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Strengthening the Credibility of Public Finances

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2021-10-13

Total Pages: 114

ISBN-13: 1513584146

Chapter 1 argues that fiscal policy should remain nimble and strengthen its medium-term frameworks, as countries face highly uncertain and differentiated prospects. Vaccination has saved lives and is helping fuel a nascent recovery, but risks are elevated amidst new virus variants, high debt, and poverty. In advanced economies, the shift in fiscal support toward medium-term packages to “build back better” will have overall positive effects globally. Emerging markets and low-income developing countries face a more challenging outlook, with permanent economic scarring and revenue losses. They need international support to increase vaccine availability and financing to achieve the Sustainable Development Goals. Many countries find themselves in a situation where fiscal support is still invaluable to protect lives and livelihoods. At the same time, governments are also facing questions on their elevated debt and gross financing needs. Chapter 2 provides countries with guidance on how they can both avoid withdrawing fiscal support too early, and yet signal to the public that their debt levels are sustainable in the long run. To commit to future deficit reduction, governments have several instruments, including undertaking structural fiscal reforms (such as pension reform or subsidies reform), pre-legislating changes to taxes or spending, committing to fiscal rules that lead to deficit reduction in the future. Countries that follow debt rules, for instance, manage to reduce debt faster that other countries, although fiscal rules should also provide enough flexibility to spend in times of need. Overall, governments that commit to sound public finances and that achieve high levels of fiscal transparency reap meaningful benefits: their budgets are more credible, their announcements are better perceived by the media, and they pay lower interest rates on their debt.

Strengthening Post-Crisis Fiscal Credibility

Author: Mr.Xavier Debrun

Publisher: International Monetary Fund

Published: 2014-04-08

Total Pages: 35

ISBN-13: 147552515X

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Institutions aimed at constraining policy discretion to promote sound fiscal policies are once again at the forefront of the policy debate. Interest in “fiscal councils,” independent watchdogs active in the public debate, has grown rapidly in recent years. This paper presents the first cross-country dataset summarizing key characteristics of fiscal councils among IMF members. The data documents a surge in the number of fiscal councils since the crisis. It also illustrates that well-designed fiscal councils are associated with stronger fiscal performance and better macroeconomic and budgetary forecasts. Key features of effective fiscal councils include operational independence from politics, the provision or public assessment of budgetary forecasts, a strong presence in the public debate, and the monitoring of compliance with fiscal policy rules.

Fiscal Rules—Anchoring Expectations for Sustainable Public Finances

Author: International Monetary Fund. Fiscal Affairs Dept.

Publisher: International Monetary Fund

Published: 2009-12-11

Total Pages: 73

ISBN-13: 1498335160

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The sharp increase in fiscal deficits and public debt in most advanced and several developing economies has raised concerns about the sustainability of public finances and highlighted the need for a significant adjustment over the medium term. This paper assesses the usefulness of fiscal rules in supporting fiscal consolidation, discusses the design and implementation of rules based on a new data base spanning the whole Fund membership, and explores the fiscal framework that could be adopted as countries emerge from the crisis.

PEFA, Public Financial Management, and Good Governance

Author: Jens Kromann Kristensen

Publisher: World Bank Publications

Published: 2019-11-24

Total Pages: 168

ISBN-13: 146481466X

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This project, based on the Public Expenditure and Financial Accountability (PEFA) data set, researched how PEFA can be used to shape policy development in public financial management (PFM) and other major relevant policy areas such as anticorruption, revenue mobilization, political economy analysis, and fragile states. The report explores what shapes the PFM system in low- and middle-income countries by examining the relationship between political institutions and the quality of the PFM system. Although the report finds some evidence that multiple political parties in control of the legislature is associated with better PFM performance, the report finds the need to further refine and test the theories on the relationship between political institutions and PFM. The report addresses the question of the outcomes of PFM systems, distinguishing between fragile and nonfragile states. It finds that better PFM performance is associated with more reliable budgets in terms of expenditure composition in fragile states, but not aggregate budget credibility. Moreover, in contrast to existing studies, it finds no evidence that PFM quality matters for deficit and debt ratios, irrespective of whether a country is fragile or not. The report also explores the relationship between perceptions of corruption and PFM performance. It finds strong evidence of a relationship between better PFM performance and improvements in perceptions of corruption. It also finds that PFM reforms associated with better controls have a stronger relationship with improvements in perceptions of corruption compared to PFM reforms associated with more transparency. The last chapter looks at the relationship between PEFA indicators for revenue administration and domestic resource mobilization. It focuses on the credible use of penalties for noncompliance as a proxy for the type of political commitment required to improve tax performance. The analysis shows that countries that credibly enforce penalties for noncompliance collect more taxes on average.

