Canaries in a Coal Mine

Posted by David Gentry

It is well known that animals and other living things can be used to detect a problem before people become aware of it. These are called sentinel animals or indicator species. A dog barking at noises that people cannot hear is an obvious example. More interesting are certain species in a marine environment that are sensitive to low levels of pollution. For more than a century canaries were used in coal mines to detect toxic gases. They became sick before people became sick, and thus gave miners a chance to escape.

To be effective, indicator species must be sensitive to known dangers. They are used to easily, cheaply and accurately monitor the presence of that danger. It is plain to see if the canary is active and happily chirping or not. A reliable relationship must exist between the state of the canary and toxic gases.

But there are limits to what canaries can tell miners. Dead canaries won’t tell where the gas is coming from or even the specific toxic gas (canaries are sensitive to multiple gases injurious to humans, such as methane and carbon monoxide). Once the canary falls off its perch, the miners know they are facing a hazard but must investigate further to find the source, exact nature and severity of the problem, and then decide what to do about it.

Job Offer: Government of Ghana Seeks Technical Advisor to the Fiscal Decentralization Unit

Local Government Capacity Support Project (LGCSP) – P122692

The Government of Ghana has secured an IDA credit of $175 million for the Local Government Capacity Support Project (LGCSP). The objectives of the project are:
i. To strengthen the intergovernmental fiscal framework; 
ii. To strengthen local public financial management and accountability for improved infrastructure and services in urban assemblies; and
iii. To improve citizens’ engagement with urban assemblies and their perceptions of urban management.

The project is divided into four components. Component 1 will support the establishment of a predictable and transparent fiscal framework for local governance by assisting the Ministry of Finance and Economic Planning (MOFEP) to develop and manage specific aspects of the fiscal framework for local governance. Component 2 will support selected urban local governments to improve their management capabilities in identified key reform areas through a performance based Urban Development Grant and targeted capacity support. Component 3 will generate civil society demand for financial information from urban assemblies, foster more effective engagement of civil society with assemblies on this data, and strengthen the capacity and engagement of citizens’ representatives on the budget and service delivery issues. Component 4 will provide support to the Ministry of Local Government and Rural Development (MLGRD) in fulfilling its roles in supporting the decentralization process and in managing the project.

IMF Technical Assistance: Positive Impact on the Ground

Posted by Camille Karamaga

Country leadership has been essential to the past and on-going success in implementing public financial management reforms in Liberia. But the IMF technical assistance seems to have played an important role, as acknowledged by the Liberian authorities in a video featured on the IMF external web.

Well coordinated assistance has been, and continues to be, provided by the IMF Fiscal Affairs department (FAD) and other development partners. FAD’s assistance, which is currently funded by the Swedish Development Agency (Sida) and the EU, relies on a resident advisor who provides intensive on-the-job capacity building and day-to-day guidance to support the ownership and sustainability of the reforms, in addition to regional activities funded by the Japanese government and routine visit from headquarters staff.

One of the lynchpins of the ongoing economic governance reforms has been the passage in 2009 of a new public financial management law, which along with its associated financial regulations, has re-established the legal basis for public financial transactions in Liberia, as portrayed in a recent blog post. As Minister Augustine Ngafuan stresses in the video, since 2007 FAD has assisted the authorities in designing and putting in place a modern legislative framework that will help Liberia manage its public finances for years to come.

PFM in the 21st Century: ICGFM issues Call for Speakers at its Upcoming Conferences

Posted by David Nummy[1]

PFM has evolved significantly over the last 15 years to meet greater demands for accountability and transparency, and to manage public finances through unprecedented economic changes and crises. The International Consortium on Government Financial Management (ICGFM) will explore this evolution during its next two international conferences, the Winter Conference in Washington, DC, from December 5–7, 2011, and the annual conference in Miami from April 29–May 4, 2012.  The theme of the Winter Conference, PFM in the 21^st Century: Modern PFM Institutions, will build on an upcoming book that the Fiscal Affairs Department of the IMF has been developing during the last year. 

ICGFM solicits proposals for speakers/panels/papers that address the methodologies, tools, technologies that define modern PFM and how it is addressing the challenges faced by governments to be more responsive, open, and better managers of public resources. As this topic will cover both of its upcoming conferences, proposals are solicited for both the winter conference in Washington, DC and the annual conference in Miami.  

