Government Results Act fails

The bill, known as the 2010 Government Performance and Results Modernization Act, would also have required agencies to post program performance scorecards on a single public website on a quarterly basis, the release said.

It set a first-year goal of a 10 percent reduction in the number of written reports required by previous Congresses and presidential administrations that are little used or obsolete. As Federal Times has previously reported, agency officials sometimes have to compile massive reports that are outdated as soon as they are printed.

"Taxpayers fund 44 separate programs in nine different federal departments that support workforce training, and we also pay for 17 separate initiatives across seven federal departments that deal with food safety," Warner said in the release. "We need a better system — a system that allows us to review the results of each program and evaluate its impact in addressing overall policy goals, whether it's the important work of retraining people who've lost their jobs or ensuring the safety of the food we eat."

The Obama administration has already created its own website, performance.gov, to track agency progress in meeting high-priority goals laid out in the administration's 2011 budget request. The site, available to federal managers since August, was supposed to open to the public this year. That move has now been delayed to "kick the tires a little more" and to get agency feedback, Office of Management and Budget spokeswoman Moira Mack said Friday

-House kills bill to improve agency performance

We Promise to Obey IMF and adopt a Fiscal Responsibility Law

Ireland's Letter of Intent;

We are preparing institutional reform of the budget system taking into account anticipated reforms of economic governance at the EU level. A reformed Budget Formation Process will be put in place. Furthermore, we will introduce a Fiscal Responsibility Law which will include provision for a medium-term expenditure framework with binding multiannual
ceilings on expenditure in each area by end-July 2011 (structural benchmark). A Budget Advisory Council, to provide an independent assessment of the Government’s budgetary position and forecasts will also be introduced by end-June 2011 (structural benchmark). These important reforms will enhance fiscal credibility and anchor long-term debt sustainability.

CATO Balances the Budget

Downsizing the Government

Climate Crisis Fact of the Day

Globally, estimated economic stresses due to climate change point to losses of USD 63 billion each year today. This impact will rise by more than 100% to USD 157 billion each year by 2030.

More Climate Vulnerability Monitor 2010

Virginia Performs

Links to Agency Peformance Plans,

Assorted

NGO Sustainability Index

Uses and Abuses of Governance Indicators

Measuring Democracy

A Users Guide to Measuring Corruption

Timor Leste Budget Time Table

An aggregate fiscal envelope for the budget year and fiscal envelopes by line
ministries and main economic expenditure categories are set annually; changes from
year to year are mainly incremental with few adjustments to reflect the changing
government priorities. In May, the MOF prepares the fiscal envelopes based on the macroeconomic projections and national priorities. The allocation of aggregate fiscal envelope between recurrent and capital
budget is not based on a clearly defined methodology, and the capital budget fiscal envelope
is not allocated to the line ministries individually. Both aggregate and detailed fiscal
envelopes are discussed and endorsed by the COM, followed by the issuance of instructions
in the budget circular to the Organs of State12 to submit their capital budget projects by mid-
June and recurrent budget proposals by end-June. The circular provides guidelines on the
preparation of annual action plans (AAPs), capital projects, new initiatives, and includes
fiscal envelopes of recurrent budgets by line ministries. The MOF provides the unit costs for
formulation of certain expenditures as supplementary guidelines. Line ministries generally
submit budget requests above the provided fiscal envelopes; in 2009, the requests were on
average 35 percent higher.

Timor-Leste, PFM consultants heaven!

Democratic Republic of Timor-Leste: Public Financial Management-Performance Report
Timor-Leste: Report on Observance of Standards and Codes (ROSC)-Fiscal Transparency Module

Highlights from the ROSC;

There is no clear and simple citizen’s guide to the budget.

 Short term recommendations;

• Initiate identification and costing of new government initiatives in the budget, both on the expenditure and revenue side, and identify recurring costs of public investment for the medium term. (2.1.3 paragraph 40)
• Require donors to provide estimates of planned expenditure volumes on a multiyear basis (but not on individual projects), and include these in the multiyear fiscal presentation and the expenditure projections in the budget. (2.1.5 paragraph 47)
• Start building capacity in costing and analytic review of capital projects and program expenditure. (2.1.1 paragraph 34)
• Include in the budget documents analysis of revenue and expenditure outturns compared to plan, for the three prior years to the budget year. (3.1.2 paragraph 63)
• Publish a clear and simple summary guide to the budget in Tetum and Portuguese to inform the population. (3.2.1 paragraph 72)
• Specify in the financial regulations the process and conditions for the access to contingency reserve funds to prevent use for other purposes. (2.2.3 paragraph 55)

 Medium Term Recommendations;

-Strengthen capacity in basic macrofiscal forecasting and use of the financial programming model. Document the macroeconomic framework. Basic macroeconomic assumptions underlying the budget estimates should be published at an early stage of the budget cycle and clearly presented in the budget documents. Extend the macrofiscal framework towards the medium term by estimating the main revenue and expenditure flows over the medium term; develop of a medium-term fiscal framework. (2.1.2 paragraphs 36 and 37)
-Develop a medium-term PIP with clear principles for the evaluation, prioritization, and approval of investment projects. Capacity building and/or buying in cost-benefit analysis in the context of multiyear investment projects is essential. (2.1.1 paragraph
34)
- Include in the timeline for budget preparation an extended period for line ministries to prepare and for the MOF to analyze and discuss the rationale and costing of the budget. For the latter, additional review capacity in MOF is needed to verify costing and challenge the recurrent and capital project budget submissions requests and correspondent links. (2.1.1 paragraph 35)
-Review and further develop the program classification of expenditure and better link it to line ministry policies; use it initially for budget planning and presentational purposes; extend the functional classification to include subfunctions and items.(3.2.2 paragraph 73)
-Strengthen the strategic planning capacity in the prime minister’s office, MOF, and line ministries, and establish clear links to the AAPs and line ministries’ budgets and
include in budget documents additional analysis on government priorities, programs, and targets. (3.2.4 paragraph 74)
-Cost existing policies and clearly separate them from new policies in the preparation of budget and forward estimates. This would enable the presentation of “baseline” expenditures at the start of the budget process. (2.1.3 paragraph 39)
-Develop a more robust methodology to expand production of baseline and budget estimates over the medium term.
-Decide on line ministry expenditure ceilings in the COM at the start of the budget cycle on the basis of baseline estimates, new expenditure initiatives and possible savings targets. These ceilings should be provided to line ministries in the budget circular, and cover both recurrent and capital expenditure
-Develop presentations in the budget in the following areas: fiscal risks, quasi-fiscal activities (including by petroleum companies), and contingent liabilities. (3.1.3 paragraph 66);
-Develop an overview of existing and new tax expenditures in the budget. (1.2.1 paragraph 22)
-The MOF should develop or commission occasional reports on long term expenditure and revenue trends. Such analyses would provide a good framework to address structural issues like population growth and the costs associated with this, or the limitations of natural resources. This would be particularly important in the preparation of the Vision 2020 plan update. (3.2.4 paragraph 74)

Quote of the Day- On the Quality of Budget Speeches

The budget speech was additionally turned into a management tool by Yashwant Sinha. Every sentence of the budget speech is put into a spreadsheet, responsibility for implementation is assigned, and quarterly reports are produced about progress of implementation. Through this, the budget speech has become the workplan of government for the year. What gets announced in the budget speech tends to get done. Few things get done in the year other than what is announced in the budget speech.

