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July 2010

July 30, 2010

A Tribute to Richard Goode (1916-2010), the First Director of the IMF's Fiscal Affairs Department

Posted by Michel Lazare


It is with deep sadness that PFM Blog announces the passing of Richard Goode on July 18, 2010. Richard Goode was a distinguished economist, whose writings on tax issues and fiscal policy in developing countries have had a long-lasting influence.

Richard Goode was the First Director of the IMF's Fiscal Affairs Department (FAD), which he headed from 1965 until his retirement in 1981. He largely contributed to making FAD, what it is today: a leading source of expertise on fiscal policy and fiscal institutions.

Most of all, Richard Goode is still remembered in FAD for his immense human qualities.

We are publishing below a copy of the e-mail that Professor Stephen Gardner circulated earlier this week about the life and accomplishments of Richard Goode, as well as reflections from John Lipsky (the IMF's First Deputy Managing Director), Jim Boughton (the former IMF historian), and Vito Tanzi (former FAD's Director) on the life and contributions of Richard Goode.

Professor Stephen Gardner also conducted a long oral history interview of Richard Goode in 1998. His transcript can be found in clicking on the following link: http://bearspace.baylor.edu/Steve_Gardner/web/Goode_Interview_1998.pdf

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July 28, 2010

Job Offer: The World Bank has an Opening for a Financial Management Specialist (FMS) Based in La Paz, Bolivia

Posted by T.K. Balakrishnan, Manager, Financial Management, Latin America and Caribbean Region, World Bank

Job descriptions and qualifications needed are detailed in the job announcements, posted on the World Bank's website: Financial Management Specialist based in La Paz, Bolivia --  Job # 101546

The Closing Date is August 9, 2010. For convenience, we provide the PFM Blog readers with excerpts from the Job Announcement.

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July 26, 2010

Program-Based Budgeting in Mauritius – A Successful Big Bang Approach

Posted by Michael Schaeffer, PFM Advisor East AFRITAC


The Collaborative Africa Budget Reform Initiative (CABRI) organized a regional workshop on May 17-21, 2010 in Mauritius entitled ‘Good Financial Governance: Towards Modern Budgeting’. The workshop was separated into a number of different sessions with the overriding intention to deepen understanding and capacity in the budgeting institutions of participating African countries to manage reform of budget systems. In the first of two blog posts, the presentation of the case study reviewing the implementation of Program Based Budgeting in the host country, Mauritius, is discussed, with reflections on lessons learned.


The session was designed to gain an understanding of the government’s challenges and lessons learned. Why did Mauritius undertake program budgeting reforms? And, what were the catalysts to achieving successful program budgeting reforms so quickly?

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July 23, 2010

Revenue Administration: Autonomy in Tax Administration and the Revenue Authority Model

Posted by Bill Crandall

Increasing autonomy for public bodies has become the norm. How has this trend affected tax administration, and what are the implications for accountability? Has the well-known “Revenue Authority” model provided a governance structure that can lead to improved performance?

TNM/ 10/12 discusses developments in autonomy in the public sector and how these developments have affected revenue administration, and comments on the range of autonomy currently practiced. OECD data is analyzed to assess measures that indicate autonomy, comparing standard tax administrations with those self-described as “semi-autonomous”.

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July 21, 2010

Social Control and Transparency in Brazil

Posted by Helio Tollini 

The requirements of the Fiscal Responsibility Law (LRF), of May 2000, helped improve transparency of the public accounts at all levels of governments in Brazil. The advances in this area were testified by the International Budget Partnership (IBP), whose 2008 Open Budget Initiative ranked Brazil 8th in terms of the budget process transparency,[1] and by the Public Expenditure and Financial Accountability (PEFA) Initiative, whose report on Brazil, currently under finalization, places the country first among approximately 90 finalized assessments.

