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June 05, 2013

Japan Approves Continued Funding for IMF Technical Assistance to South Eastern Europe

Posted by Rocio Sarmiento[1]

Since 2009, the Fiscal Affairs Department (FAD) of the IMF has been providing considerable technical assistance (TA) to South East European (SEE) countries through a Regional Program that is sponsored by the Japanese Government, and is implemented in close cooperation with the Center for Excellence in Finance (CEF), based in Ljubljana, Slovenia. The overarching objective of the Program is to strengthen fiscal management capacity to ensure that all SEE countries—EU member and non-EU member countries alike—have the necessary capacity to design and implement measures to support fiscal consolidation and long-term fiscal sustainability.

The fiscal consolidation efforts of SEE governments have been supported by strengthening fiscal controls, improving the allocation of budgetary resources and more cost-effective service delivery, while efforts to protect revenue through more efficient revenue administration have focused on facilitating reform efforts that over time should bring the region’s tax administrations on par with modern European counterparts, and achieve consistency in the application of tax administration practices throughout the region.

While the current economic crisis that is affecting the region has brought to the open new weaknesses in specific areas of fiscal management, sustained reform efforts over the last decade have already led to important successes:

  • In public financial management, key achievements include the considerable progress made in putting into place medium-term budget frameworks (Romania and Serbia), the continued trend towards introducing new fiscal responsibility legislation and accompanying fiscal rules, and the introduction of fiscal councils (Croatia and Slovenia). Similarly, considerable progress has been made in the development of fiscal reporting that meets international standards (Bosnia and Herzegovina) and budget execution processes (Kosovo and Macedonia), and many countries include cash and debt management as a high priority on their capacity-building agenda (Albania and Montenegro).
  • In revenue administration, commitment to reform has increased significantly across all countries. Strategic business plans detailing reform efforts are now in place in most countries. These set out the direction, methods, activities and timelines for aligning the tax administrations with international recognized standards. A modern Compliance Risk Management model, which is also recommended by the EU and the OECD, is being phased in across the region with already excellent compliance outcomes in a number of countries. Most tax administrations in the region have succeeded in reorganizing their headquarters to reflect tax administration functions (while still maintaining overly large field structures) and have acted on the advice to segment taxpayers into risk categories and to create Large Taxpayer Offices. The establishment of viable business plans for reforms and the clarity achieved with regard to the tax agencies’ strategic IT directions have been instrumental in helping the tax administrations to attract donor support for essential IT reforms. This has, for example, occurred in Albania (donor: Austrian Government) and Moldova (donor: World Bank). Without such inputs full modernization of tax administrations will be impossible. These positive developments have benefitted greatly from sustained TA support, which has been made possible largely by funding provided by the Government of Japan (at times supplemented by other donors). FAD technical assistance has also facilitated donor coordination by offering clear reform roadmaps that are appropriately prioritized and sequenced.

The regional approach to technical assistance has been made possible through a very close collaboration between FAD and the CEF in terms of creating synergies between FAD technical assistance and CEF training activities, thus leveraging the impact of both capacity development activities throughout the SEE region.

The continued support of the Japanese Government has allowed FAD to renew its commitment to supporting reforms in fiscal management throughout the SEE and continue its close collaboration with the CEF to the benefit of countries in the region.

[1] Technical Assistance Officer for the Resource Management Division, working closely with FAD’s technical assistance divisions in preparing the department’s TA, monitoring delivery and providing management information.

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. 


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