- Ajah Shah, Which type of budget speech is this?

Sri Lanka Budget 2011

Skimming through Sri Lanka budget speech;

-I undertook a Pre Budget Review of all 25 districts and provincial level work. I wish to share some evidence of progress. Sri Lanka’s poverty which was 15.2 percent in 2006 has declined to 7.6 percent in 2010. Most important development is that poverty in rural areas has declined from 15.7 percent to 7.6 percent while in the estate areas, it has declined from 32 percent to 9.2 percent. We will direct our strategies to reduce poverty below 5 percent within the next 5 years...

-All island unemployment which was 7.2 percent in 2005 has dropped to 5.8
percent by 2009. In addition, earnings of our farmers and the labour force have increased. In 2005, farmers could not secure even Rs.10 for a kilo of paddy they produced. We managed to maintain it in the range of Rs. 24 – 28 per kilo.

-Our country is ranked first in the world in the health and survival indicators, sixth in the political empowerment indicators and among the top 20 in the world in gender equality indicators as well as a location attractive for outsourcing. Our performance in education and health is above average.

-The export potential of value added, branded exports has been estimated in excess of US$ 5 billion over the medium term.

-Tourism should be a billion dollar business. Although
tourist arrivals have picked up and expected to be around 600,000 this year, earnings from tourism shows only a moderate increase. This is largely because the industry as a whole is underpriced. Therefore, I propose to impose a levy of US$ 20 per bed on all five star hotels which charge a room rate that is less than US$ 125 per night from January 2011 in order to compel all hotels to charge better rates.

-We must get ready to facilitate 2.5 million high spending tourists by 2016. Tourists must see our richness and diversity. Over the next few years the capacity of this industry need to be tripled from the current level of around 15,000 rooms.

-Sri Lanka is fast emerging as a niche global destination attracting outsourcing of IT and BPO services. It has become the fifth largest exporter. At present, the country is ranked seventh among the 50 best emerging global cities that attract outsourcing...The Government has launched various programs to increase ICT literacy to 75 percent by 2016.Our aim is to make this industry a US$ 2 billion export activity by 2016.

-our key goal in this decade of development is to improve our productivity by 5-6 percent per annum.

-SriLankan Airline and Mihin Lanka will be expanded with new aircrafts to increase the fleet to 30 by 2012. I propose to exempt SriLankan and Mihin Lanka from all taxes for a period of 10 years to strengthen the two enterprise

-nearly 3 million Sri Lankans are engaged in overseas employment.
The remittance income to the country is expected to be nearly US$ 4 billion this year. However, there is no proper social security system for these people when they reach old age. Therefore, I propose to set up an Overseas Employees’ Pension Fund (OEPF).

-My attempt in this Budget is to sustain our achievements and manage future risks in our economy. We have achieved an economic growth rate of near 8 percent. Inflation has stabilized at around 6 percent. Poverty has come down to 7.6 percent and unemployment to 5 percent. These are all achievements within 5 years. This argues well in favour of our development strategy. The Central Bank has built up US$7 billion reserves. Our banking system has a further US$ 1.5 billion. So the economy has sufficient external assets. All these are achievements that all of us must be proud of. A low rate of inflation of around 5-6 percent, economic growth rate of around 7-8 percent and a society free from poverty are our medium term targets.

-raising income beyond US$ 4,000 per capita is not the only objective in our strategy. People need equitable opportunities to enjoy such high income.

For Discussion: How do you rate this budget speech?

Related:
Budget Speech 2011

2011 budget to introduce fiscal reforms

"The 7.5 percent budget deficit target should be achieved comfortably
as the expenditure would be the same like last year and the revenue is
picking up," Jayasundera said. He said economic growth would be close
to 7 percent, as earlier forecast.

"The reserves are more than the IMF target. I am optimistic of the IMF
releasing both the third and fourth tranche together," he said.

Jayasundara said he expects tourism revenue to grow to $1 billion
annually from its present $400 million, and foreign direct investment
to boom to $1.5-2 billion annually from around $600 million now.

He said foreign investment inflows should put upward pressure on the
rupee currency. "I see a higher probability for appreciation than
depreciation," he said.

The six areas where the budget speech has to deliver

Core public goods are international relations, defence, police and judiciary. These are the foundations of civilised existence. They are pure public goods in that everyone benefits when these are done properly. When law and order conditions are good, a new born child benefits from these without imposing any new cost upon the country.

You Too Can Fix the Budget

Budget Puzzle: You Fix the Budget

O.K., You Fix the Budget

The Deficit Commission and Enactment Strategies

For Discussion- Should Public Commissions include concrete implementation strategies in their reports as David Brooks alleges below;

The report from the chairmen lists some of the best ways to raise revenue and cut spending. But it comes with no enactment strategy. In this climate, asking politicians to end the mortgage deduction and tax employer health care plans and raise capital gains taxes and cut benefits for affluent seniors is like asking them to jump on a buzzing sack full of live grenades. They won’t do it.

Related:
Deficit commission leaders are not addressing the root causes of the long-term deficit

The PowerPoint

So, About That Deficit Commission ...

Tax revenues capped at 21% of GDP

The deficit commission report
Mankiw is happy, Krugman and DeLong are upset.

Panel Seeks Social Security Cuts and Higher Taxes

The deficit commission’s plan

Assorted on Obama's Management Agenda

Task Force on Government Performance


From Setting Goals to Achieving Them;

OMB’s budget-setting process is often seen as its primary role, with the organization’s responsibility for improving government’s management and performance taking a backseat. But the Obama administration has made clear that improving performance across agencies is important to it by appointing a chief performance officer for government and re-energizing the management side of OMB.

What Government Can Learn from the Preakness

We therefore recommend that the bill include a limit of five high-priority goals per agency or perhaps a ceiling across government of no more than 100 goals. These are priorities, after all.

Setting Goals for Government: The Senate Can Deliver This Fall


Asking Questions Like the British Do

I remember being struck by the power of the approach that Barber invented when I was working as an official in the British government back in 2001. By asking three sets of difficult but very simple questions, the Delivery Unit changed the way that we thought about our jobs. The three themes were:

What journey are you trying to make in terms of the goal? Where are you now and what’s the destination?
What’s your strategy to get there? Why do you think your interventions will work?
How will you monitor progress as you proceed? Do you have the capacity to adjust your strategy as you go along?

