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?

Assorted on Privatization

Privatization- Zombie Economics (John Quiggin)

Shri Vijay Kelkar,Chairman, Finance Commission spoke on the topic ‘On Strategies for Disinvestment and Privatisation’

World Economic Prospects -World Bank

World Bank: Global Economic Update

View more presentations from worldbank.

South Asia (SAR) has been marked down to 3.7 percent growth for 2009 from 5.4 percent anticipated earlier—and down from 5.6 percent registered in 2008. Though terms of trade have moved in favor of the region with the falloff in oil prices, weakening demand in export markets (including burgeoning Indo-Sino trade) is being felt sharply, as is a tempering of services exports from India’s high-tech centers, as capital spending wanes globally. Remittances are anticipated to ease as conditions in host countries falter, albeit with some lag. Capital inflows have diminished, contributing to falloff in investment growth, notably in India. Fiscal support for slowing economies may face constraints in already quite high budget deficits.

External financing requirements for developing countries as a group are anticipated to increase to $1.3 trillion in 2009, comprised of current account deficits ($330 billion) and principal repayments on private debt coming due ($970 billion). With a decline in capital flows to developing countries underway, this would generate an estimated financing gap of between $270-$700 billion, depending on the size of roll-over risks and the magnitude of capital flight. Regions with the largest funding gaps are Europe and Central Asia, Latin America, and Sub-Saharan Africa. In the current projections, 84 of 109 developing countries would face financing gaps, in most cases too large to cover by drawing down reserves alone. This suggests that in the absence of sufficient international support, countries could be forced into generating a sharp reversal in current account balance, implying further decline in domestic demand and imports.

Debates regarding the possible “shape” of recovery from the current downturn continue. But there is little question that the outlook for 2010 in particular, is surrounded by extreme uncertainty across a wide array of policy- and other variables that will eventually bring about a revival in economic activity. The pronounced cycle in worldwide investment could have sufficient dynamic to carry global growth back to positive territory by 2010, as the pace of decline in investment moderates, and postponed demand for durable consumer goods begins to catch up. Together with the effects of monetary and fiscal stimulus this results in the modest global recovery in the baseline forecast presented here.

However, continued banking problems or even new waves of tension in financial markets could lead to stagnation in global GDP or even to another year of decline in 2010. In all cases, the estimated output gap1 would increase in 2010 because (in the baseline as well), growth falls well short of potential (figure 1.e). This implies that unemployment and fiscal deficits will increase further into 2010, in high-income and developing countries alike, while disinflationary conditions could persist well into the year.

World Economic Prospects 2009

Random Technical Assistance reports

Nepal: Strengthening National Accounts System
Technical Assistance Consultant's Reports

National Accounts Manual

IMF explains its Pakistan plan

Masood Ahmed writes an op-ed;

How does the IMF see the economic and financial challenges facing Pakistan and how can it help to address them?

The first point to stress is that overcoming the current economic crisis will require hard choices and sustained action over the coming year. Fortunately, the strategy set out by the government, on which the IMF's support is based, provides a sound basis for action. The objectives are clear: first, restore overall economic stability and confidence by acting on key macroeconomic imbalances—which means reducing the unsustainably high fiscal deficit and tightening monetary policy to bring down inflation and strengthen foreign exchange reserves. And second, the adjustment programme must be designed in a manner that ensures social stability and adequate support for the poor.

A second point is that while the necessary macroeconomic tightening will clearly involve some pain, it is important that the burden of adjustment should fall least on the most vulnerable members of Pakistani society. And that is why for the IMF it was crucial that the government's programme includes key social protection measures. Expenditure on the social safety net will be increased to protect the poor through both cash transfers and targeted electricity subsidies.

Third, it is important to point out that the programme—and its conditionality—is based on the targets and measures that the authorities have themselves set for the next two years. The IMF is convinced that the best-implemented programmes are the ones that are home grown and fully owned by the country.

Fourth, the success of the programme hinges on sustained and forceful implementation. Strong and determined implementation of the reforms included in the programme will allow the country to get its economy back on a sustainable path. Strengthening public sector institutions and governance will need to be a key dimension of this effort. In this respect, building domestic consensus around the measures included in the authorities' package constitutes a key factor in the period ahead.

Finally, while the key to success lies in the hands of the government and people of Pakistan, the international community also needs to support these efforts. To this end, the financing from the IMF will help to ease the path of adjustment and will provide a strong signal of support to the international community.

Sea of Poppies

Sea of Poppies: A Novel
by Amitav Ghosh

How much spending is enough on strengthening public expenditure management?

The People's Republic of Bangladesh intends to apply for a grant of around US$ 95 million from a Multi-donor Trust Fund (MDTF) administered by the International Development Association (IDA) and with the participation of five development partners, Department for International Development (DFID), European Commission (EC), Canadian International Development Agency (CIDA), Danish International Development Agency (DANIDA) and the Netherlands, toward the cost of Strengthening Public Expenditure Management Program (SPEMP) and it intends to apply part of the proceeds to payment for goods, works and services to be procured under this program.

- Strengthening Public Expenditure Management Program in Bangladesh

Recently from ADB

Political and Economic Update (Nepal)

Longer-term growth and development prospects hinge on the establishment of lasting peace and political stability as well as preserving macroeconomic stability and continuity of key economic reforms. Although the new Government has yet to announce a detailed policy and development agenda, the Common Minimum Program agreed between the coalition partners suggests that they will not deviate significantly from the strategic thrusts of the current Three- Year Interim Plan. The Plan seeks to reduce poverty and widening inequality through reconstruction, rehabilitation, and reintegration, pro-poor and broad-based economic growth, good governance and effective service delivery, social and infrastructure development, and an inclusive development process. However, the new Government is likely to come under pressure to deal with sensitive issues such as integration of former combatants and high oil and food prices in ways that could jeopardize fiscal sustainability and macroeconomic stability. There is also a risk that private investment could decline if the new Government fails to improve the enabling environment through concrete policy measures.

