Saturday, February 28, 2009

How do you rate a Finance Minister?

Finance Minster Dr Ezra Suruma has been honoured as the best finance minister in Africa for the year 2008 by The Banker magazine.

The Banker, established in 1926, is a UK based global intelligence financial magazine that investigates, exposes and passes expert comment on critical developments in the global banking sector. The Banker is published monthly and its ninth Year of the Awards were sponsored by Qatar Financial Centre.

An article in the January edition of the magazine described Dr Suruma as a minister who has overseen a year of strong growth in the face of a series of economic head winds....

Acting Secretary to the treasury Keith Muhakanizi said - at the award giving ceremony on February 9 at Serena Hotel - that Uganda had a consistent economic growth but came out to perform strongly in 2007/08.
“Our real market GDP shot to a record 9.8 per cent fuelled by a robust expansion in the construction, telecom and services sector,” he said...

Mr Muhakanizi said this had been complimented with cautious micro-economic policies rated the best in the world and opting for a private sector led economy that granted Uganda a global B+ placing it among the best economies in Africa...

The criterion for the assessment of the Bank of the Year Awards is conducted among 148 countries and the result is built around detailed questionnaires provided by banks.

This year 740 banks from 150 countries submitted questionnaires to Financial Times Magazine. Peter said their global judging team reflects not only on the latest results, growth rates and performance data over the period contained in the questionnaires but also analyses all available material examining technology, acquisitions and key strategic developments.

According to the Magazine, Uganda scored highly having kept inflation under 7 per cent from 6.8 per cent in 2007. Banks remained well capitalised with an average ratio of liquid assets to deposits of 51 per cent - which saw foreign banks flock into the market - and deposits increased by 26 per cent.

-Suruma named Africa’s finance minister

via IMF's PFM blog.

For Discussion: How do you rate a finance minister? By GDP growth, fiscal space, public debt? I say have a look at the budget speech.

From Suruma's latest budget speech;

Mr. Speaker, I have now come to the end of this year's budget speech. I have put on record Uganda's rate of economic growth which averaged 8.9 percent in real terms in the last three years (10.3 percent in Financial Year 2005/06, 7.4 percent in Financial Year 2006/07 and 8.9 percent in Financial Year 2007/08). I am sure that you Mr. Speaker and honorable members deserve to be congratulated that during your tenure of office our country registered the highest rate of economic growth ever recorded in our history….

Mr. Speaker, the world has marveled for long at the achievements of the Asian tigers.. I hope you will permit me Mr. Speaker to express the hope that the world will soon recognize that there are also .African tigers. and Uganda is certainly one of them....

Mr. Speaker, I would have wished to do better. Indeed during the past several months I have had to bear and absorb attacks and angry protests of many Members of Parliament, Ministers and Heads of Departments who wanted and deserved more money than they got. I am sure we all recognize and understand that this is not a personal matter. These are the real sacrifices we must collectively bear to transform Uganda from poverty to prosperity. I therefore want to ask for forgiveness and understanding from so many people whose requests I have not been able to address adequately in this budget. I ask you to be patient and remember that even in our homes we cannot provide for every single need and desire that our families may want.

Whither Intergenerational Equity



via Mark J. Perry

Sunday, February 22, 2009

Book recommendation


The Long and the Short of it: A Guide to Finance and Investment for Normally Intelligent People Who Aren’t in the Industry
John Kay

Many friends over the years have asked me - ‘what can I read that tells me about finance and investment in a non-technical way but doesn’t insult my intelligence?’ Few books do this. I have often recommended Burton Malkiel’s A Random Walk down Wall Street, but that book is now old (first published in the 1970s) and very American. So I thought I would have a go myself. And the credit crunch made it all the more topical.

Recent TAs from ADB

Kingdom of Cambodia: Capacity Development for National Economic Policy Analysis and Development Management, Phase III

Strengthening Governance and Accountability in Pacific Island Countries (Phase 2)

Saturday, February 21, 2009

Model Fiscal Rules

The empirical and theoretical literature has identified the key characteristics of a model fiscal rule. The rule should be as follows:
Well-defined: indicator, institutional coverage, specific escape clauses:
- Overall balance preferred over current balances as investment expenditure suffers from both conceptual and measurement weaknesses;
-Public sector rather than general government (to include off-budget operations and the cost of quasi-fiscal activities of public enterprises; however, it may be desirable to exclude the social security system as assets cover future contingent liabilities).
Transparent: accounting, forecasting, and institutional arrangements.
Adequate: contain inflation (limits on borrowing from the central bank), reduce remaining external vulnerabilities (limits on budget deficit), sustainability of public-debt-to-GDP ratio (limits on government debt, or a minimum primary surplus).
Consistent: criteria need to be internally consistent and with other macroeconomic or policy rules (inflation targeting).
Simple: appeal to legislature and public.
Flexible: accommodate external shocks by allowing room for automatic stabilizers and discretionary policies to work (i.e., use of structural primary surplus rule or balanced-budget rules over a medium-term horizon).
Enforceable: constitutional or legal statutes, perhaps with penalties; independent fiscal councils.
Efficient: the rule should prevent structural one-off measures (frequent adjustment in tax rates); a fiscal rule should be a catalyst for fiscal reforms that ensure sustainability.


