Transcript Document 7269558

Public Financial Management
Reforms
Trends and lessons
Istanbul
June 6, 2005
Bill Dorotinsky
The World Bank
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
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Popular Reforms
Reforms generally try to change incentives to better meet objectives
by changing rules, roles and information
Macrofiscal
Discipline
MTEF
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Performance, Program budgeting
IFMIS, automation
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Fiscal Responsibility Laws
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Treasury Single Account
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Budget classification, chart of account
Reporting/ Transparency
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Strategic
Allocation
Operational
Efficiency
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Procurement
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Internal control/audit
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External audit
The World Bank
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Recent trends
 Fragmenting MoF
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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
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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
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“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
The World Bank
Source: Transforming MOF: Organizational Recommendations and Implementation.
Confidential report to Indonesian Ministry of Finance. June 18, 2003.
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“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
The World Bank
Source: Transforming MOF: Organizational Recommendations and Implementation.
Confidential report to Indonesian Ministry of Finance. June 18, 2003.
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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
The World Bank
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