Introducing Reforms and Building Capacity: Lessons from Nepal

Posted by Udaya Pant 
 
At the government’s request, the IMF’s Fiscal Affairs Department (FAD) is supporting Nepal in exploring the feasibility of installing a Treasury Single Account (TSA) regime.  As FAD’s resident Treasury advisor since August 2009, I have worked with counterparts and stakeholders to outline an action plan to progressively consolidate approximately 14-16,000 government accounts held in commercial banks into a TSA at the country’s central bank, the Nepal Rashtra Bank (NRB). This TSA is to be managed by the Financial Comptroller General (FCG) of Ministry of Finance (MOF).  

A Steering Committee under FCG and supporting technical groups are in position to oversee implementation. It was decided by the FCG that the new system must be automated and any new TSA modules should be compatible with existing FMIS systems.

The government had no unique budget allocated for the new automated TSA system so, with modest and hard bargained amounts from the MOF’s own budget, software was developed in-house for implementing pilots in two districts. Simultaneously, resources to support plans for upgrading other supporting IT and communication infrastructure were sought from donors. After observing the success of the two pilots, DFID provided initial funding for strengthening the TSA module in the Budget/FMIS software. This DFID funding will flow through a World Bank supported Multi Donor Trust Fund (MDTF), which in total provides $5,000,000 to the FCGO for these areas. The IMF’s technical assistance for the TSA project is funded by the Japanese government.

The two pilots are doing reasonably well and we now have 38 districts on TSA. By December 2013 all 75 districts covering the whole country will be on board; with full functionality planned at the central level.

The TSA reforms, together with automation of treasury operations, are expected to improve management of disbursements and revenue recording to the point that they reach international standards. Installation of the TSA regime in Nepal began hesitantly but is presently being implemented energetically; the MOF have shown their commitment to the implementation. 

To support full-functioning of the TSA, the reform program also envisages major reforms in the budgeting, budget execution, government banking arrangements, treasury management, and accounting processes.In this respect, TSA implementation will be like the ‘iceberg reform’ that will eventually bring complimentary reforms in budgeting, financial management and internal controls.

“I just called TSA I love you” – Using Mobile Payment Systems to Support IFMIS

Posted by Kris Kauffmann

A major challenge in implementing an integrated FMIS in developing or post-conflict countries is in achieving connectivity and eliminating cash handling. However, the almost global coverage of mobile phone networks, and associated payments system now being implemented in some African countries, offers a potential solution to improving government treasury operations in many developing nations.

In places where there is widespread internet coverage and broad geographic coverage of the bank branch network, payments from a treasury can be simply channeled through the banking system. Compared to physical distribution of cash, this has significant benefits in terms of using available cash more efficiently, avoiding corruption, supporting electronic reconciliations, and improving the timeliness of payments. An integrated IFMIS and a Treasury Single Account at the central bank are integral parts of such a payment system.

Brazil: Raising the Bar on Fiscal Transparency

Posted by Jorge Hage, Comptroller General of Brazil

In November 2004 the Brazilian Office of the Comptroller General created the Transparency Portal of the Federal Public Administration (http://www.transparencia.gov.br/) to provide free access to the federal budget data. The Portal can be accessed by anyone without the need of a username or password. This is intended to facilitate citizen oversight of the federal budget. The Portal is a webpage in which the budget execution of the federal government is disclosed using a user-friendly presentation with language less technical than used in the accounting system. The Portal is very comprehensive and provides information on all transfers to states, municipalities, and the Federal District; transfers to citizens benefiting from social programs; and direct spending of the federal government agencies through tender processes or direct contracts. Among others, it includes spending of each agency on per diem remuneration of staff, office supplies, equipment, projects and services; as well as spending through credit cards used by federal government officials.

Certifying PFM Systems for Donor Budget Support to Fragile States – Professor Collier’s Proposal

Posted by Tej Prakash

In a recent op-ed (later also presented at an Overseas Development Institute (ODI) meeting), Prof. Paul Collier has put forward the argument that where donor aid is allowed to flow through the budget system of a fragile state, it has largely failed to deliver the results promised. The reasons given for this failure, range from incompetence to corruption. And, it is suggested that in the near future, there seems to be little chance of any meaningful improvement in these outcomes. He argues that the governance system in many of these countries is broken, and its focus is by no means primarily to provide services to the citizens. It is suggested that budget systems of these countries are extremely ‘leaky’ (‘looting of the public purse”) and that donors do not have, by and large, either the information or the technical expertise, to prevent misuse of aid money.

Collier makes a distinction between aid given for critical operations and for more general budget support operations. For critical operations he recommends using ‘imported administrative capacity’ to manage all spending, including donor funds through specific project support arrangements. His proposal relates only to donor budget support and does not address existing parallel project based arrangements operated by many donors. He does suggest that it is possible to improve the ‘technical’ aspects of donor flows. The focus of technical improvements would not be to introduce policy ‘conditionalities’ through a back door, but to enforce the country’s own laws. He cites the insight of Tinbergen that to implement any objective, there should be a distinct instrument with its distinct effect. Hence, the two main objectives: meeting the need for funds (how much) and ensuring their effective use (on what), should be managed by two different instruments.

