Public Participation in Fiscal Policies: Where do we Start?

Posted by Tania Sánchez Andrade[1]

Public participation in fiscal policy is based on the belief that those who are affected by government decisions have a right to be involved in the decision-making process. The comments or opinions received from the public on fiscal policy issues should be registered, published, and receive a response from the government. In an earlier post in this blog, Murray Petrie discussed what public participation in fiscal policy is, why it is important, and how it has been incorporated in international fiscal transparency standards. More guidance is needed, however, on how governments can meaningfully incorporate public participation in fiscal policy-making. To offer some answers, GIFT has worked systematically during the last five years to generate greater knowledge about country practices and innovations in citizen engagement. It has produced country case studies, the Principles of Public Participation in Fiscal Policy, and a Guide on Public Participation, which is being continuously expanded.

Building Fiscal Capacity in the Caribbean

 

Posted by Suhas Joshi[1]

PFM capacity in the Caribbean was recently given a boost by the delivery of a regional Seminar on Cash and Debt Management and Commitment Control. The event was held in St. Lucia under the aegis of the IMF’s Financial Management in the Caribbean Program (FMCP). The FMCP is a technical assistance program, funded by Canada, and focuses on some heavily-indebted Caribbean countries. The program supports reforms and capacity building in budget and treasury management through legal and institutional modernization, using a range of advisory and capacity building tools. Its focus is on countries in the ECCU[2] that are supported by IMF programs, such as Grenada, Dominica, St. Vincent & the Grenadines, and St. Kitts & Nevis. But the program also covers other fiscally vulnerable countries in the region, such as Barbados and Belize. In addition to addressing the specific needs of these countries, the FMCP utilizes regional approaches where there is a benefit to be gained from collaboration.

This first FMCP Regional Seminar was held in St. Lucia from 29 May to 2 June 2017, and was inaugurated by the Minister of Finance of St. Lucia. The Minister pointed out the importance of building fiscal capacity in the region, especially given the high level of indebtedness. Sessions were delivered by the FMCP PFM Regional Advisor, the IMFs Regional Debt Advisor, and two other experts. Details of the program can be found here.

Challenges of Modernizing FMIS

Posted by Nicolas Botton[1]

Under pressure for fiscal consolidation, supranational directives, or merely the need to better allocate resources and manage cash, many governments around the world are trying to extract more information out of their Financial Management Information Systems (FMIS). Governments often use different systems for different purposes – budget execution, payroll management, cash and debt management, revenue collection, public procurement, and so on – using different technologies and processes, in different administrative and geographic locations. But modern financial management puts a premium on the efficient exchange of information, and for systems to communicate with each other – to use an unlovely technical term “interoperability”. Very often, the evolutions are impeded by the fragmentation of the data[2] Getting an across-the-board view and producing up-to-date analytical information on public finances is therefore a considerable challenge. What kind of solutions can be found?

The Stages of PFM Reform in Fragile States

Posted by Mario Pessoa[1]

A recently published policy note by the IMF discusses the challenges of reforming fiscal institutions in fragile states. It identifies several stages through which such reforms typically pass. In broad terms, these stages comprise: (i) an immediate phase following a conflict or natural disaster; (ii) a stage when the fragile state has stabilized but is still vulnerable; and (iii) a stage when the country in no longer fragile. For each of these stages, the paper defines a PFM reform strategy and associated requirements for technical assistance (TA). Initially, the paper recommends that fragile states prioritize actions that allow them to gain immediate control over the budget. Once they have become more stable, the countries can gradually progress to more advanced reforms, such as the development of medium-term expenditure strategies.

Quick wins are important during the first stage as they can help increase the authorities’ confidence and encourage further reforms. The recommended strategy includes:

Sustainable Infrastructure Development in the Pacific Islands

Posted by Lorena Estigarribia, Roland Rajah, and Richard Neves[1]

Infrastructure, whether delivered or owned by the public or private sector is critical for sustainable economic and social development. This is especially so for Pacific island countries, whose remoteness, vulnerability to natural disasters, and highly dispersed population make the need for enhanced connectivity through transport and ICT networks particularly urgent. Making infrastructure development sustainable in the long term remains a perennial challenge throughout the region.

Development partners have been helping Pacific countries build infrastructure for decades. During the 1960s and 1970s, governments in the region constructed many new infrastructure projects such as water treatment plants, sewerage systems, roads, airports, and ports.

Yet most assets were not properly maintained due to weak governance, excessive reliance on donor funds to fill in the gaps, and political economy challenges. Funding for ongoing maintenance was hindered by competing expenditure priorities. The lack of maintenance not only constrained the expansion of existing projects and popular access to even basic infrastructure, but also made the assets extremely vulnerable to climatic threats.

Public Participation in Fiscal Policy

Posted by Murray Petrie[1]

Direct engagement between citizens and governments is increasingly recognized as a critical link in the chain between fiscal transparency, more effective accountability for public financial management, and better fiscal and development outcomes. The importance attached to public participation reflects the acceptance that citizens and civil society organisations are important agents of good governance and sustainable development, alongside markets and the state.

 So, what is public participation in fiscal policy?

 Public participation refers to the variety of ways in which the public – including citizens, civil society organizations, community groups, business organizations, academics, and other non-state actors – interact directly with public authorities on fiscal policy design and implementation. The interactions range from one-off consultation, through face to face deliberation, to ongoing and institutionalized relationships.

Public participation covers both macro-fiscal policy – the main fiscal aggregates, the appropriate size of the deficit and so on – as well as micro-fiscal issues of tax design and administration, and the allocation and effectiveness of spending. It encompasses engagement in four main domains:

Brazil’s Efforts to Improve Fiscal Transparency

Posted by Paulo Medas [1]

An increasing number of countries have done an assessment of their fiscal transparency practices against the principles in the IMF’s Code of Fiscal Transparency. Brazil did so in 2016, amidst ongoing efforts to upgrade transparency. The IMF just published the results.

According to the IMF, Brazil’s practices meet many of the principles of the Fiscal Transparency Code at good or advanced levels. Brazil has made significant progress over recent decades in providing regular information on the budget and its implementation at all levels of government. For example, fiscal statistics encompass the general government sector and recognize most of the government’s assets and liabilities. Fiscal reports are published frequently and annual financial statements are audited. The institutional scope of budget documentation is comprehensive and extensive budgetary information is made available to the general public. Since 2010 a Citizens Budget has been  published which provides core information in a non-technical manner. Brazil is also a leading country in providing citizens with a formal voice in budget deliberations. Elected representatives of National Councils and committees and representatives of civil society can contribute to the planning and budget processes, including through participation in public hearings.