Practitioners in Economic Policy

Profile of Maria Ramos;

Maria Ramos and her Finance Department colleagues were charged with putting in front of South Africa’s ministers and cabinet viable options for reaching economic targets without jeopardizing financial stability. Ramos says nothing was sugar coated.

“In 1996 we had to put a fiscal policy in place that had to say to the nation that if we wanted to achieve a sustainable economic growth path of 6 percent, this was how we would get there. That was our starting point. People often think that the program of growth, employment, and redistribution was about cutting the deficit. That’s not the question we asked. We asked: ‘If we want 6 percent growth, what do we need to have in place to achieve it?’

“Very quickly, we came to the conclusion that you can’t get to 6 percent growth when you have a position of fiscal instability, because you can’t borrow your way out of a crisis. We didn’t want to go to the IMF—we didn’t think that was going to be a sustainable solution—and we were very close to that. South Africa had no reserves—in fact we had a negative reserve position because we had a net open forward position at that point of about $26 billion. We had debt-to-GDP ratios of around 50 percent, we had debt-servicing costs reaching the point where they were unsustainably high. So the fiscal position was pretty precarious: the metrics didn’t add up.

“So if you want to get growth there, you have to fix the base. And fiscal sustainability is hard to achieve and it’s easy to lose. That’s what we placed before policymakers, before the cabinet. And I have to say that, as hard as it was, when faced with that, I never came across a politician from the president down who said: ‘No, we can’t do this because it’s going to be unpopular for me.’ What’s been remarkable for me as a civil servant to see was that politicians from the top down were able to say ‘What is in the best interests of our country? It’s going to be painful, it’s going to be hard.’ Those investments continue to pay off today.”

Random Course

Public Economics- from MIT OpenCourseWare

Tax Gap visualisatiion

This may be the most difficult diagram I've ever done. The information and data is swathed in obfuscation, economic jargon and subtle sleight-of-hand definitions and sub-definitions that mask the meaning from interested readers. It was a real struggle. I hope it and the data make sense.

Evaluating Government Employment and Compensation- A Primer

Just released brief from IMF.

Evaluating Government Employment and Compensation
Author/Editor: Clements, Benedict J. , Gupta, Sanjeev . Karpowicz, I. , Tareq, Shamsuddin

Related:
Wage Policy and Fiscal Sustainability in Benin

Kiribati: 2009 Article IV Consultation - Staff Report

Kenya: Selected Issues and Statistical Appendix

How to Praise a Finance Minister

"The observed resilience of the Mauritian economy is a testimony to the positive impact of the reforms carried out since 2006, which favoured economic diversification and adaptation at the same time that it created fiscal space for expansionary macroeconomic policies and other innovative, timely, temporary and targeted responses to cushion the crisis impact".

-World Bank, Mr Fabiano Bastos, quoted in the Budget Speech

Random thoughts on Improving PFM Technical Assistance

'The best solutions are those where international experience is judiciously mixed with local genius'-Suhas Joshi

Some more comments on Richard Allen's post about improving effectiveness of PFM TAs';

- I don't see any problems in moving towards what locals and advisers see as best practice; as long we consider that there are many recipes of 'best practice'

-TA reports should always start the dialogue, but how does one institutionalise discussion and follow up of TA reports on PFM? Which committees should be responsible, and at which level?

- Mr. Joshi also makes importance points in the comments-'countries therefore do not need large prescriptive reports but help is resolving the constraints they have'. I fully agree, 'it is more useful to have as a TA someone who understands the country and has spent some time there'

- One of the biggest problems I've seen are consultants who want to take you for a ride- this is a problem for assistance provided by some international donors who have weak internal expertise, exceptions include World Bank and IMF. Countries need to seriously think the donor they approach for reform PFM areas and whether they have a comparative advantage in them.

Putting Foreign Aid in Macro-Fiscal Frameworks

I found the following from the Mauritius budget call circular to be useful- putting aid into overall sectoral ceiling is really a feature of mature MTEF. Mauritius budget process is certainly very advanced.

Financial resources expected from development partners (grant or loan funding) have already been factored in the macro-fiscal framework used for working out spending limits and do not therefore constitute an additional source of funds available for spending.

For Discussion: How's foreign aid incorporated in MTEF's in other countries like Albania, which have mature MTEF's?

Related:
Albania- Albania Public Expenditure and Institutional Review 2001


REPIM

MDG T-Shirt Ideas

Source: you know from whom

Economic Growth Officers' Conference

Didn't know USAID had economic growth officers- I wonder what Prof. Easterly would say about it. Anyway I have collated some of the the podcasts of the sessions below- Romer's session is highly recommended.

Technology Drive Growth, Rules Drive Development
Paul Romer, Stanford University
Steve Radelet, Department of State

The Millennium Development Goals: The Road to 2015

Global Climate Change: Impact on Agriculture and Costs of Adaptation

Global Climate Change: Leveraging Investment Flows for Mitigation

Reinventing Government: Designing Programs to Enhance Public Sector Effectiveness and Performance
H.E. Minister Imad Fakhoury, Ministry of Public Sector Development, Government of the Hashemite Kingdom of Jordan
Ms. Widad Qutaishat, Results-Oriented Government Component Lead, USAID/Jordan Fiscal Reform II Project, DAI
Dr. Emil Bolongaita, Director, Management Systems International
Moderator: Dr. Mark Gallagher, Chief of Party, USAID/Jordan Fiscal Reform II Project, DAI

A Behavioral Approach to Economic Development
Sendhil Mullainathan, Poverty Action Lab and Harvard University
Michael Kremer, Harvard University

Government ICT Applications that Save Businesses Time and Money
Valentina Mintah, Crown Agents
Efrain Laureano, Chemonics International
Judy Payne, USAID/EGAT/I&E/ICT

Accelerating Job Creation and Growth
Steve Kapsos, ILO/Geneva
Mary Hobbs, USAID/Kosovo
Eduardo Tugendhat, CARANA Corporation
Lili Stern, U.S. Department of Labor

Access to Innovative Financial Services

World Bank’s Doing Business Indicators: Lessons Learned and New Directions
Svetlana Baguadinova, Doing Business Project, The World Bank
Rita Ramalho, Enterprise Analysis Unit, The World Bank
Carolin Geginat, The World Bank

Monitoring and Evaluation for Economic Growth

Shared Growth Diagnostics: Finding the Binding Constraint to Growth and Poverty Reduction

USAID Economic Growth Programming: Ultimate Impacts

Assorted

Anti-disorder campaigns can change urban norms;

Part of what people like about New Delhi’s metro is that the cars are clean and people are relatively courteous. Some riders are so pleased, in fact, that they volunteer their time to ensure it stays that way. They enforce rules against public spitting and urination. Though such rules are routinely ignored in the rest of the city, the volunteers appear to be winning the battle so far to sustain new norms among metro riders.

