Mon 130 Angelovska

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Country Perspectives on Advancing Public Financial Management Reform-What Really Works

PFM REFORM LANDSCAPE

Anita Angelovska-Bežoska
National Bank of Republic of Macedonia

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Mon 130 Angelovska

  1. 1. 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
  2. 2. Content <ul><li>Objectives of the PFM reforms; </li></ul><ul><li>Budget Planning Reforms: </li></ul><ul><ul><ul><ul><ul><li>main features; and </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>implementation problems. </li></ul></ul></ul></ul></ul><ul><li>Budget Execution Reforms: </li></ul><ul><ul><ul><ul><li>main features; and </li></ul></ul></ul></ul><ul><ul><ul><li>implementation problems. </li></ul></ul></ul><ul><li>Requirements for successful reforms; </li></ul><ul><li>Conclusion. </li></ul>
  3. 3. Objectives of the PFM reforms <ul><li>Three main objectives of the PFM system: </li></ul><ul><ul><li>fiscal control; </li></ul></ul><ul><ul><li>strategic allocation of resources; and </li></ul></ul><ul><ul><li>efficient and effective use of public resources. </li></ul></ul>
  4. 4. Is there a trade off among the objectives? <ul><li>Short-run against long-run perspective; </li></ul><ul><li>Priorities at different stages of development; </li></ul><ul><li>Gradual approach: </li></ul><ul><ul><li>fiscal control; </li></ul></ul><ul><ul><li>fiscal control + strategic allocation of resources; </li></ul></ul><ul><ul><li>fiscal control + strategic allocation of resources + efficient and effective use of resources. </li></ul></ul>
  5. 5. Budget preparation reforms <ul><li>Main features: </li></ul><ul><ul><li>focus on results (output /outcome) rather than inputs; </li></ul></ul><ul><ul><li>higher degree of flexibility for budget managers in line ministries (consolidation of line items, reallocations, end-of-the-year flexibility); </li></ul></ul><ul><ul><li>higher responsibility focused on results (performance measurement); </li></ul></ul><ul><ul><li>medium-term perspective (greater certainty about the availability of funds and longer-term view on fiscal position); </li></ul></ul><ul><ul><li>transparency and accountability . </li></ul></ul>
  6. 6. Budget preparation reforms <ul><ul><ul><ul><li>Implementation problems : </li></ul></ul></ul></ul><ul><ul><ul><ul><li>weak political support by the government; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>absorption capacity at the spending units level limited; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>˝big-bang˝ approach; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>reluctance for broadening the coverage of the budget document (off-budget funds); </li></ul></ul></ul></ul><ul><ul><ul><ul><li>pro-forma program budgeting; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>unclear definition of strategic priorities; </li></ul></ul></ul></ul>
  7. 7. Budget Execution Reforms <ul><li>Main features: </li></ul><ul><ul><li>improving cash management (min. borrow. cost and maximize return); </li></ul></ul><ul><ul><li>introducing comprehensive TSA in order to: </li></ul></ul><ul><ul><ul><ul><li>improve cash management; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>enhance control and monitoring; and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>improve reporting and transparency; </li></ul></ul></ul></ul><ul><ul><li>improving financial planning and forecasting; </li></ul></ul>
  8. 8. Budget Execution Reforms <ul><li>Main features (cont.): </li></ul><ul><ul><li>controlling all stages of expenditures (commitment control) in order to: </li></ul></ul><ul><ul><ul><ul><li>prevent arrears; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>support budget planning; and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>support cash management. </li></ul></ul></ul></ul><ul><ul><li>introducing higher flexibility in the use of resources on a line-item level; </li></ul></ul><ul><ul><li>improving payment system infrastructure. </li></ul></ul>
  9. 9. Budget Execution Reforms <ul><ul><ul><ul><li>Implementation problems: </li></ul></ul></ul></ul><ul><ul><ul><ul><li>reluctance of spending units to give up own accounts for introduction of TSA; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>reluctance of executing expenditures financed by special revenues through the TSA; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>specific requirements by donor institutions (managing foreign aid); </li></ul></ul></ul></ul><ul><ul><ul><ul><li>weak coordination of budget preparation and budget execution reforms, as well as accounting and reporting reforms; </li></ul></ul></ul></ul>
  10. 10. Budget Execution Reforms <ul><ul><ul><ul><li>Implementation problems (cont.): </li></ul></ul></ul></ul><ul><ul><ul><ul><li>weak coordination with monetary policy; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>limited cash management operations due to macroeconomic constraints; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>difficulties in keeping up with the increased workload ; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>lack of training of the spending units. </li></ul></ul></ul></ul>
  11. 11. Requirements for successful reforms <ul><ul><li>capacity of administration to manage reform: </li></ul></ul><ul><ul><ul><li>improved capacity at the central level; </li></ul></ul></ul><ul><ul><ul><li>strengthened capacity of the spending units </li></ul></ul></ul><ul><ul><li>political support by government; </li></ul></ul><ul><ul><li>sufficient internal control mechanisms; </li></ul></ul><ul><ul><li>appropriate legal framework; </li></ul></ul>
  12. 12. Requirements for successful reforms (cont.) <ul><ul><li>appropriately sequenced reforms; </li></ul></ul><ul><ul><li>strong coordination of foreign donors; </li></ul></ul><ul><ul><li>external TA if internal capacity is insufficient </li></ul></ul><ul><ul><li>is also helpful; </li></ul></ul><ul><ul><li>structural conditionality in IMF programs. </li></ul></ul>
  13. 13. <ul><li>Thank you for your attention . </li></ul><ul><li>[email_address] </li></ul>

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