Winter 2008 Conference, Washington Country Perspectives on Advancing Public Financial Management Reform-What Really Works PFM REFORM LANDSCAPE Anita Angelovska-Be ž oska National Bank of Republic of Macedonia

Content Objectives of the PFM reforms; Budget Planning Reforms: main features; and implementation problems. Budget Execution Reforms: main features; and implementation problems. Requirements for successful reforms; Conclusion.

Objectives of the PFM reforms;

Budget Planning Reforms:

main features; and

implementation problems.

Budget Execution Reforms:

main features; and

implementation problems.

Requirements for successful reforms;

Conclusion.

Objectives of the PFM reforms Three main objectives of the PFM system: fiscal control; strategic allocation of resources; and efficient and effective use of public resources.

Three main objectives of the PFM system:

fiscal control;

strategic allocation of resources; and

efficient and effective use of public resources.

Is there a trade off among the objectives? Short-run against long-run perspective; Priorities at different stages of development; Gradual approach: fiscal control; fiscal control + strategic allocation of resources; fiscal control + strategic allocation of resources + efficient and effective use of resources.

Short-run against long-run perspective;

Priorities at different stages of development;

Gradual approach:

fiscal control;

fiscal control + strategic allocation of resources;

fiscal control + strategic allocation of resources + efficient and effective use of resources.

Budget preparation reforms Main features: focus on results (output /outcome) rather than inputs; higher degree of flexibility for budget managers in line ministries (consolidation of line items, reallocations, end-of-the-year flexibility); higher responsibility focused on results (performance measurement); medium-term perspective (greater certainty about the availability of funds and longer-term view on fiscal position); transparency and accountability .

Main features:

focus on results (output /outcome) rather than inputs;

higher degree of flexibility for budget managers in line ministries (consolidation of line items, reallocations, end-of-the-year flexibility);

higher responsibility focused on results (performance measurement);

medium-term perspective (greater certainty about the availability of funds and longer-term view on fiscal position);

transparency and accountability .

Budget preparation reforms Implementation problems : weak political support by the government; absorption capacity at the spending units level limited; ˝big-bang˝ approach; reluctance for broadening the coverage of the budget document (off-budget funds); pro-forma program budgeting; unclear definition of strategic priorities;

Implementation problems :

weak political support by the government;

absorption capacity at the spending units level limited;

˝big-bang˝ approach;

reluctance for broadening the coverage of the budget document (off-budget funds);

pro-forma program budgeting;

unclear definition of strategic priorities;

Budget Execution Reforms Main features: improving cash management (min. borrow. cost and maximize return); introducing comprehensive TSA in order to: improve cash management; enhance control and monitoring; and improve reporting and transparency; improving financial planning and forecasting;

Main features:

improving cash management (min. borrow. cost and maximize return);

introducing comprehensive TSA in order to:

improve cash management;

enhance control and monitoring; and

improve reporting and transparency;

improving financial planning and forecasting;

Budget Execution Reforms Main features (cont.): controlling all stages of expenditures (commitment control) in order to: prevent arrears; support budget planning; and support cash management. introducing higher flexibility in the use of resources on a line-item level; improving payment system infrastructure.

Main features (cont.):

controlling all stages of expenditures (commitment control) in order to:

prevent arrears;

support budget planning; and

support cash management.

introducing higher flexibility in the use of resources on a line-item level;

improving payment system infrastructure.

Budget Execution Reforms Implementation problems: reluctance of spending units to give up own accounts for introduction of TSA; reluctance of executing expenditures financed by special revenues through the TSA; specific requirements by donor institutions (managing foreign aid); weak coordination of budget preparation and budget execution reforms, as well as accounting and reporting reforms;

Implementation problems:

reluctance of spending units to give up own accounts for introduction of TSA;

reluctance of executing expenditures financed by special revenues through the TSA;

specific requirements by donor institutions (managing foreign aid);

weak coordination of budget preparation and budget execution reforms, as well as accounting and reporting reforms;

Budget Execution Reforms Implementation problems (cont.): weak coordination with monetary policy; limited cash management operations due to macroeconomic constraints; difficulties in keeping up with the increased workload ; lack of training of the spending units.

Implementation problems (cont.):

weak coordination with monetary policy;

limited cash management operations due to macroeconomic constraints;

difficulties in keeping up with the increased workload ;

lack of training of the spending units.

Requirements for successful reforms capacity of administration to manage reform: improved capacity at the central level; strengthened capacity of the spending units political support by government; sufficient internal control mechanisms; appropriate legal framework;

capacity of administration to manage reform:

improved capacity at the central level;

strengthened capacity of the spending units

political support by government;

sufficient internal control mechanisms;

appropriate legal framework;

Requirements for successful reforms (cont.) appropriately sequenced reforms; strong coordination of foreign donors; external TA if internal capacity is insufficient is also helpful; structural conditionality in IMF programs.

appropriately sequenced reforms;

strong coordination of foreign donors;

external TA if internal capacity is insufficient

is also helpful;

structural conditionality in IMF programs.

Thank you for your attention . [email_address]

Thank you for your attention .

[email_address]