Even when cities enforce formal rules against certain kinds of behavior, creating a culture of compliance with the rules can be challenging. The Delhi metro monitors are simply trying to preserve a desirable equilibrium.

-How The Times built teacher effectiveness database

'Long-run fiscal policy is health policy'

Is it a justification for earmarking a tax;

The National Commission on Fiscal Responsibility and Reform, co-chaired by former Clinton White House Chief of Staff Erskine Bowles and former Republican Senate Whip Alan Simpson, faces two over-riding problems. First, it must find a new source of revenue for the federal government, a source that is relatively stable, produces substantial proceeds, and does not create large disincentives for employment, saving, and investment. Second, it must bring the rate of growth of health care spending closer to the rate of growth of the rest of the economy. The gap over the last 30 years, 2.8 percent per annum, is unsustainable. As Alice Rivlin, a member of the new commission, has said, “Long-run fiscal policy is health policy.”1 Control of health expenditures will require comprehensive change in the way the country finances and delivers health care. A value-added tax (VAT) dedicated to funding basic health care for all through enrollment in accountable care organizations would help solve the revenue and health spending problems at the same time. A VAT, by itself, has much to recommend it. Unlike a payroll tax, it does not discriminate against employment. Unlike the income tax, it taxes only consumption, not saving. The base (consumer expenditures) is more stable than payroll or income over the business cycle and is large enough to provide a substantial yield at a relatively modest rate. While it is not immune to evasion or avoidance, a VAT is not as vulnerable to these problems as the income tax.

Making Sense of Government Report Cards

Government agencies increasingly are putting out report cards on cars, schools, restaurants and other offerings to help consumers sort among them. But such grading systems can emphasize simplicity over precision, and decisions about the criteria they use have a significant impact on results. Plus, using letter grades risks lumping together very different performers. In Los Angeles County, 98% of restaurants got A's or B's last year for health safety....

Different agencies view the grades differently, and that view affects how they construct the grading curve. Florida education officials keep changing their formula for rating schools "to continue to raise the bar" so schools keep seeking progress, says Juan Copa, bureau chief for research and evaluation for the state Department of Education.

The health departments in Los Angeles County and New York view A grades as an incentive for restaurants that improve their practices so they can lure in more customers; therefore, there aren't plans to make it harder to ace the test.

Grading systems inevitably include some criteria while excluding others, and require that choices be made about how to weight those that are included.

-Report Cards for Consumers Don't Always Make the Grade

Memo to Self- Things to Learn

CrowdFlower;

Labor-on-demand is cloud computing but with human workers. In the same way you can divide tasks among a bunch of computers to get more processing power, you can get scalable, parallel work with our online workforce.

Assorted Public Policy programs

Public Policy at Duke

Public Policy at Rand

GMU, and Maryland

Wanted - Costing Experts!

Cost accounting is relatively overlooked area in Central Finance Agencies in low income countries- which I think aught to be an important area if we want to progress to a comprehensive MTEF. The following job advertisement for an expert to Brazil, sounds interesting;

The objectives of the project are to (i) implement the public cost system in phases, starting with four pilot entities (health, education, prisons, and social assistance); (ii) develop a cost methodology adequate to the public services at the state level; (iii) organize seminars, courses, and other training events to educate the state officials on how to prepare and use cost information; (iv) document the cost methodology used in the existing projects; (v) prepare guidelines for external dissemination of cost data; and (vi) prepare progress reports.

Assorted

Added some updates to the sides on PEM Experts and Blogs, including PFM Board,Governance Journal blog,

Price Index of Marijuana

Price of Weed- an interesting project- "We want to crowdsource the street value of marijuana from the most accurate source possible: you, the consumer. Help by anonymously submitting data on the latest transaction you've made."

Making PFM TAs more effective- follow the Chinese way

I really liked the suggestions made by Richard Allen on improving PFM technical assistance. The second recommendation is for me more relevant and practical. The first one is not something practical, and should be left to the reform champions in the country. As in other areas, the we could learn a thing or two from the Chinese on PFM.

The first is for technical PFM missions to become less purely technical...
Take, for example, a recommendation that I found in a recent report on a middle-income country with a distinctively Southern European approach to public administration. This was to establish a top-down budget preparation process, in which the cabinet of ministers would play a key role in debating fiscal policy options, and setting multi-annual ceilings on budgetary expenditure. A related recommendation was to establish a system of periodic expenditure review, as used quite successfully in countries such as the Netherlands and the U.K.

...Unfortunately, in relation to the country concerned they make very little sense because (i) the cabinet system is weak and would require a complete overhaul to make it work on the lines suggested, an outcome which seems politically implausible; (ii) the government is a weak coalition, unlike in many Anglo-Saxon countries which have one-party governments, and has no proven capability to make hard choices about public expenditure; (iii) the ministry of finance is politically fragmented, weakly led and has limited capacity to undertake the technical analysis which would be necessary to improve the efficiency of the expenditure prioritization process...

... My suggestion would be that technical PFM missions mounted by the Fund or Bank should include a political economy expert whose job should be to carry out the necessary institutional analysis and subject the recommendations of the PFM technicians to a rigorous reality check before they are put onto paper. Greater use could also be made of local consultants with an in-depth knowledge of both public finance and the institutional environment...

My second suggestion is that technical assistance reports should never be the end-point of a process of intervention by the Bank or Fund. To prevent such reports being quietly put on a shelf in the minister’s back office, and left to gather dust, they should always be the starting point of a discussion and dialogue with the finance ministry on the analysis undertaken by the mission, and its findings and recommendations,..
 Instead of reports containing 50 or more recommendations compressed into a complex multi-annual action plan, the outcome of such a dialogue should be, for the average developing country, a much smaller subset – say three or four, at most -- of carefully selected actions that could realistically be undertaken during a 4-5 year period, and which stand a reasonable chance of being implemented.

China has adopted this approach for many years, with some success. Rather than asking the Bank or Fund to mount a full-blown technical assistance mission, the authorities propose a seminar on accounting or budget classification or budget preparation to which they invite specialists from a range of countries. The emphasis is on learning, engaging in a dialogue with experienced counterparts, and translating the experience of others into ideas which might (or might not) be relevant to the Chinese experience, their institutions and decision-making processes.

Database of Central Finance Agencies

Sounds like World Bank PFM people are doing important work;

Richard Allen is currently working on a project with the World Bank that is analyzing the role and responsibilities of central finance agencies (CFAs) in low-income countries. A database covering 70-80 countries is being prepared, along with case studies of selected countries. The project includes a strong emphasis on the analysis of political economy and institutional characteristics of CFAs.

Is this corruption- Egyptian reformist minister becomes World Bank MD?