-FISCAL POLICY DURING DOWNTURNS AND THE PROS AND CONS OF ALTERNATIVE FISCAL RULES, chapter in
Philippines: Selected Issues

El Salvador letter of intent


To mitigate these risks, we have designed a program aimed at preserving macroeconomic stability during 2009 and boosting the economy’s resilience to external shocks. The program aims to: (i) bolster confidence by maintaining sound macroeconomic policies; (ii) upgrade the regulatory and supervisory framework of the banking system; and (iii) increase the liquidity buffers of the financial system.

Within this context, the program will focus on preventive and contingency measures, in particular, in the financial system. The measures will be anchored on strict adherence to El Salvador’s monetary regime of official dollarization and a prudent fiscal policy, while expanding social programs to mitigate the impact of the global growth slowdown. Financial system policies will concentrate on enhancing readiness to detect and respond resolutely to signs of stress in the banking system...

The nonfinancial public sector (NFPS) comprises the central government, the rest of the general government (Instituto Salvadoreño del Seguro Social (ISSS), the municipal governments, public hospitals, the national university, and other decentralized agencies), and the nonfinancial public sector enterprises (Comisión Ejecutiva Hidroeléctrica del Río Lempa (CEL), Comisión Ejecutiva Portuaria Autónoma (CEPA), Administración Nacional de Acueductos y Alcantarillados (ANDA), and Lotería Nacional de Beneficiencia (LNB)).

3. The overall balance of the NFPS is measured on a cash basis from below the line, defined as (a) net domestic financing of the NFPS; plus (b) net external financing of the NFPS; plus (c) proceeds from exceptional revenues such as, but not limited to, proceeds from privatization or licenses and concessions, as defined in the attached Table A1. The components of the NFPS financing will be defined and measured as follows:

(a) The net domestic financing of the NFPS is defined as the sum of: (i) the increase in net claims of the domestic financial system on the NFPS, excluding government bonds initially sold abroad; (ii) the net increase in the amount of public sector bills (Letes) and bonds held outside the domestic financial system and the NFPS, excluding bonds initially sold to nonresidents; and (iii) floating debt of the NFPS due to expenditure operations and tax refund payments.

(b) The net external financing of the NFPS comprises (i) disbursements of external loans; plus (ii) receipts from the issuance of government bonds abroad and Letes held by nonresidents; minus (iii) cash payments of principal (current maturities of both loans, bonds and Letes); minus (iv) cash payments of arrears (principal and interest); minus (vi) debt buybacks or other prepayments of debt (at market value); minus (vii) debt-equity swaps accounted at the market value of these papers; and minus/plus (viii) the net increase/decrease in other foreign assets of the nonfinancial public sector.

(c) proceeds from exceptional revenue such as, but not limited to, proceeds from privatization, the sale of licenses, and the granting of concessions. These would be defined as (i) the cash payments received by the Treasury from the sale of state-owned assets; plus (ii) debt equity swaps, accounted at market values. Also included are up-front payments

-El Salvador: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding

Monday, February 16, 2009

Tanzania Civil Service reform experience


Reform efforts in this area started in 1991 with the Civil Service Reform Program (CSRP). This program, implemented between 1991 and 1999, was designed to reduce the size of both the civil service and the wage bill to contain costs while strengthening managerial capacity and improving the organizational structure. The main achievements were a decline in the number of central government personnel from a peak of 355,000 in 1992 to 264,000 by 1998/99 (Figure 11); better control over employment levels using a personnel database and a computerized payroll system (the wage bill exceeded budget by 40 percent in 1994 but by only 2 percent in 1999); and recomposition of the aggregate wage bill by rationalizing and decompressing the pay structure and consolidating allowances into basic salaries.