The LRF had never been changed until the recent approval of Complementary Law nº 131, of May 2009. The new law requires all federative units (which includes the municipalities) to make available “detailed information” on the Internet, in real time, of their budget and financial execution. According to the law, since May 28, 2010, the federal government, the states and the municipalities with more than 100,000 inhabitants are obliged to provide the required information on their own websites. The deadline is extended by one more year for municipalities whose number of inhabitants ranges from 50,000 to 100,000, while the municipalities with less than 50,000 inhabitants have three extra years to adjust, until May 2013. The law foresees sanctions for non-compliance, like the withholding of voluntary transfers from the federal government, which are very important for smaller states and municipalities.

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July 19, 2010

Implementing a Financial Management Information System in a Fragile State Context – Afghanistan’s Successful Experience

Posted by Janis Platais, Pierre Messali and Sailendra Pattanayak

In Afghanistan, the task of rebuilding and consolidating fiscal institutions is particularly challenging because of the ongoing security situation. When the Interim Administration took office in January 2002, there were no computers in the Ministry of Finance (MoF) and few understood the proper role of a finance ministry. A further consequence of the conflict was that communication and other links with the provincial administrations were weak. Against this background, the authorities have made substantial progress in implementing the Afghanistan Financial Management Information System (AFMIS) to make public financial management (PFM) more effective and efficient.

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July 16, 2010

Functionally Organized Tax Administration

Posted by Maureen Kidd

What is meant by the term function-based organization? What are the key components of a function-based organization in tax administration, and what are its advantages? What is the current experience in the use of function-based organizational structures?

TNM/10/10 provides guidance on the development of the organizational approach to tax administration. It describes the use of a function-based organization structure rather than an organization based on business product or type of customer. This kind of structure is predicated on the idea that efficiency can be optimized by grouping together similar activities executed by employees with related skills and specialties. It discusses the importance of distinguishing between the headquarters policy responsibilities and field operational activities.

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July 14, 2010

The Platform Approach in PFM Reform – Positive for Cambodia so far, but not necessarily the magic bullet for all countries

Posted by Peter Murphy[1] 

A key strategic element of Public Financial Management (PFM) reform in Cambodia has been the use of the platform approach, a strategy designed to package and sequence reform measures (platforms) which, taken together, progressively aim to produce a higher level of PFM competence. (www.mef.gov.kh). In Cambodia four platforms were defined with overarching themes, commencing with improved Budget Credibility, and to be followed by strengthened Financial Accountability, development of Policy-Based Budgeting and finally enhanced Accountability for Performance. This sequencing reflected the recognition that strengthening aggregate efficiency and core elements of the existing PFM framework were necessary, prior to addressing more substantive accountability, policy and performance issues. 

The platform approach has been relatively successful in Cambodia in supporting implementation of a comprehensive and complex PFM reform strategy in a challenging post-conflict environment. The Cambodia experience demonstrates a positive outcome for the platform approach, in a country which has a stable political and socio-economic environment, where substantive engagement from political leadership and management is present, and where there is a preference for well-planned consensus-based change, supported by unified and continuous donor support. Periodic review (quarterly monitoring, annual retreats, bi-annual evaluations and end of stage reviews) and flexibility in the application of the platform framework has also proved to be an important element in the implementation. The political and human capital, coordination and implementation costs on both the government and donor side of the approach are substantial.

Continue reading "The Platform Approach in PFM Reform – Positive for Cambodia so far, but not necessarily the magic bullet for all countries" »

July 12, 2010

A Treasury Single Account is an Essential Tool for Consolidating and Managing Governments’ Cash Resources – A New IMF Working Paper

Posted by Sailendra Pattanayak and Israel Fainboim

It is not uncommon to find fragmented government banking arrangements, with multiple bank accounts in commercial banks belonging to different government ministries/agencies, with idle cash sitting there. Such arrangements hinder effective cash management and control over cash balances.

