Two Richards Talk Fiscal Transparency

Posted by Rachel F. Wang

On November 1, 2012, the IMF’s Fiscal Affairs Department (FAD) published a policy paper entitled, “Fiscal Transparency, Accountability, and Risk”. The paper reviews the progress made in improving fiscal reporting since the late 1990s; considers what the global financial crisis has taught us about the adequacy of prevailing fiscal transparency standards, practices, and monitoring; and makes a series of recommendations for revitalizing the global fiscal transparency effort in the wake of the crisis. Richard Allen, a seasoned advisor on public financial management issues and former deputy division chief in FAD, sat down with Richard Hughes, the new head of FAD’s Public Financial Management Division I and co-author of the paper, to talk about its key insights and implications.

Richard Allen (RA): Can you tell me why it was decided to prepare a new IMF policy paper on fiscal transparency?

Richard Hughes (RH): There were really two motivations.

The first motivation was that the IMF has been in the fiscal transparency business for about 15 years. We started work in earnest in the wake of the Asian Financial Crisis with the development of the Fiscal Transparency Code (Code of Good Practices on Fiscal Transparency) and Manual (Manual on Fiscal Transparency) and the Fiscal ROSC (Reports on the Observance of Standards and Codes). So, 15 years on, we wanted to take stock of how much progress we have made in promoting greater fiscal transparency, review how these fiscal transparency instruments were performing, and look at how much work was left to be done.

Accounting Reforms on the Agenda in Azerbaijan

Posted by Mark Silins

The Treasury Community of Practice (TCOP) of PEMPAL[1] conducted a highly interactive three-day workshop entitled “Public Sector Accounting Policies and Practices” from November 6–8, 2012.  Treasury heads and specialists from 18 TCOP-member countries, as well as representatives of the Ministry of Finance of France, took part in the workshop held in Baku, Azerbaijan. The workshop was supported by experts from the World Bank, OECD, SECO and the Slovenian Centre of Excellence in Finance.

The general objective of the Baku event was to provide an opportunity for TCOP members to exchange experiences in implementing public sector accounting and reporting reforms. The event was designed to deepen participants’ understanding of the conceptual, institutional and operational challenges associated with the implementation of accounting reforms, particularly transition to the use of accruals and alignment with IPSAS. The event involved some very informative presentations by officials from participating countries on good practice and practical tips and traps associated with this area of reform, supplemented by input from a small number of international experts. This approach provided a useful basis for a range of dynamic group discussions by TCOP-member countries. As the host country, Azerbaijan also provided detailed information on its broader economic and PFM reforms to date, along with its plans for the future.

Views from the Field No. 8 – West Bank and Gaza

Posted by Pierre Messali

In the latest in the series “Views from the Field”, Richard Allen interviewed Pierre Messali, the World Bank’s Public Sector Expert in West Bank and Gaza, Jerusalem.

RA:  Please describe your new position in Jerusalem and your work priorities in the coming year.

PM:  As the World Bank’s Senior Public Sector Specialist in West Bank and Gaza (WB&G), Jerusalem, I am in charge of supporting the Palestinian Authority (PA) with its Public Financial Management (PFM) and Civil Service Reform (CSR) agendas, as well as broader governance reform issues. A series of major initiatives was launched in these areas during 2008-2011 by my predecessor, Mark Ahern. My primary objective is to keep these multiple agendas alive and to support the PA in their implementation. On the PFM side, the main focus is on strengthening cash forecasting and accounting in order to address the current challenging fiscal/cash situation, and to issue financial statements in line with IPSAS.  Regarding CSR, we plan to help the PA define principles, methodology and modalities for managing human resources, taking account of the constraining fiscal environment. Other important areas of work include support for the implementation of the new public procurement law, especially setting up the High Council for Public Procurement; and testing the PA’s appetite for developing the newly established Anticorruption Commission.

Views from the Field No. 7 – East Asia

Posted by Suhas Joshi

In the latest in the series “Views from the Field”, Richard Alen interviewed Suhas Joshi, FAD’s PFM Advisor in East Asia, who is based in Cambodia.

RA:  What is your experience of working as a PFM advisor around the world?

SJ: Tolstoy starts Anna Karenina with the sentence “Happy families are all alike, unhappy families are unhappy in their own way”. In the same way countries are all alike in their basic PFM requirements and issues but each is unique in its own problems and issues. I have had the privilege of having sat on both sides of the donor table - in India I used to deal with bilateral aid to India and now, for 13 years with the Fund, I have delivered aid to Russia, West African states such as Ghana, Liberia, Sierra Leone and Gambia, then 15 Pacific Island countries, and now to Cambodia, Laos, Vietnam, Nepal, Bangladesh, Bhutan, Indonesia, Sri Lanka, Myanmar and Maldives.