The next stage of reform, the Public Service Reform Program (PSRP), spanned 2000–07. The focus changed to improving delivery of public services. While improvements were made in some areas, progress was slow. Positive areas included the introduction of a performance management system and more decentralized policy making. However, poor service delivery persists in many areas, accountability remains weak, and there are limited value-for-money assessments. The PSRP sought to adjust salary scales to attract and retain qualified staff. For this purpose, it incorporated the medium-term pay policy, which had been adopted by the government in 1999, aimed at gradually increasing civil servant remuneration over the following five years, as well as enhancing the salaries of key professional, technical, and managerial personnel. The policy envisaged a gradual increase in the wage bill of about half a percentage point of GDP by 2003/04, together with a further decline in the size of the civil service. Its implementation was uneven, but the significant wage increase introduced with the 2006/07 budget (reflecting in part a consolidation of allowances previously recorded separately from wages) put remunerations close to the targeted level. Even so, retaining quality staff remains challenging. A further substantial salary increase was granted in 2008. At the same time, the wage bill increased by more than originally envisaged, as the government recalibrated its employment strategy to achieve the MDGs and substantially expanded the hiring of education and health workers.

To enhance performance and accountability and better align its operations with MKUKUTA, a second phase of the PSRP has recently been launched. It emphasizes building the capacity of government entities to formulate policies; decentralizing human resources processes and systems; retaining quality staff through adequate remuneration and incentives; institutionalizing performance management systems; and increasing public sector accountability. The government is still aggressively hiring teachers and health care workers to address pressing social needs. A revised Medium Term Pay Policy is under preparation.

-Tanzania: The Story of an African Transition

Sunday, February 15, 2009

E-gov chief of Obama Administration

Kundra also worked as vice president of marketing for Evincible Software, which provided electronic signatures and identity management for financial services companies and the Defense Department. In addition, he served on the adjunct faculty at the University of Maryland, where he received a bachelor degree in psychology and a master's in information technology.

As administrator of e-government, Kundra will work with the Chief Information Officers Council to formulate policy and help agencies manage IT investments. He could bring a different approach to technology than his predecessor. IT professionals in government and those working for contractors say Evans, who began her post as e-gov chief under the Bush administration in 2003, say she managed information technology as a commodity rather than a strategic asset. Kundra, conversely, brings a more activist approach that emphasizes using the latest technology such as Google applications to affect directly government performance.

One change Kundra may take on immediately is cloud computing, a process that stores all applications on remote servers instead of on laptop and desktop computers as a means to make networks more efficient. "The cloud will do for government what the Internet did in the '90s," Kundra told Nextgov in a November interview. "It's a fundamental change to the way our government operates by moving to the cloud. Rather than owning the infrastructure, we can save millions."

Teresa Bozzelli, managing director and chief operating officer for the technology research firm Government Insight, which worked with the Obama IT transition team, agreed that a shift to cloud computing would be beneficial for federal agencies.

"The government owning everything as opposed to buying infrastructure as a service really needs to change," Bozzelli said. "In the new model, you only buy what you use. The government is paying for no downtime. It's both a short-term approach for cost savings and a long-term strategy for bringing in advantageous technology upgrades more quickly."

Kundra also is a strong proponent of giving the public access to government data. "Why does the government keep information secret?" he rhetorically asked during an interview with Nextgov. "Why not put it all out in the government domain?" [Since arriving in Washington], I've made all the government databases public. Every 311 call, every abandoned automobile, who has responded, etc. It provides high-level oversight of the daily tasks of government."

-Kundra said to be Obama's pick for OMB e-gov chief

Book recommendation

Best Practices in Quantitative Methods
Jason W. Osborne, Ph.D., Editor

Assorted

The Indian Railway King;
Lalu is a happy man: happy to have risen to become rich, beloved, and reviled all over India; happy that a grateful nation credits him with whipping its beleaguered rail system into profitability; and happy that he’s managed to do all this and somehow stay out of jail. Under his leadership, Indian Railways has gone from bankruptcy to billions in just a few years. When Lalu presented his latest budget to Parliament on February 13, he bragged, "Hathi ko cheetah bana diya" ("I have turned an elephant into a cheetah"). What’s his secret?

“Cow dung,” he says. “I have 350 cows, including bulls. Cow dung—no need of gas.” Everyone tells me about Lalu’s “rustic common sense,” though I’m unsure how burning manure for fuel has made Indian trains suddenly run profitably. But his point is a broad one, about systems efficiency and country wisdom and resourcefulness. “Railways is like a Jersey cow. If you do not milk it fully, it gets tenail,” a swollen and infected udder. Milk every last drop out of Indian Railways, Lalu told his subordinates, and it will prosper....

