1. Public Financial Management: Concept and Importance

2. Financial Management
Management of resources for achieving optimum outputs
Flow of financial resources – Input, process, output
Internal Control – Regulations, procedures, Approval/Scanctions
External Scrutiny – Audit, Public Hearing
Financial Responsibility and

3. Management of financial resources : Financial Management
Management of public resoruces
Result of Resource use
Fiscal Policy
Government/Institutions
Effective
Efficient
Transparent
Accountable
Public Financial Management
Laws
Systems
Procedures
Organizations

4. Public Financial Management
Public Sector
General Government
Public Corporations
Central Government
State Governments
Local Governments
Public Non-Financial Corporations
Public Financial Corporations
Budgetary Entities
Other Social Sectors
Extra Budgetary Entities

5. PFM Concept PFM deals with government finance,
Government administers and controls resources of the country on behalf of the citizens through PFM
PFM is concerned with handling of public purse/Money
Management of revenue and expenditure in a broader sense.
Needs to be guided by laws, systems, procedures and organizations.
Should guarantee the effective, efficient, transparent and sustainable use of resources.
Should have mitigate the risk associated with finance.
Should serve the interest of the people at large.
Enables Government to fulfil its fiduciary role on behalf of the owners of the nations resources

6. PFM Objective and Process
Objectives
Improve Fiscal transparency
Strengthen political accountability for fiscal and budgetary outcomes
Define a medium term fiscal process
Ensure that fiscal policy guides budgetary policy
Ensure fiscal discipline and sustainability
Preserve macro-fiscal stability
Address inter generational equity concerns
1. Financing (fiscal ) framework
2. Budget Preparation (resource allocation)
3. Budget Approval
4. Budget Execution
5. Accounting and Reporting
6. Oversight, Scrutiny and Audit
PFM Process

7. Scope of PFM
PFM deals with the efficient allocation of public resources, distribution of income and macroeconomic stabilization of the country;
Taxation and revenue management,
Borrowing and debt management,
Budgeting and expenditure management,
PMF procedure and organizations,
Responsibility and accountability,
Oversight, scrutiny and Audit

8. Importance of Public Finance Management
planning, programming and budget preparation
Efficient allocation of resources
increased tax base, compliance
Revenue collection
budget releases, procurement and expenditure management
Delivery of services to the people
reporting, monitoring and control
Management and operational efficiency
parliamentary oversight and external audit
Accountability to the people:

9. Borrowing and debt management,
Budget & Borrowing influenced by wider Policies and Operations
A country's borrowing policy should be consistent with its macroeconomic objectives
Economic Growth
targets
Contain inflation levels
Limit budget deficit
to certain level
Keep credit & money
Supply under control
Macroeconomic
Objectives
Multilateral debt
Bilateral debt
Export Credits
Mixed Credits
Private/Commercial
External Debt
Treasury Bills
Bonds/Stocks
Loans/ Overdraft
Promissory notes
Arrears
Domestic debt
Used for deficit financing,
Conditional or unconditional
Soft or hard loan
Categorized as Bilateral and Multilateral
Received directly or reimbursable
Internal Debt ( National or Domestic loan ):
External Debt ( Foreign or International loan): outward and inward
Multilateral, Bilateral institutions or individual.
Institutions: NPC, MoF, FCGO, NRB, Donors, MDA's

10. Budgeting Authorization for use of public fund
Strategic allocation/distribution of resources
Macroeconomic Projections
Fiscal target (fiscal policy)
Revenue Projection
Borrowing and other flows available
Expenditure Projection
Adjust expenditure as of resources
Assess affordable fiscal envelope
Fiscal and monetary policy
Debt
Fiscal deficit
Aid flows
Budget Process and Institutions: MOF, NPC, ….

11. Budgeting Process Govt revenue & Grants from donors
How govt will spend
the funds
If Expenditure >
Revenue =
Budget deficit
How to fund the deficit?
Always by borrowing

12. Expenditure management
Issuance of Budget
Program approval
Authorization
Process and expenditure
Accounting and Reporting
External Scrutiny / Auditing 1. 2. 3. 4. 5. 6.

13. PFM Functional Framework of Nepal
Legal Framework
Institutional Framework
PAC
Constitution
Legislative/Parliament
Civil society Organizations
OAG
Executive/Government
Acts /Regulation
NVC
Ministry of Finance
(Budgeting and Financing)
External Scrutiny and Audit
Macroeconomic policies
Taxation
Expenditure
Reporting
IRD
FCGO
Working policies
DOC
Ministries, Agencies field offices
Accounting
RID
Process/Directives
Execution
Financial Institutions/Banks

14. PFM Implementation Structure of Nepal - Central
President
Judiciary
Legislative
Parliamentary Committees (PAC)
Constitutional Bodies (OAG)
Others: Dev. Partners, CAN, ASB, Ind. Acc. Auditors, CSOs
PFM Implementation Structure of Nepal - Central
Central Bank
Commercial Banks
Consolidat ed Fund
Executive (OPMCM)
MOF
FCGO
DTCOs
NPC
Line Ministries
Departments
Paying Offices
PPMO, NVC

15. Taxation and revenue management,
"No taxation without representation."
Tax rate needs to be imposed by Act.
Parliament
Audit Observations
Tax Decision
Government
OAG
Tax Accounting & reporting
MoF
Tax Administration
Reports, Budget allocation, distribution
RMIS
FCGO
Banking Arrangement
RAS/ASYCUDA
Concerned office
Public/Stakeholders/Taxpayer

16. PFM Reform PFM is taken as an essential part of development process.
PFM changes the manner of governance by mobilizing the public resources in the area of strategic importance.
PFM Reform enables desirable fiscal and budgetary outcomes;
Aggregate fiscal discipline : budgetary & fiscal risk control;
Strategic allocation of resources; priority and policy based
Efficient service delivery: using resources for best PSD
PFM reform needs to be implemented as part of an overall strategy - reforms should be part of an overall strategic movement towards change (holistic public sector reform initiative) in order to enhance operations and outcomes in the public sector.

17. PFM Reform …..
Principally PFM reform is focused in the following guiding areas;
country leadership - in setting/managing the PFM reform strategy and action plan.
PFM diagnostic - in an integrated and coordinated manner with appropriate tools in regular timing and scope as of country needs.
Capacity building - adding value to government decision-making cycles.
Framed within a multi-year horizon, sequenced around agreed priorities, and built upon a coordinated approach.
Linked to a robust monitoring and evaluation framework.

18. Discussions