Egyptian minister becomes World Bank's Managing Director;

“Mahmoud Mohieldin has proven himself a tireless reformer whose work on economic and financial reform helped Egypt weather the global financial crisis. An outstanding young leader, his first hand experience of development and of the World Bank -- both as Minister and as World Bank Governor -will serve us well as we undertake our own reform program and scale-up our client focus,” said Zoellick.

No it's not. He was a regular feature on World Bank's PREM Weeks and other events. A PhD from Warwick, it's an excellent choice. Congratulations Mr.Mohieldin. A true practioner in every sense.

Related:
Interview with H. E. Mahmoud Mohieldin

We put specific timelines. We didn’t really hesitate to continue with the reforms despite the criticism at the beginning, and I have to admit that we are very lucky, because when we were conducting these reform measures, we were expecting that their impact on investment and growth was going to be taking at least three to four years. It actually took around two to three years, because of the benign emerging markets environment, and the fact that the economy at large was recovering from a long period of recession. And so with elements of recovery, a benign emerging markets environment, and credible economic policies, we managed to achieve what we have achieved so far...

It’s led by the minister of finance, with my membership, the minister of economic development, minister of trade and industry, governor of central bank.We meet every Monday evening.

On the Reform of Business Environment: The Case of Egypt

Videos:
An Egypt Case Study of Financial Sector Reform

PREM Week 2005: Session 05 - Why Do Economies Grow?

Internal Brain Drain: Why Gender Inclusion Matters for Growth

How to Reform the Business Environment

Fiscal Space

Interesting staff policy note from the Fund on Fiscal Space.

Getting Economic Reforms done- Uganda Experience

My six-year reform experience was like driving a reform bus on a long journey, eliciting passengers along the way to a shared destination

-Florence Kuteesa

An interesting book on Ugandan Economic Reforms;
Uganda's Economic Reforms -Insider Accounts;

1. Overview of Ugandan Economic Reform since 1986
This synthesis chapter draws out the main findings from the individual chapters. After much agonizing over the direction of economic policy, three fundamental reforms between 1990 and 1992 —legalization of the parallel foreign exchange market, liberalization of coffee marketing, and the establishment of fiscal discipline — brought macroeconomic stability. Together with trade liberalization and privatization, Uganda was set on the road to a liberal, capitalist economy. Concern that growth was bypassing the poor led to a focus on poverty reduction between the mid 1990s and early 2000s. Measures such as decentralization, the Poverty Eradication Action Plan, the Medium Term Expenditure Framework, the Poverty Action Fund, and Sector Working Groups succeeded in attracting increased aid and channeling it into poverty reduction. Sound economic management and a clear commitment to poverty reduction together explain why Uganda was the first beneficiary of both HIPC debt relief and the shift from project aid to budget support. The resulting increase in public service delivery contributed to rapid poverty reduction. The pace of reform has eased since 2002. The chapter concludes by emphasizing the crucial importance of political support for successful economic reform.

2. Institutional and Political Dimensions of Economic Reform
This chapter provides the institutional and political context for the technical reforms discussed in subsequent chapters. It summarizes the abortive attempts at reform of the Obote II government and discusses changes made by the NRM to the economic institutions it inherited in 1986. The long, heated debate over the direction of economic policy was resolved with the merger of the finance and planning ministries and the establishment of fiscal discipline in 1992. The critical role of the President in key economic decisions such as fiscal discipline, the commitment to poverty reduction, and the sale of Uganda Commercial Bank is highlighted. The role of Parliament has increased with the restoration of democracy. The chapter also examines how the finance and planning ministry became one of the strongest in Africa.

3. Exchange Rate, Fiscal, and Monetary Policy
This chapter identifies three phases in Uganda's transformation from a war-torn economy into one that has sustained rapid growth and low inflation since 1992. There were two major reforms in the early 1990s. First the parallel foreign exchange market was legalized in 1990. Following the merger of the finance and planning ministries in 1992, a sharp fiscal adjustment established fiscal discipline and reduced inflation to single figures. The second phase was one of unconventional macro policy for the rest of the 1990s. With little scope for monetary policy, low inflation was sustained largely by tight, short-term fiscal control. In the 2000s, financial deepening and budget reforms have provided a foundation for a more orthodox mix of fiscal and monetary policy.

4. Public Service Restructuring and Pay Reform
This chapter discusses two elements of Public Service reform of particular relevance to the overall economic reform programme the restructuring of the Public Service and pay reform. It highlights the halving of the size of the Public Service between 1990 and 1995 and the subsequent increase following the Poverty Eradication Action Plan commitment to increased provision of basic public services. It also looks at the collapse in real wages during the 1980s and examines progress towards paying public servants a ‘living wage’.

5. Tax Reform
By 1990 tax revenue in Uganda had declined to 5% of GDP. Revenue was heavily dependent on export taxes, which discouraged exports. This chapter discusses the policy and administrative measures taken during the 1990s to make the tax system more transparent and productive. Export taxes were replaced by import taxes, which were progressively reduced to relatively low levels. The most significant single reform was the introduction of Value Added Tax in 1996. Despite initial resistance by traders, strong political support enabled VAT to take root. The Uganda Revenue Authority has spearheaded revenue administration reform since 1991. This chapter discusses the key drivers in setting up an autonomous revenue agency, the successes and challenges in revenue administration, and what could have been done better. It also looks at the challenges and lessons of implementing VAT in an environment of low tax compliance.

6. Planning and Development Budget Reform, 1990–1995
The NRA victory triggered substantial aid flows, accounting for over half of public expenditure. However, the planning and budgeting systems had collapsed,; so donors largely did their own thing and much aid was ineffective. This chapter describes the measures adopted to establish some order and bring government policy priorities to bear on donor allocations and public expenditure generally. It discusses the key reforms, designed to attract increased aid and improve the effectiveness of all public expenditure: the merger of the finance and planning ministries; consolidating responsibility for sector policy, planning, and budgeting in a single division; capturing aid in the plan and budget; integration of the plan and development budget; establishment of internal review processes and the challenge function; and management of counterpart funding. Aspects of Uganda's ‘legacy’ are highlighted, such as: the Paris Declaration principle that aid should align behind government plans; the PIP as the forerunner of the Poverty Eradication Action Plan and poverty reduction strategies; linking plan and budget; and Public Expenditure Tracking Surveys.

7. The Poverty Eradication Action Plan
Uganda was a pioneer in designing a holistic, comprehensive development plan targeted at poverty eradication. The 1997 Poverty Eradication Action Plan was the original prototype ‘poverty reduction strategy’, which is now a prerequisite for countries wishing to access HIPC, World Bank, IMF, and other donor support. This chapter shows how the PEAP developed from the Public Investment Plan of the early 1990s through an extensive consultative process. It discusses the influence of the PEAP on resource allocation and sector policies. It describes how the PEAP has evolved during subsequent revisions, the changes in the institutional framework for planning and monitoring, and the efforts to maintain the relevance of the PEAP over time.