Only Bollywood does more to unite India than its railways. The statistics beggar belief: every year, Indians take 5.4 billion train trips, 7 million per day in suburban Mumbai alone. New Delhi Station sees daily transit of 350,000 passengers, which is roughly five times more than New York’s LaGuardia Airport, and enough to make Grand Central look like Mayberry Junction. The railways’ total track mileage rivals the length of the entire U.S. Interstate Highway system, even though the United States is three times the size of India. Among human resource problems, the railways of India are an Everest. Its employees outnumber Wal-Mart’s by a figure comparable to the population of Pittsburgh. The world’s only larger employer is the People’s Liberation Army of China. (The third-largest employer is the British National Health Service.)


If This Stimulus Isn't Big Enough, Could There Be a Sequel?;
The stimulus got "less stimulative," Rivlin said, as it passed through the Senate and some of the things that offered "the biggest bang for the buck" were scaled back, such as more money for food stamps.

Nigel Gault, an economist with Global Insight, was among several analysts who cited the addition of a fix for the alternative minimum tax as one of the bill's disappointments.

"Telling people you're not going to impose a tax increase on them they weren't expecting in the first place is not stimulus," he said.

The use and misuse of computers in education

The use and misuse of computers in education : evidence from a randomized experiment in Colombia

Summary: This paper presents the evaluation of the program Computers for Education. The program aims to integrate computers, donated by the private sector, into the teaching of language in public schools. The authors conduct a two-year randomized evaluation of the program using a sample of 97 schools and 5,201 children. Overall, the program seems to have had little effect on students' test scores and other outcomes. These results are consistent across grade levels, subjects, and gender. The main reason for these results seems to be the failure to incorporate the computers into the educational process. Although the program increased the number of computers in the treatment schools and provided training to the teachers on how to use the computers in their classrooms, surveys of both teachers and students suggest that teachers did not incorporate the computers into their curriculum.

South Asia-Indicators and Analysis of the Commercial Banking Sector;

Getting Finance in South Asia 2009: Indicators and Analysis of the Commercial Banking Sector;
On January 27th, 2009, the World Bank in association with the Info Shop, presented an event and panel discussion in honor of the new book by Kiatchai Sophastienphong and Anoma Kulathunga, entitled Getting Finance in South Asia 2009: Indicators and Analysis of the Commercial Banking Sector . This new volume of literature, accompanied by a CD-ROM, has provided indicators about the commercial banking sector in Bangladesh, India, Nepal, Pakistan and Sri Lanka. Additionally, the book analyzed data in area such as access to finance, performance and efficiency, financial stability, capital market development, marketing concentration and competiveness and corporate governance.

Event Chair Ernesto May opened the event by commenting on the importance of this volume in relation to the current world financial crisis as a vehicle for better understanding the health of financial sectors within these countries and the region as a whole. Next, author Kiatchai Sophastienphong presented on the objectives, background, and findings of the study. Sophastienphong commented that the study actually began in 2002 as a stop-gap measure; however, the project has evolved ever since. He also explained that concerning the next edition, the team plans to expand their data collection to include Afghanistan, Bhutan and Maldives. Co-author Anoma Kulathinga then presented on the methodology concerning data collection and how the information was divided into six separate dimensions.

Tuesday, February 10, 2009

This n That

Russian Debt And The Euro

Education Is All in Your Mind

Mostly Harmless Econometrics
I just read the new book, "Mostly Harmless Econometrics: An Empiricist's Companion," by Joshua Angrist and Jorn-Steffen Pischke. It's an excellent book and, I think, well worth your $35. I recommend that all of you buy it.


Adjustments downward

The reshaping of the stimulus: public choice thoughts

Enlightened research, fuelled by the dark stuff;
From the outset, Gosset’s focus was practical – as the economist and historian Steve Ziliak has discovered through his work in the Guinness archives. To produce beer to a high standard on an industrial scale, Gosset needed to sample and experiment with hops, malt and barley. But experiments are expensive and Gosset developed his small-sample methods because he wanted to understand how many experiments were necessary to be confident of his results. That was a clear trade-off: how much confidence is “enough” depends on the costs of further research and the benefits of extra precision.

Ziliak and his co-author Deirdre McCloskey argue in a recent book, The Cult of Statistical Significance, that most academic disciplines have forgotten this trade-off. Instead, they use an artificial standard propagated not by Gosset but by the famous statistician and mathematical geneticist Ronald Fisher, who took Gosset’s calculations and turned them to his own devices. Fisher proposed ignoring any finding that failed to reach the 95 per cent confidence level. In other words, until the odds against a pattern having emerged by chance are 19 to 1 against, disregard the pattern completely.


The paradox of thrift

Podcast of the Day

Acemoglu on the Financial Crisis