« COVID-19: New IMF Notes on Fiscal Issues (Batch 2) | Main | Measuring the Cost to Governments of COVID-19 »

April 22, 2020

“Do Whatever It Takes but Keep the Receipts”—the Public Financial Management Challenges

Covid

Posted by Manal Fouad, Gerd Schwartz and Claude Wendling[1]

Governments around the world have been doing “whatever it takes” to provide massive fiscal support packages to address the adverse impact of the COVID-19 pandemic on people and firms. The Spring 2020 Fiscal Monitor supported the speedy response by governments, but also advised to “keep the receipts.” In this context, adhering to fiscal transparency, public accountability and institutional legitimacy are the key public financial management (PFM) challenges for keeping the receipts, that is, managing the fiscal and economic fallout from the pandemic.  

Transparency, accountability, and legitimacy underpin PFM frameworks in one way or another. Often, these frameworks themselves originated in circumstances of crisis. As an example, the 1215 Magna Carta, which set the basis for financial accountability of the ruler, was written at a time when England was embroiled in a foreign war. Emergency situations can offer a fertile ground for vested interests to use public funds for private gain, making it critical that vulnerabilities to corruption and misuse be recognized and mitigated. But this is not just about money: to be successful in addressing a crisis, government policy responses aimed at safeguarding people and firms require building public trust, confidence, and support.

A recent note published by the Fiscal Affairs Department, “Keeping the Receipts: Transparency, Accountability, and Legitimacy in Emergency Responses”, shows a way forward in this respect, building on good practice examples from different crises, including the current one. Accordingly, transparency, accountability and legitimacy need to anchor design, implementation, and oversight of emergency support packages.

Design. The specific challenges here emanate from the need to balance the demands of an urgent and timely response in a volatile economic environment with a high degree of transparency in the identification and communication of measures. Legal authorization of policy measures has to be obtained in a clear and transparent manner, according to each country’s institutional framework – in most cases through a Supplementary Budget. Crisis-related measures must be presented in the budget with the adequate degree of granularity.

For example, in Germany, a detailed presentation of the so-called “protective shield to manage the coronavirus pandemic” has been made available, both to Parliament in a more technical form and to the wider public, including detailed costing, eligibility criteria and presentation of administrative processes for each measure. Clear policy goals and performance indicators have to be set, adjusted to each country’s capacity and institutional level. Governments should also strive to be transparent in presenting the impact of the crisis on public finances and the economy, even while acknowledging the numerous uncertainties.

Even under strong time pressure, there is value in consulting with stakeholders, both to improve the design of the support package and to help build support amongst economic actors. Expert and independent civil society organizations (CSOs) can provide inputs to improve the design of fiscal measures or help target it to specific, at-risk constituencies. For example, CIEP in Mexico developed proposals on various policy alternatives to reallocate budget resources and provide economic support in the present period.

These consultations have however to be conducted speedily and in a transparent manner. For example, Côte d’Ivoire, before announcing its pandemic policy response at the end of March 2020, held consultations at the level of the Minister of Finance with banks and employers’ unions.

Implementation. A key challenge here is to provide adequate control and tracking/traceability of budget and off-budget interventions, to ensure that the emergency measures are deployed in line with their intended purpose – and if necessary, review measures if they are seen to be missing their objectives. Additional COVID-19 related spending should be tracked, ideally through dedicated programs or sections of the budget. This also applies to donors’ funding, which should be channeled through the budget with full transparency on its utilization, possibly using mechanisms such as voluntary contribution fund (fonds de concours) in Francophone PFM frameworks. It is also important to be transparent in applying off-budget measures such as guarantees, which constitute a significant part of support packages in the current crisis. When rapid implementation of the policy response requires adapting existing rules to provide more flexibility, this has to be done in a transparent manner.

An example is public procurement, where competitive bidding and publicity of the process have to be preserved as much as possible. Ukraine has successfully launched an e-procurement platform, ProZorro, which has processed some health sector contracts and resulted in clear savings. In the same vein, relaxing ex-ante and upstream controls for rapid response has to be counterbalanced by strengthened ex-post controls. For example, in Peru, rules applicable to the Supreme Audit Institution have been adjusted to allow it to monitor activities in order to prevent misuse and help implement timely corrective action, notably with regard to emergency procurement.

Oversight. The challenge here is to ensure comprehensive and transparent reporting and public accountability procedures that existing oversight institutions (e.g. Parliament, the Supreme Audit Institution, independent fiscal councils), civil society, and the public at large are able to enforce while the new support measures are being designed and implemented. This means regularly reporting on the progress in the implementation of the support package – both on and off-budget operations – and a focus on accessibility of information for the average citizen.

For example, in the Philippines, local governments are required to prepare monthly reports on the utilization and status of implementation of COVID-19 related special grants. The reports are then required to be published on their respective website and posted at minimum three conspicuous public places in the community. Parliamentary oversight of implementation is also a cornerstone for accountability, to be exerted either through conventional tools (standard role of the Finance or Budget Committee) or through specific mechanisms.

The latter solution has been chosen in New Zealand, which established a new Parliamentary select committee — the Epidemic Response Committee — which will meet remotely to scrutinize the Government’s response to COVID-19, under the chairmanship of the Leader of the Opposition. Lastly, involving civil society organizations in monitoring and ex post assessments can help provide a « grass-roots » vision of the effectiveness of the support package and better inform the work of existing public institutions. For example, ICEFI in Guatemala is monitoring the implementation of emergency measures and alerting government authorities to speed up administrative procedures for successful implementation.

“Keeping the receipts” is not as simple as it sounds. Ultimately however, using the key ingredients—fiscal transparency, public accountability, and institutional legitimacy—in designing, implementing, and overseeing the emergency support packages will serve governments well. They will not only serve managing the crisis but also managing the exit from the crisis and reverting to a sustainable long-term fiscal path, including through better fiscal risk disclosure and management.

This article is part of a series related to the Coronavirus Crisis. All of our articles covering the topic can be found on our PFM Blog Coronavirus Articles page.

 

[1] Fiscal Affairs Department, IMF.

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.

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.


August 2020

Sun Mon Tue Wed Thu Fri Sat
            1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31          
Aug 20



Back to top of page
©2007 IMF. All Rights Reserved. About Us | Terms of Use