Deux années d’assistance technique en gestion financière publique à l’AFRITAC de l’Ouest

Posté par Benoit Taiclet

Affecté comme Conseiller résident en gestion financière publique pendant deux années au centre régional d’assistance technique du FMI pour l’Afrique de l’ouest (AFW) à Bamako (Mali), j’ai ainsi eu le privilège d’intégrer une équipe tout entière dévouée à l’assistance aux pays « clients » membres de l’AFRITAC de l’Ouest. Ce billet pour décrire les activités conduites par le Centre au quotidien pour délivrer l’assistance technique la plus utile possible, en collaboration avec les équipes nationales volontaires et réactives. 

L’AFRITAC de l’Ouest en un clin d’œil [1]: AFW est l’un des deux centres régionaux d’assistance technique du FMI pour l’Afrique de l’Ouest assurant le renforcement des capacités et  des formations techniques pour une dizaine de pays d’Afrique de l’Ouest. Le coordonnateur du centre, son équipe et les huit Conseillers résidents apportent leur soutien sur différentes disciplines telles que : gestion publique, administration fiscale et douanière, statistiques, gestion de la dette et supervision bancaire.

Two years of PFM at AFRITAC-West

Posted by Benoit Taiclet

The past two years I was assigned to the West African Regional Technical Assistance Center—AFRITAC-West (AFW) in Bamako, Mali as an IMF resident PFM advisor. I had the privilege to give this assignment my best effort—and join a hard working team devoted to their job and customers, the member countries. This short post describes the daily business in AFW as it carries out relevant technical assistance (TA) with willing and responsive national teams.

AFRITAC-West at a glance[1]: AFW is one of the two IMF Regional Technical Assistance Centers (RTACs) for West African countries. It delivers capacity-building technical assistance and training to ten countries in Western Africa. Center coordinator, local staff and eight resident advisors (RAs), provide support on broad areas of TA, public financial management, tax and customs administration, statistics, debt management, banking supervision.

Cash Management: More Than Just Public Financial Management

Posted by Greg Horman

The overriding objective of cash management is to ensure that the government is able to fund its expenditure in a timely manner and meet its obligations as they fall due. Cost-effectiveness, risk reduction, and operational efficiency are also important. Cash management is a critical, albeit not so visible, dimension of effective public financial management, with important linkages to monetary policy implementation. More precisely, cash management encompasses two distinct but related activities: cash flow forecasting and cash balance management. The former is concerned with these questions: (i) Over a given time period (daily, weekly, monthly, and so on), what is the volume of the government’s aggregate cash inflows and outflows? (ii) At the end of each time period, what is the balance of cash at hand? The latter is concerned with this question: (iii) What actions does the government take to ensure that it has the “correct” amount of cash at hand at any point? This posting highlights some of the issues related to managing cash balances, which is not very well covered in the public financial management literature.

Changes in the daily cash balance of the treasury single account (TSA), domiciled at the central bank, are mirrored by changes in banking sector liquidity. Indeed, they may be the most significant autonomous influence on liquidity. The central bank takes these changes into account in its monetary policy operations. Effective cash management is characterized by agreement between the ministry of finance and the central bank on the flow of information from the ministry of finance to the central bank on the likely future size of the TSA. Ideally, this should be provided in real time, or at least before the start of each day. Insofar as the ministry of finance can manage its cash flows reasonably tightly around a target balance for the TSA, the government’s cash balance becomes largely neutral for monetary policy purposes.

PEFA Newsflash: PFM Consultant for Communication of PEFA's Corporate Message

 
The PEFA Secretariat intends to recruit a short-term consultant to assist the PEFA Secretariat in heightening awareness of and communicating the PEFA Program's corporate message, mainly through web-based and print media. The position would commence September 2011.

Please see the attached TOR for a full description of the tasks. Should you wish to apply, either go the the PEFA website and click on the link on the home page, or go to the World Bank website. Apply on or before 8/12/2011.

Download Terms of Reference

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.

Implementing a New PFM Legal Framework in Liberia: Two Years On

Posted by Camille Karamaga

One of the greatest challenges in post-conflict Liberia has been to restore public confidence in the government’s financial management system. In order to build public trust, the government has put in place new fiscal policies, laws and governance institutions to address past weaknesses and build a stable foundation for future economic development, with assistance from FAD and other development partners.[1] Key to these reforms has been the new Public Financial Management Law that was passed in 2009 and underpinned the government’s efforts to rebuild credible systems for prudent and efficient management of public finances.