In his Theban plays Sophocles says “There is nothing new under the sun”. In the same vein, I see in all the countries where I have worked certain fundamental PFM issues that remain the same. Yet diversity in location, size and capacity makes each country and its problems different. This creates a challenge for practitioners at the implementation stage - indeed a philosophical one. Often we tend to believe that we, as TA providers, are guiding the reform process. But, as the Gita tells us, we are not the “doers” – we are at best catalysts in the reform process. As I saw from my experience in India, the main “doers” of reform are the ministers and government officials in any country. They are busy performing the routine functions of government about 90% of their time, failing which they will lose their jobs. This leaves about 10% of their time to engage in the reform process. If government officials have to implement several reforms at the same time, their resources are further stretched, resulting in slow implementation. Factor in a bureaucracy that is often either de-motivated or ambivalent, then none of our efforts will bear fruit!

In sum, we need to be realistic in our hopes and recognize that unless we have a high level champion to provide motivation and guidance, the reform process will be slower than expected, if indeed it will be implemented at all. Reform needs to be combined with sustainable capacity development so that the “doers” can do things themselves, and correctly, while we support them in meaningful ways.

Who Breaks a Butterfly Upon a Wheel? Reforming the French Government 2007-2012

Posted by Maximilien Queyranne

In 2007, at the beginning of President Sarkozy’s mandate, the French government launched an ambitious reform agenda to improve the quality of services to the public, to reduce costs and to modernize management of central government financial and human resources. This program was called RGPP (a French acronym for the general review of public policies). As pointed by the OECD, RGPP was active during a key period for public sector reform in France. This momentum it created was characterized by a cocktail of: (i) a president who solemnly promised during the election campaign of 2007 to drastically modernize and streamline the public sector; (ii) a retirement spike in the public sector which allowed for restructuring and boosting productivity; and (iii) a country with some fiscal room for maneuver, a year before the onset of the global financial and economic crisis.

Five years later, the new government has decided to kill off RGPP, on the basis of a report by government internal auditors. At the same time, the OECD published a special review providing an international perspective on RGPP. These reports show that the OECD and government internal auditors’ analyses are largely consistent regarding RGPP’s scope and objectives, but disagree on the methods and decision-making processes that it employed. The reports also indicate that RGPP was poorly integrated with the PFM reforms initiated by the 2001 Organic Budget Framework Law (Loi organique relative aux lois de finances, LOLF) many of which were implemented before RGPP began.

The Importance of Strengthening PFM at the Sub-National Level in Sub-Saharan Africa

Posted by Stephan Klingebiel and Timo Mahn[1]

The ongoing trend of decentralizing governance responsibilities to the sub-national level in many countries in sub-Saharan Africa (SSA) is likely to continue in the near future. In order to achieve its objectives, it will be crucial that this transfer of responsibilities will be matched by equal efforts to increase sub-national Public Financial Management (PFM) capacity.

As a cross-cutting issue of domestic accountability systems and of development policy, PFM lies at the heart of countries’ governance systems. It therefore comes as no surprise that PFM systems at the level of the central state have become one of the key reform areas in developing countries in SSA. At the same time, however, the capacity of, and the conditions for PFM at the sub-national tiers of government to date have received much less attention. While there are signs of a growing demand for sub-national PFM approaches, development partners so far have not fully come to terms with the implications of this trend in designing their technical and financial support programs.

Views from the Field No. 6 – The Caribbean

Posted by Eileen Browne

Richard Allen interviewed Eileen Browne, FAD’s PFM Advisor in the Caribbean Regional Technical Assistance Center (CARTAC) for the latest in the series “Views from the Field”.

RA:  What makes the technical assistance CARTAC offers different?

EZB:  Two things:  the people, culture and institutions of the Caribbean region and CARTAC’s focus on member-driven TA efforts.

The Caribbean is a constellation of small islands and coastal nations and CARTAC serves 20 English-speaking ones, many of which celebrated their 50^th anniversary of independence this year.  Jamaica is the largest island with 3 million inhabitants; Trinidad and Tobago is the second in size with 1.2 million; Barbados is the third with 0.25 million and the rest of the nations are smaller.  Eight of them have formed a currency union. The Caribbean enjoys middle-income status yet shares many institutional deficits with much poorer countries. 

Seeing Our Way Through The Crisis: Why We Need Fiscal Transparency

Posted by Carlo Cottarelli and previously published on iMFdirect

Without good fiscal information, governments can’t understand the fiscal risks they face or make good budget decisions. And unless that information is made public, citizens and their legislatures can’t hold governments accountable for those decisions.

Fiscal transparency—the public availability of timely, reliable, and relevant data on the past, present, and future state of the public finances—is thus to the foundation of effective fiscal management.

A new paper from the IMF on fiscal transparency, accountability, and risk considers the progress we have made in opening up the “black box” of fiscal policymaking over the past decade, the lessons of the recent crisis for current fiscal reporting standards and practices, and the steps we need to take to revitalize the global fiscal transparency effort.