8. Budget Reform and the Medium Term Expenditure Framework
The initial budget reforms from 1992, aimed at establishing macroeconomic stability and credibility of the budget, focused on the short term. This chapter shows how, once these immediate targets were achieved, the finance and planning ministry gradually implemented a Medium Term Expenditure Framework. This was intended to facilitate a realignment of public expenditure in line with the political priorities set out in the Poverty Eradication Action Plan and to improve the predictability of public funds, while adhering to the aggregate resource envelope. The chapter examines trends in sector allocations, to assess whether the MTEF facilitated significant shifts, and looks at progress towards improving the predictability of the budget. It also discusses the pioneering measures taken to promote public and political consultation on the budget. Other reforms discussed include the virtual Poverty Action Fund, output oriented budgeting, fiscal transfers to local government, and public expenditure reviews.

9. Sector Wide Approach and Sector Working Groups
Once fiscal discipline had been restored and basic expenditure management systems established at the central level, the finance and planning ministry increasingly turned its attention to expenditure at the sector level. This chapter discusses the evolution of Sector Working Groups and Sector Wide Approaches. It shows how responsibility for drawing up sector policy and expenditure priorities was increasingly delegated to SWGs. These were led by sector ministries but included representatives from other government institutions in the sector, the finance ministry, donors, and civil society. They assumed an increasingly important formal role in determining sector allocations in the budget process. The chapter shows how SWAps emerged as a mechanism which fused the policy, planning and budget processes through the development of inclusive sector investment plans, budgets to implement those plans, and joint monitoring mechanisms. They helped develop common donor approaches within sectors, improving alignment to government policies, and promoting the use of government systems.

10. Poverty Monitoring
Political concern that rapid economic growth did not appear to be benefiting the poor led to an increased focus in the mid-1990s on ensuring public expenditure was pro-poor and on monitoring poverty trends. This chapter discusses the measures adopted to increase the poverty focus of the budget. It also looks at the institutional arrangements and the methods used to monitor poverty trends. Household survey data shows that between 1992 and 2006 Uganda experienced one of the largest and fastest reductions in income poverty recorded anywhere in modern times. Participatory Poverty Assessments, which were pioneered in Uganda, and other non-quantitative methods illustrate the multi-dimensional nature of poverty and the unevenness of progress towards poverty reduction.

11. Statistics Reform
Many of the economic reforms were dependent on reliable statistics. Like many other government systems, statistics collection virtually collapsed during the 1970s. This chapter shows how systems for collecting, analysing, and disseminating official statistics have been rebuilt since the late 1980s. It starts with a historical review of statistics institutional development before going on to look at the main categories of statistics currently collected, and at their analysis and dissemination.

12. Debt Management and Debt Relief
This chapter shows how the rapid accumulation of debt from 1986 led to a debt crisis in 1990. It discusses the debt management strategies adopted following the crisis to ensure that it would not recur. Paris Club rescheduling and commercial debt buy-back helped reduce the stock of arrears. However, this increased the share of multilateral debt, which could not be rescheduled, to 75%. Uganda was in the vanguard of the debt relief movement of the 1990s, which culminated in the Highly Indebted Poor Countries initiative, and was the first country to benefit from HIPC. This chapter shows how sound economic management and a strong commitment to poverty reduction underpinned the case for multilateral debt relief in a country where debt was vividly crowding out social expenditure. It also looks at Uganda's role in the HIPC initiative and shows the impact of debt relief on debt service costs.

13. Aligning Aid with Government Fiscal Objectives
This chapter evaluates efforts by the government to encourage donors to shift their aid into budget support and to ensure that aid flows were consistent with the government's macroeconomic objectives for fiscal policy and its strategic expenditure priorities. Aid to Uganda rose sharply in the second half of the 1990s, funding a major expansion of public expenditure. This was accompanied by a shift in aid modalities, from projects to budget support, in line with government preferences. Uganda was in the forefront of the rapid growth in budget support, which has been one of the most profound developments in the aid business in recent years. The chapter examines the key institutional reforms intended to encourage the shift towards budget support and looks at some of the problems encountered with aligning budget support with the Medium Term Expenditure Framework. It also examines the reasons for government's strategic objective of reducing the budget's dependence on donor aid.

14. Fiscal Decentralization
In the 1990s Uganda embarked on an ambitious programme of political, fiscal, and administrative decentralisationization reforms as a means of rebuilding and expanding the delivery of basic services, and fostering local democracy and accountability. This chapter examines the roots and evolution of the reforms, focusing on the fiscal side of decentralisationization. It examines how a rapid expansion in central grants helped support the expansion of basic services, the tension between centralised funding and local autonomy, the stagnation of local taxation, the incentives for and establishment of public financial management capacity, and the evolution of planning and budgeting systems. It concludes by asking whether the decentralisationization process was managed in a way that helped or hindered the expansion of basic services.

15. Financial Management and Accountability Reform
Macroeconomic stability and increased growth were achieved in the early 1990s despite very weak financial management and accountability systems. This chapter shows how these weaknesses became even more pronounced following the adoption of the 1995 Constitution, decentralization, expanding budgetary demands, and the requirements of the Poverty Eradication Acton Plan, among others. Strengthening public financial management and accountability was critical if progress was to be sustained and if donors were to be persuaded to channel more aid through government systems. Yet in 1998 the entire government had just two professional accountants. The chapter presents the key reforms adopted to strengthen financial management and accountability, looking at changes in the areas of the legal and policy framework, institutional capacity building, and processes and systems, particularly the introduction of the Integrated Financial Management System.

16. Privatization and Parastatal Reform
By the late 1980s Uganda's large public enterprise sector had become a major drain on the Treasury and a bottleneck to economic growth. To address this situation the government embarked on a major privatization and public enterprise reform programme in 1993. By 2005 the programme was largely complete and most public enterprises had been privatized, reformed, or closed down. This chapter discusses the key issues, reforms, and institutions that were central to the divestiture and reform of public enterprises. The implementation process is discussed along with the various methods adopted, the numbers that were divested and the proceeds from the process. The chapter identifies the key challenges faced during the process and assesses the impact of the reforms on issues such as government finances and post-divestiture performance. It concludes with an appendix on utility reform.

Assorted on Value Added by Teachers

the value-added debate in education policy

What Makes a Great Teacher Great?

