8 30hs   25.09.09   Jim Brumby   Grand3
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8 30hs 25.09.09 Jim Brumby Grand3



Apresentação proferida durante o 6º. Seminário Internacional do CPC no CReCER realizado no hotel Grand Hayatt em São Paulo no dia 25/09/2009.

Apresentação proferida durante o 6º. Seminário Internacional do CPC no CReCER realizado no hotel Grand Hayatt em São Paulo no dia 25/09/2009.



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8 30hs 25.09.09 Jim Brumby Grand3 Presentation Transcript

  • 1. CReCER’09 LATIN AMERICA AND THE CARIBBEAN Restoring Confidence in the Wake of the Financial Crisis September 23-25, 2009 Presented by Jim Brumby September 25, 2009 Closer to the People: PFM Innovations for Sub-national Governments
  • 2. Outline of the Presentation
    • Consequences of the Global Financial Crisis
    • How will the Financial Crisis Affect Sub-National Governments
    • What can SNGs do? Coping strategies
    • PFM innovations: Challenges and Lessons from International Experience
  • 3. Global Financial Crisis and Poverty
      • By end-2010, 89 million more people are expected to be living in extreme poverty
      • Shortfalls to cover at-risk core spending (health, education, safety nets, and infrastructure) amount to about $11.6 billion for the poorest countries
      • Despite sharp declines in commodity prices
        • Food prices in August 2009 are about 57.6 percent higher than in 2005
        • Energy prices are about 27.5 percent above their average in 2005
      • Some specifics impacts:
        • The current downturn could result in 30 to 50 thousand additional infant deaths in Sub-Saharan Africa in 2009.
        • Some 48 garment factories have closed in Cambodia between September 2008 and May 2009, leaving 62,000 unemployed.
          • Women make up nearly 90 percent of garment industry workers.
  • 4.
    • Projected increases in overall fiscal deficits in smaller advanced countries of 7.8 percentage points of GDP in 2009 and 8.8 percentage points in 2010 are larger than in the advanced G-20.
    • Much of the increase in fiscal deficits in emerging market and developing countries reflects a sharp decline in revenues, not fully matched by lower spending.
  • 5. The Financial Crisis and Sub-National Governments
      • Contagion Mechanism – Fiscal stress at National Level might be transferred to SNG
      • National authorities might be tempted to transfer part of the adjustment to SNGs, for example, by cutting or delaying transfers.
      • Even in countries were transfers are automatically allocated and/or mandated by the Constitution (i.e. Philippines), the decrease in government revenue will reduce the amount of these transfers.
      • Difficulties in mobilizing Own Source Revenue
      • In most SNGs, the main source of OSR are: (i) Business Tax, and; (ii) Real Property Tax (RPT). Revenues from both sources will likely experience a significant decrease as a consequence of the economic downturn.
      • Reduced Fiscal Space in SNGs
      • Depending on expenditure assignments, SNGs will likely experience even tighter fiscal space, and temptations will be to cut capital outlays to absorb the lion’s share of the adjustment cost.
      • Balance sheet adjustment likely to be large
  • 6. What can SNGs do? Coping strategies
    • Productive Efficiency : “ Do the same with less " or improve the value for money of existing public expenditures;
    • Allocative Efficiency : Cut poor quality or low-performing programs;
    • New public asset management policies : Adjustment in SNG’s balance sheet in response to reduced fiscal space, and where possible, stimulate demand.
    • Performance information/monitoring systems ;
      • Performance budgeting or result-oriented budgeting ;
    • Fundamental reviews & strategic planning (preference changes)
    • Public investment management performance strategies .
  • 7. PFM Innovations Lessons from International Experience
    • Lessons in implementing performance-oriented reforms
    • When reforms involve different tiers of government…
      • Strong partnership between central and sub-national levels of government
      • Active consultation increases chance of adoption and implementation of reforms
    • Well designed reforms
      • Performance oriented reforms require creation of adequate information systems Performance indicators need coupled with performance Objectives
      • Targets should be set at realistic levels
      • Beware perverse incentives
      • Usage is a major measure of success – focusing on using information for decision making
  • 8. PFM innovations Lessons from international experience (2)
    • Lessons in implementing performance-oriented reforms
    • Think Big, Start Small
      • Make a virtue of simplicity. Avoid over engineered reforms
      • Initial diagnostic should reduce concerns about duplication or overlapping efforts
      • Costs need to be managed
      • Flexibility. Performance oriented reforms need permanent , progressive and incremental improvements
      • Donor driven efforts usually not sustainable
      • Strong champion is usually essential to success
  • 9. Conclusion
    • GFC is significant toll on the balance sheet of all levels of Government
    • SNGs are likely to bare a very significant share of adjustment costs
    • Improvements in productive and allocative efficiency can help:
      • "Doing the same with less" or improving value for money;
      • Cutting poor quality , or low-performing, or out of favor programs; and
      • Resorting to new public asset management policies.
    • Some promising PFM innovations focus on performance include:
      • Performance budgeting or result-oriented budgeting;
      • Performance monitoring systems;
      • Strategic planning, informed by fundamental reviews; and
      • Reinvigorated public investment management processes, including innovative infrastructure financing vehicles, particularly in the context of large size cities and states.