assistance — let me count the ways

Posted by Bill Dorotinsky

In the past, IMF member countries generally received technical assistance (TA) from the Fiscal Affairs Department (FAD) through IMF programs with countries. TA requests generally focused on public financial management (PFM) institutional reforms deemed essential for delivering the program and addressing an existing fiscal risk or source of fiscal distress (e.g., treasury management). But the pattern has changed -- member countries are increasingly accessing IMF technical assistance directly, without or outside a program, and on a broader range of PFM topics (e.g., performance budgeting, medium-term expenditure frameworks). There is more recognition that the IMF can help countries improve their PFM systems in general, and hopefully avoid fiscal crises, through such reforms as medium-term expenditure frameworks.

So, how does FAD provide TA? What Types of PFM technical assistance does FAD provide? How can countries access services? Why do countries seek FAD TA? This brief post seeks to answer these questions.

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November 05, 2007

France's National Audit Office ("Cour des Comptes"): 200 years and counting!

Posted by Michel Lazare and Dominique Bouley


On November 5, 2007, the French National Audit Office (La Cour des Comptes) celebrates its 200th anniversary with a re-enactment of its 1807 inaugural session. The current Cour des Comptes was created by Emperor Napoleon I (in a September 16, 1807 law).

Its historical roots are even much older: a royal ordinance in 1256 prescribed that mayors in Normandy had to report their financial accounts to a royal commission once a year; and an institution called chambre des comptes was created in 1303.

Continue reading "France's National Audit Office ("Cour des Comptes"): 200 years and counting!" »

November 02, 2007

Increasing Fiscal Transparency -- Brazil's Budgetary Fiscal Risk Report

Posted by Mario Pessoa

Brazil As public financial management (PFM) systems develop and become more complex, the need to identify, quantify, and manage various public finance risks expands. As the need expands, the capacity and instruments to do so expand as well. Brazil's PFM system advanced considerably with the adoption of its Fiscal Responsibility Law (FRL) in 2000, and it has further advanced transparency by publishing a "Budgetary Fiscal Risk" report (BFR) as one of many annexes to its annual budget.

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