Why enact a new PFM law in Liberia?

The enactment of the PFM law was the beginning of a long journey towards improving transparency and accountability in the country’s PFM systems. In the words of the President of Liberia at the official launch of the IFMIS on July 12^th, 2011, “The enactment, in 2009, of the Public Financial Management Law, followed by the adoption of the enabling regulations in 2010… has, for the first time in Liberia, provided clear terms of reference for key players in the PFM process and the guidelines governing the relationships among those players”.  For the first time, the country has a comprehensive PFM law that provides one piece of legislation covering the entire budgeting and accounting cycle consistent with good international practice. The law also lays a clear path for the future development of PFM practices in Liberia.

Forward Estimates: Rocking or Rolling?

Posted by Kris Kauffmann

In my view, it is now well established that using rolling forward estimates is a central element to the successful implementation of any Medium Term Expenditure Framework approach. By establishing the future costs of existing policies, for say 2-3 years after the budget, this provides a foundation for future budget planning processes, where the focus shifts to the costs verses benefits of changing those existing policies and their established costs. Multi-year estimates also support longer term macro fiscal as well as managerial planning. In recalling Australia’s MTEF reforms and describing the impact of rolling forward estimates, a senior official is quoted as telling the World Bank that “If you had to pick out the one thing that we have done above all others, this reform would be the most dramatic change.”

Yet we often see in developing and emerging market countries that while government may have adopted what appears to be forward estimates in their budget processes, they have not been able to achieve the dramatic changes in budgeting described above. It is a characteristic of these countries that the forward estimates, while published in the previous budget, are not accepted as being highly relevant for future budget processes.

An Interview with Vito Tanzi

 
 

Posted by Carla Sateriale

Vito Tanzi was director of the IMF Fiscal Affairs Department for 20 years, from 1981 to 2000. Since then he has served as Senior Associate at the Carnegie Endowment for International Peace, Undersecretary for Economy and Finance in the Italian government, and consultant and scholar to various international institutions and research institutes. Since his retirement from the Fund he has authored 11 books. Last week Mr. Tanzi’s latest book, Government versus Markets: The Changing Economic Role of the State, was presented at IMF headquarters in Washington. FAD research assistant Carla Sateriale interviewed Mr. Tanzi on his new publication.      

 

What inspired you to write this new book, Government versus Markets, at this point in your career?

I’ve had at least three, maybe four careers throughout my life, which have shaped my perspective. I started in academia—studying at Harvard, and then teaching at American University and George Washington University. I spent 27 years at the Fund, then two years as a minister in the Italian government, and then several more years as a researcher and scholar at the Carnegie Endowment and at the Inter-American Development Bank. Finally, I decided to do what I had always wanted—have a period of my life with no formal commitments. I wanted to allocate all my time to reading, research, and writing. In many ways it has been the most productive period of my life. I have been able to publish five books between last year and now. Two of them in particular, The Charm of Latin America and Russian Bears and Somali Sharks, allowed me to weave together my perspectives on economics with my concrete experiences. Government Versus Markets gave me the opportunity to combine my observations on fiscal policy and regulation with my interest in the historical evolution of the role of the state.

Rwanda: A Decade of Difficult but Sustained Public Financial Management Reforms

Posted by Lewis Kabayiza Murara

Only a decade ago Rwanda did not possess a properly articulated public financial management system, and there were few qualified staff to run the system, especially public accountants. Since then the government has put in place many of the elements required for a sound system of public financial management. Some weaknesses remain, in particular in relation to local accounting capacity, but the government of Rwanda appears firmly committed to establishing a modern, efficient, transparent and accountable PFM system. In 2006, the government put in place a Public Financial Management Action Plan aimed at strengthening several aspects of the existing public financial management system. In particular, the government sought to strengthen accounting capacity, improve the audit function, and put in place more robust financial controls and reporting procedures, new rules on fiscal and financial decentralization, and procurement reforms. Subsequently, and following the first-ever PEFA assessment on Rwanda in 2007, a comprehensive and ambitious five-year Public Financial Management strategy was prepared in 2008 and is now being implemented, with some degree of success as evidenced by a repeat PEFA assessment concluded in December 2010.

This blog post attempts to summarize salient features of Rwanda’s public financial management landscape, including a short paragraph on public procurement (which tends to be forgotten by IMF and other PFM specialists as a key area in public financial management and tends to be treated separately).