A government that lacks effective control over its cash resources can pay for its institutional deficiencies in multiple ways. First, idle cash balances in bank accounts often fail to earn market-related remuneration. Second, the government, being unaware of these resources (or being unable to use them), incurs unnecessary borrowing costs on raising funds to cover a perceived cash shortage. Third, idle government cash balances in the commercial banking sector are not idle for the banks themselves, and can be used to extend credit. Draining this extra liquidity through open market operations also imposes costs on the central bank.

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July 09, 2010

Tax Administration in Small Economies

Posted by Maureen Kidd

How should small and micro economies organize their tax administration? Are general principles of organization difficult to apply in these situations? What kinds of organizational solutions have been adopted for tax administrations in these situations?

TNM/10/06 defines small and micro economies in the context of tax administration and discusses a number of general principles of tax administration organization. It goes on to look at the particular characteristics of tax administration in small and micro economies using the examples of Fiji and the Seychelles.

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July 07, 2010

Renewed Focus on Extrabudgetary Funds

Posted by Dimitar Radev

The increasing fiscal challenges in the aftermath of the crisis require a renewed focus on extrabudgetary funds (EBFs) that represent a significant part of central government expenditures. The purpose of the recently issued note on EBFs, as part of the IMF’s Technical Notes and Manuals series, is to address this requirement. The note is based on an 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), in which FAD staff analyzed the status of, and policy regarding, EBFs.[1] The note is substantially reorganized in comparison with the original paper and includes updated information to reflect recent developments.

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July 05, 2010

Full Disclosure of Government Debt, and How it Can Go Wrong

Posted by Yang-Hyun Jin 

The more the issue of fiscal adjustment comes to the attention of the public, the more important is the full disclosure of the government or public debt. Just in follow up to the previous post, government or public debt should not be confused with public sector debt which includes the debt of publicly-owned corporations. Government or public debt to GDP ratios are often used as targets of government fiscal policy or even part of fiscal rules that are  enshrined in law, Constitution or International Treaty. The Maastricht Treaty of course famously limits in principle government debt to GDP of eurozone members to a maximum of 60 percent. 

To have sufficient information on the exact amount of government or public debt is not only a starting point for fiscal adjustment but also a criterion for measuring the success of consolidation efforts. In some countries, the authorities adhere to the accepted standards of disclosure as fully as possible. In other countries, however, the authorities’ attitude toward full disclosure of public debt information is more evasive. This is especially the case when full disclosure has political or market consequences.

This blog argues that it is important to respect the criteria and definitions of government/public debt, and not evade full disclosure, but that evasion can and does take place. It examines the definition of public debt and how that information should be reported.

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July 02, 2010

New Online Public Debt Database

Posted by Claudia Dziobek

The World Bank and The International Monetary Fund are joining efforts to present public sector debt statistics in an online centralized database. It is designed to complement the existing quarterly external debt statistics (QEDS) database. The new database is expected to come online in December 2010.

Purpose of the Public Sector Debt Statistics Centralized Database

The main purpose of this database is to facilitate timely dissemination of debt data of the public sector of members of the IMF’s General Data Dissemination System (GDDS) and, over time, the Special Data Dissemination Standard (SDDS). By presenting such data (and related metadata) in a central location, the database will support macroeconomic analysis and cross-country comparisons.

The classifications and definitions are harmonized with those used in other statistical manuals, such as the System of National Accounts 2008 (SNA2008), Government Finance Statistics Manual 2001 (GFSM2001), and Balance of Payments and International Investment Position Manual (BPM6). The Public Sector Debt Statistics Guide is being prepared. Draft chapters are available at www.tffs.org.

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July 01, 2010

A Proposal for Sustainable Management of Hydroelectric Revenues in Paraguay

Prepared by Teresa Dabán 

Paraguay’s budget highly depends on the revenues derived from the hydroelectric, bi-national power plant, Itaipú. The management of these revenues poses important macroeconomic, intergenerational, and political economy challenges. Addressing these challenges is especially important given the temporary nature of the forthcoming windfall related to the recent agreement with Brazil and the projected decline of Itaipú revenues over time. This post draws on the IMF Country Report No.10/170 on Paraguay.

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