How the teachers were evaluated

Putting Teachers to the Test

Teacher Evaluation and Test Scores

The newspaper takes on the two L.A. sacred cows—teachers and unions—and lives to print again

Using Test Scores To Out Ineffective Teachers

Capital Investment Diagnostic

An interesting new paper from World Bank- A diagnostic framework for assessing public investment management;

Summary: This paper provides a pragmatic and objective diagnostic approach to the assessment of public investment management systems for governments. Since weaknesses in public investment management can negate the core argument that additional fiscal space allocated to public investments could enhance future economic prospects, attention to the processes that govern public investment selection and management is critical. The paper begins with a description of eight key "must-have" features of a well-functioning public investment system: (1) investment guidance, project development, and preliminary screening; (2) formal project appraisal; (3) independent review of appraisal; (4) project selection and budgeting; (5) project implementation; (6) project adjustment; (7) facility operation; and (8) project evaluation. The emphasis is placed on the basic processes and controls (linked at appropriate stages to broader budget processes) that are likely to yield the greatest assurance of efficiency in public investment decisions. The approach does not seek to identify best practice, but rather to identify the "must have" institutional features that would address major risks and provide an effective systemic process for managing public investments. The authors also develop a diagnostic framework to assess the main stages of the public investment management cycle. In principle, the identification of core weaknesses will allow reforms to focus scarce managerial and technical resources where they will yield the greatest impact. In addition, the framework is intended to motivate governments to undertake periodic self-assessments of their public investment systems and design reforms to enhance the productivity of public investment.

If New York State did a PEFA how would be its rating?

The payroll indicator would certainly be a 'D';

As Gov. David A. Paterson calls lawmakers back to work on the budget this week, he has announced that the fiscal situation is so serious that he must begin laying off state workers. But there is one wrinkle, as officials try to pare government spending: No one knows for sure how big the state work force actually is.

That is because the state has not one but two public payrolls.

One is controlled by the governor, encompassing about 131,000 employees, who toil for agencies like the Health Department, the parks department and the Department of Motor Vehicles. That payroll has shrunk by about 25 percent in the last two decades — so has the much smaller legislative payroll — and usually shoulders the brunt of layoffs.

The other lies beyond the direct control of the governor and includes perhaps 163,000 more workers employed by independent public authorities and agencies — though that number is an estimate, because not all authorities have been reporting their payrolls to a central state registry. And projections of state employment by the federal government do not always match the state government’s figures. The work force beyond the governor’s control has largely bucked the statewide retrenchment, according to a review compiled by The New York Times...

Legislation last year forced them for the first time to turn over their employment data to a central registry. But that represents only current staffing, making it difficult to determine whether the authorities have been shrinking or expanding over time.

Why is Peter Orszag leaving?

Mr. Orszag, you may recall, was the administration’s main proponent of “bending the curve” on health care expenditures. Frustrated that House Democrats wouldn’t accept some painful cost-cutting measures in the new health care law, Mr. Orszag pushed for and won a controversial provision to create something called the Independent Payment Advisory Board. This is an outside commission of 15 appointees who will, beginning in 2014, identify cuts to Medicare if the plan exceeds a preset rate for growth. Congress then has to either approve the cuts or propose an alternative.

The significance of this new advisory board goes well beyond the immediate question of how to rein in Medicare costs. Mr. Orszag, who declined to be interviewed, has said that the board represented, for Congress, the “single-biggest yielding of power to an independent entity since the creation of the Federal Reserve.” In other words, the Medicare Board isn’t only a means of cutting government spending; it is a means, too, of wresting the constitutional responsibility for budgeting away from powerful committee chairmen.

The Medicare Board may be the most striking example of this strategy, but it is hardly the only one. Mr. Orszag also helped broker the creation of an 18-member debt commission that will offer specific alternatives for re-ordering the federal budget. The administration has also proposed a bill — known in the punchy language of Washington as “expedited rescission authority” — that would effectively give the president the power to strike out spending items after the budget has been approved.

-Budget Chief tried to tilt power to Executive Branch

Can WikiLeaks model work for the government

He had come to understand the defining human struggle not as left versus right, or faith versus reason, but as individual versus institution. As a student of Kafka, Koestler, and Solzhenitsyn, he believed that truth, creativity, love, and compassion are corrupted by institutional hierarchies, and by “patronage networks”—one of his favorite expressions—that contort the human spirit. He sketched out a manifesto of sorts, titled “Conspiracy as Governance,” which sought to apply graph theory to politics. Assange wrote that illegitimate governance was by definition conspiratorial—the product of functionaries in “collaborative secrecy, working to the detriment of a population.” He argued that, when a regime’s lines of internal communication are disrupted, the information flow among conspirators must dwindle, and that, as the flow approaches zero, the conspiracy dissolves. Leaks were an instrument of information warfare.

These ideas soon evolved into WikiLeaks. In 2006, Assange barricaded himself in a house near the university and began to work. In fits of creativity, he would write out flow diagrams for the system on the walls and doors, so as not to forget them. There was a bed in the kitchen, and he invited backpackers passing through campus to stay with him, in exchange for help building the site. “He wouldn’t sleep at all,” a person who was living in the house told me. “He wouldn’t eat.”

As it now functions, the Web site is primarily hosted on a Swedish Internet service provider called PRQ.se, which was created to withstand both legal pressure and cyber attacks, and which fiercely preserves the anonymity of its clients. Submissions are routed first through PRQ, then to a WikiLeaks server in Belgium, and then on to “another country that has some beneficial laws,” Assange told me, where they are removed at “end-point machines” and stored elsewhere. These machines are maintained by exceptionally secretive engineers, the high priesthood of WikiLeaks. One of them, who would speak only by encrypted chat, told me that Assange and the other public members of WikiLeaks “do not have access to certain parts of the system as a measure to protect them and us.” The entire pipeline, along with the submissions moving through it, is encrypted, and the traffic is kept anonymous by means of a modified version of the Tor network, which sends Internet traffic through “virtual tunnels” that are extremely private. Moreover, at any given time WikiLeaks computers are feeding hundreds of thousands of fake submissions through these tunnels, obscuring the real documents. Assange told me that there are still vulnerabilities, but “this is vastly more secure than any banking network.”

Before launching the site, Assange needed to show potential contributors that it was viable. One of the WikiLeaks activists owned a server that was being used as a node for the Tor network. Millions of secret transmissions passed through it. The activist noticed that hackers from China were using the network to gather foreign governments’ information, and began to record this traffic. Only a small fraction has ever been posted on WikiLeaks, but the initial tranche served as the site’s foundation, and Assange was able to say, “We have received over one million documents from thirteen countries.”

-Julian Assange’s mission for total transparency

Related:
WikiLeaks on Twitter

Wikileaks and Iceland MPs propose 'journalism haven'

Recommended Reading

IMF- Selected Issues- Albania;

Comparative Inflation Performance in Southeastern Europe and Albania

Fiscal Rules for Sustainable Public Finances In Albania

Assorted on Sectoral MTEFs- Education

Education Sector MTEF- Vietnam

Education Financial Planning in Asia
A series of case studies on Implementing Medium-Term Expenditure Frameworks in 6 countries -- the Republic of Korea, Mongolia, Nepal, Tajikistan, Thailand and Viet Nam

MTEF for Developing a New Education Strategy- Lesotho

MTEF Portal - UNESCO

Performance, the Upper Level in Management as Part of an MTEF

PFM in MENA- what's the value for money of 407 billion dollars

A new report from the World Bank "Public Financial Management Reform in the Middle East and North Africa: An Overview of Regional Experience" surveys the experience of the region on the topic of public financial management reform.