Public Financial Management and Its Emerging Architecture

Author: Mr. M. Cangiano

Publisher: International Monetary Fund

Published: 2013-04-05

Total Pages: 468

ISBN-13: 1475512198

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The first two decades of the twenty-first century have witnessed an influx of innovations and reforms in public financial management. The current wave of reforms is markedly different from those in the past, owing to the sheer number of innovations, their widespread adoption, and the sense that they add up to a fundamental change in the way governments manage public money. This book takes stock of the most important innovations that have emerged over the past two decades, including fiscal responsibility legislation, fiscal rules, medium-term budget frameworks, fiscal councils, fiscal risk management techniques, performance budgeting, and accrual reporting and accounting. Not merely a handbook or manual describing practices in the field, the volume instead poses critical questions about innovations; the issues and challenges that have appeared along the way, including those associated with the global economic crisis; and how the ground can be prepared for the next generation of public financial management reforms. Watch Video of Book Launch

Improving Fiscal Transparency to Raise Government Efficiency and Reduce Corruption Vulnerabilities in Central, Eastern, and Southeastern Europe

Author: Mr.Bernardin Akitoby

Publisher: International Monetary Fund

Published: 2020-05-11

Total Pages: 66

ISBN-13: 1513532839

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This departmental paper investigates how countries in Central, Eastern, and Southeastern Europe (CESEE) can improve fiscal transparency, thereby raising government efficiency and reducing corruption vulnerabilities.

Climate-Sensitive Management of Public Finances—"Green PFM”

Author: Mr. Fabien Gonguet

Publisher: International Monetary Fund

Published: 2021-08-11

Total Pages: 21

ISBN-13: 1513583042

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Public financial management (PFM) consists of all the government’s institutional arrangements in place to facilitate the implementation of fiscal policies. In response to the growing urgency to fight climate change, “green PFM” aims at adapting existing PFM practices to support climate-sensitive policies. With the cross-cutting nature of climate change and wider environmental concerns, green PFM can be a key enabler of an integrated government strategy to combat climate change. This note outlines a framework for green PFM, emphasizing the need for an approach combining various entry points within, across, and beyond the budget cycle. This includes components such as fiscal transparency and external oversight, and coordination with state-owned enterprises and subnational governments. The note also identifies principles for effective implementation of a green PFM strategy, among which the need for a strong stewardship located within the ministry of finance is paramount.

Transparency in Government Operations

Author: Mr.J. D. Craig

Publisher: International Monetary Fund

Published: 1998-02-03

Total Pages: 50

ISBN-13: 155775697X

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Transparency in government operations is widely regarded as an important precondition for macroeconomic fiscal sustainability, good governance, and overall fiscal rectitude. Notably, the Interim Committee, at its April and September 1996 meetings, stressed the need for greater fiscal transparency. Prompted by these concerns, this paper represents a first attempt to address many of the aspects of transparency in government operations. It provides an overview of major issues in fiscal transparency and examines the IMF's role in promoting transparency in government operations.

Guidelines for Public Expenditure Management

Author: Mr.Jack Diamond

Publisher: International Monetary Fund

Published: 1999-07-01

Total Pages: 84

ISBN-13: 9781557757876

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Traditionally, economics training in public finances has focused more on tax than public expenditure issues, and within expenditure, more on policy considerations than the more mundane matters of public expenditure management. For many years, the IMF's Public Expenditure Management Division has answered specific questions raised by fiscal economists on such missions. Based on this experience, these guidelines arose from the need to provide a general overview of the principles and practices observed in three key aspects of public expenditure management: budget preparation, budget execution, and cash planning. For each aspect of public expenditure management, the guidelines identify separately the differing practices in four groups of countries - the francophone systems, the Commonwealth systems, Latin America, and those in the transition economies. Edited by Barry H. Potter and Jack Diamond, this publication is intended for a general fiscal, or a general budget, advisor interested in the macroeconomic dimension of public expenditure management.

Fiscal Monitor, October 2020

Author: International Monetary Fund. Fiscal Affairs Dept.

Publisher: INTERNATIONAL MONETARY FUND

Published: 2020-10-14

Total Pages: 124

ISBN-13: 9781513552705

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Chapter 1 of the report draws some early lessons from governments’ fiscal responses to the pandemic and provides a roadmap for the recovery. Governments’ measures to cushion the blow from the pandemic total a staggering $12 trillion globally. These lifelines and the worldwide recession have pushed global public debt to an all-time high. But governments should not withdraw lifelines too rapidly. Government support should shift gradually from protecting old jobs to getting people back to work and helping viable but still-vulnerable firms safely reopen. The fiscal measures for the recovery are an opportunity to make the economy more inclusive and greener. Chapter 2 of this report argues that governments need to scale up public investment to ensure successful reopening, boost growth, and prepare economies for the future. Low interest rates make borrowing to invest desirable. Countries that cannot access finance will, however, need to do more with less. The chapter explains how investment can be scaled up while preserving quality. Increasing public investment by 1 percent of GDP in advanced and emerging economies could create 7 million jobs directly, and more than 20 million jobs indirectly. Investments in healthcare, housing, digitalization, and the environment would lay the foundations for a more resilient and inclusive economy.