Presentation on theme: "Public Financial Management Reforms Trends and lessons Bill Dorotinsky The World Bank Istanbul June 6, 2005."— Presentation transcript:
Public Financial Management Reforms Trends and lessons Bill Dorotinsky The World Bank Istanbul June 6, 2005
The World Bank 2 Three Objectives of Public Expenditure Management Systems Macrofiscal discipline and stability –Avoid public finance crises –Support economic growth and stability Strategic allocation of resources –Match government policy with programs, objectives Technical efficiency –Getting the most from each lira spent
The World Bank 3 Popular Reforms Macrofiscal Discipline Strategic Allocation Operational Efficiency MTEF Performance, Program budgeting IFMIS, automation Fiscal Responsibility Laws Treasury Single Account Budget classification, chart of account Reporting/ Transparency Procurement Internal control/audit External audit Reforms generally try to change incentives to better meet objectives by changing rules, roles and information
The World Bank 4 Recent trends Fragmenting MoF –Separate debt agency –Separate procurement function –Separate treasury –Separate budget –Separate revenue authority –Separate planning and policy processes (persistent state rather than trend) All tend to weaken the MoF –Effect on financial management unclear –Frequently done to improve pay or improve independence
The World Bank 5 Longer-term Trends Changing role of MoF, central budget office –Control to monitoring/oversight –Policy analysis and development over excessive budget detail –Shifting authority towards line ministries Emphasizing training and guidance Performance over compliance –Analysis of emerging issues, problems, and health of decision-making and finance system Integration of planning into budget process –Integration of capital and recurrent budgets
The World Bank 6 “Benchmarking” Recent McKinsey Study looked at 7 dimensions of 7 country Finance Ministries Australia, Brazil, Malaysia, Singapore, Thailand, UK, US All had taken steps to ‘empower’ line ministries and professional managers All had made substantial efforts to strengthen external audit All had taken measures to move away from input budgeting towards performance or output budgets Most had taken measures to improve transparency of processes and information Source: Transforming MOF: Organizational Recommendations and Implementation. Confidential report to Indonesian Ministry of Finance. June 18, 2003.
The World Bank 7 “Benchmarking” (continued) Six had made substantial effort to separate policy development and oversight from implementation All had taken strong measures to consolidate similar functions, especially cash and debt management Most had taken some measures towards greater checks and balances to MoF functions Source: Transforming MOF: Organizational Recommendations and Implementation. Confidential report to Indonesian Ministry of Finance. June 18, 2003.
The World Bank 8 Broad Lessons How reform undertaken, organized matters –Stakeholder, user involvement –Clear change sought, clear problem to fix Measureable results Focused objectives Proper sequencing –MTEFs fail if accounting, execution weak –Too many reforms at one time tend to fail –Narrow reforms, well sequenced, may have more impact than comprehensive, government-wide reforms