According to the most recent World Bank data, governments throughout the MENA region spent approximately $407 billion dollars in 2007 in delivering their policy, regulatory and service functions.

Related:
Executive Summary
Country Cases

PFM Efficiency gains in Egypt

one percent efficiency gain in Egypt’s budget for 2009 would yield $637 million dollars, enough resources to build 40,000 schools, pave 4,500 kilometers of highway, or recruit an additional 600,000 doctors.

- "Public Financial Management Reform in the Middle East and North Africa: An Overview of Regional Experience"

July Book Club readings

There are a few PFM related books in our July list.

Author Blog of the Day- Daniel Ben Ami

danielbenam

In Pictures- UK Emergency Budget

via Big Picture

 via The Economist

The first crucial decision he had to make was his goal for the public finances: his “fiscal mandate”. He set an exacting objective of balancing the cyclically adjusted current budget (which excludes net investment) within five years. In his next big decision, he plumped for overachieving: the specific plans he set out over the next four years mean that the goal should be met in 2014-15, a year early.

Infographic of the Day- How Laws Are Made

How Our Laws Are Made

Check list for ensuring value for money of public spending?

British Treasurer George Osborne issued details of the 'process and principles' that will underpin the Spending Review;

-Thinking innovatively about the role of government in society;
-Taking the difficult decisions to reduce the deficit collectively as a Government; and
-Consulting widely using all available talents to deliver a stronger society as well as a smaller state.

It also lists a check list of criteria for evaluation public spending-

• Is the activity essential to meet Government priorities?
• Does the Government need to fund this activity?
• Does the activity provide substantial economic value?
• Can the activity be targeted to those most in need?
• How can the activity be provided at lower cost?
• How can the activity be provided more effectively?
• Can the activity be provided by a non-state provider or by citizens, wholly or in
• partnership?
• Can non-state providers be paid to carry out the activity according to the results
• they achieve?
• Can local bodies as opposed to central government provide the activity?

Related:
How the UK Will Wield the Razor;

The first is that there is too much emphasis on efficiency gains as the source of savings, whereas the focus should have been primarily on program cuts. Thus the number one objective of the new “strategic approach to spending” outlined in the government’s document is a “step change in the drive for efficiency and value for money in the public sector” – with specific mention of operational efficiencies, contract renegotiations, benchmarking and the maximization of collective buying power. Substantial quick reductions in public expenditure can, however, only come about by eliminating or scaling back whole programs...

One notes in this context that the nine criteria which ministries will be asked to apply in reviewing their expenditure are not as single-mindedly focused on the identification of program cuts as was the case with the six tests applied in the Canadian program review process, but instead wander into the areas of improving the targeting and effectiveness of programs. To be fair, the government document does mention welfare spending as a key focus of the spending review, and this is very important. But overall, there needs to be a much greater focus on program review.

Assorted

OMB's FY 2012 Budget Guidance

Reducing Unnecessary Spending

The Defense of Computers, the Internet and Our Brains

A High-Five for the Invisible Hand

Lübeck as the First Charter City

Australian Budget 2010-11, assorted

Budget Overview

What I wrote on Budget Day: Aid;

The story behind the $1 billion is that Australia has promised to increase development aid to 0.5 per cent of its Gross National Income (as I explain here (link to critique of Henry Review from last week), National Income and not the more commonly used Domestic Product is the right basis for most calculations. Unfortunately for the government (at least in this instance), a recent agreement by statistical agencies has changed the way GNI is calculated. Australia’s statisticians were the first to implement this change, and the result was to increase our GNI by 4 per cent, or about $50 billion.

Budget 2010 – It’s no Sex & The City 2

Federal budget 2010-11 – a sad document

Overall score: 4/10 – too much emphasis on the surplus and not enough emphasis on jobs and living standards.

Generating a Social Surplus;

Too often when evaluating the budget, we tend to focus on the accounts. To be sure, making sure the government has enough revenue to pay the bills is central to the process. But at its core, it is about economic policy-making. So on that level, we need to think broadly about economic benefits and costs.

IMF's Fiscal Monitor

See the transcript of the discussion of the FM;

QUESTIONER: Hi. One, I have a basic math question I’m trying to understand and then a sort of broader question.

So, you’re saying overall for the advanced G-20 countries, by 2030 the debt increases by 40 percentage points or thereabouts. And so to get it to a safe level they have to reduce the deficit by 8.5 percentage points over 10 years -- 8.75, sorry. How does that math work? Why does 8-3/4 get you 40 percentage points?

And then secondly, a sort of broader philosophical question, so you have a variety of tax increases and spending cuts, why don’t you have built in there, since you’re saying growth is so important, growth measures that you would score in the same way you’re scoring this?

MR. COTTARELLI: Let me start from the second one. Of course, there is a recovering growth in the projections, but there is no major increase in potential growth. The reason why we have not done this is to be, in a way, on the cautious side because these reforms in this area are extremely important but it’s difficult to calculate when they will yield benefits.

So, I think that while all countries facing fiscal adjustment should implement the measures to boost potential growth, I think it would be a bit risky to assume from the beginning that potential growth would pick up more strongly than expected, than before the crisis.

What countries, in our view, should do is to base fiscal adjustment on relatively conservative projections on output growth and then hope, to have the strong expectation, that through reforms it would be possible to improve potential growth and there would be upside surprises.

But in terms of measuring risk, I think it would be better not to base fiscal adjustment plans on the expectation that potential growth will be higher than before the crisis. Actually, it is better to be cautious.

On your specific question, the difference is between flows and stock. The improvement in the primary balance is an improvement in the flow and that of course is not from the first tier. It’s a gradual improvement, but it’s an improvement in the flow, in the primary position every year. As a result of this, at the end, you get a decline in the debt ratio by about -- with respect to the baseline and to the starting point, by about 35, 40 percentage points. We can perhaps go through separately to do the math later on at the end.

Assorted

Journal of Development Effectiveness

Human Opportunity Index for Latin America

2010 Nepal Economic Update

2010 Sri Lanka Economic Update

Australia's Future Tax System Review

Public Debt - the very basics

Why Our Current Budget Situation Is a Crisis;

In short, there is no precedent for reducing the ratio of debt to GDP by simply growing our way out of it. Instead, policy choices must be made in order to restore a primary surplus.

U.S Government Debt Since World War II;

My reading of this history is that one should not be optimistic that we can simply shrink the ratio of debt/GDP by growing the denominator. A lot of the reduction that took place between 1947 and 2000 was due to running primary surpluses. If we are going to do that again, we will have to do so in spite of the fact that military spending is a much smaller share of GDP (so that arithmetically there is less room to cut) and in spite of the way that Social Security and Medicare are going to be affected by demographics and health care spending trends.