Dealing with the Proliferation of Bilateral Trade Agreements: Consolidation, Multilateralization, Harmonization, or Dilution? (No. 123) (Regional)

Inflation in Developing Asia: Demand-Pull or Cost-Push? (No. 121) (Regional)

What Constrains Indian Manufacturing? (No. 119) (India)

Governance Reform Program (First Phase) (Mongolia)

Program Agreement for Assam Governance and Public Resource Management Sector Development Program

Proposed Loan and Technical Assistance Grant: Assam Governance and Public Resource Management Sector Development Program (Subprogram II) (India)

Preparing the Strengthening Higher Education Project (Financed by the Japan Special Fund) (Lao People's Democratic Republic)

Eligibility of State-owned Road Enterprises for Participation in ADB-financed Projects (Uzbekistan, Republic of)

Can Pakistan live within its means?

The government decided on Friday to eliminate subsidies on oil and gas and to phase out the subsidy on electricity by June 2009 under a plan to stabilise the economy.

Announcing an economic package at a press conference, Finance Minister Naveed Qamar said it was aimed at bringing about macroeconomic stability, narrowing down the fiscal and current account deficits and minimising pressures on foreign exchange reserves.

The finance minister, who was accompanied by State Bank Governor Dr Shamshad Akhtar, said Pakistan would not seek any new assistance from IMF, but international financial institutions and donors could monitor implementation of the package.

“We are not going into an IMF programme,” he said, adding that the “home-grown” package had been worked out in consultation with different stakeholders, including the World Bank, IMF and ADB.

”I can safely announce today... we have eliminated the entire fuel subsidy and there is no additional subsidy today that is going out of the budget to subsidise fuel,” Mr Qamar added.

He said the subsidy on gas had also been withdrawn and the actual cost of gas would now be passed on to consumers.

He admitted that the passing on of subsidies to consumers would add to people’s hardship, but said the government had to stabilise macro-economic indicators which had deteriorated because of the policies of the previous government. He said the government was trying to be close to the fiscal deficit of around 4.7 per cent.

The finance minister said that various measures had been proposed to minimise government spending, but did not elaborate. However, he said the government was looking at PSDP allocations.

”We can only spend what we have in the kitty and suggest a drastic cut in the development sector,” he added.

Admitting that excessive borrowings from the SBP had led to inflation, Mr Qamar said the government had decided to launch non-bank borrowing schemes, including PIBs and commercial papers, in order to curb inflation.

-All fuel subsidies withdrawn

Related;
IMF might bail Pakistan out

Creative solutions for education in poor countries

Sugata Mitra: Can kids teach themselves?

MTEF Expert of the Day - Graham Scott

Dr. Graham Scott, former Secretary to the Treasury of New Zealand. Some of his experience;

Office of the Public Sector Development
Commission, Bangkok in cooperation with the World Bank – Case Study on Thailand’s Public Sector Reform. Writing a case study for inclusion in a book on the Royal Thai Government’s Public Sector Reform to assist other developing countries, particularly Asian countries, contemplating public sector reform.

Advised Royal Government of Bhutan on the development of new financial management arrangements to support the move from a monarchy to a constitutional democracy. This included drafting a Public Finance Act and advising on the design and implementation of reforms associated with this Act. [World Bank project]

World Bank - Governance Reform in Lao PDR. Writing a background report on governance reform in Lao PDR as input for the Lao PDR Country Policy and Institutional Assessment (CPIA).

Advised Government of Latvia on financial management reforms including reforms to the budget process (MTEF etc). Assisting Ministry of Finance and Ministry of Economy with development of new programmes, strategic plans and the linking of this work to the budget and reporting systems.

Advised Ministry of Finance and Economy on the concepts and implementation of MTEF approach to budgeting. Includes advice on roles and responsibilities in the MTEF process, programme design, legal matters, timing and information requests and processing.


Advisor to the World Bank on the public expenditure review for Mongolia.

Advisor to Ministry of Finance in Macedonia on reforms to financial management and organisational developments within the Ministry of Finance, including implementing strategic planning processes

Advisor to the Office of the Auditor General of Canada on the examination of the public service reform initiatives- also 1994,1995.

Visiting Scholar to the Fiscal Affairs Department of the International Monetary Fund. Produced paper for publication- “Government Reform in New Zealand”. Occasional paper No 140, International Monetary Fund, Washington DC, October 1996.

The Secretary to the Treasury, Government of New Zealand
The chief executive of the Treasury responsible for providing policy advice on a broad range of economic, financial and commercial issues. The significant work achieved during this time included:

• Design and implementation of approaches to fiscal policy and public management which revolutionised the way New Zealand governments manage their financial affairs.
• Development of the State Sector Act and the Public Finance Act which brought about the devolution of financial authority to government departments and agencies and pioneered the concepts of output-based budgeting and performance management.
• Initial development of New Zealand’s pioneering Fiscal Responsibility Act which strengthened the accountability of the executive to parliament for sound principles of fiscal management on a medium and long-term framework.
• Design and administration of New Zealand’s corporatisation programme which created State-owned enterprises out of many departmental functions and incorporated them under New Zealand company law. Privatisation of most of these activities.
• Redesign of the functions of the New Zealand Treasury, including privatising the management of pension funds and other functions.
• Establishment of the Debt Management Office, an office which holds responsibility for the policy and administration of the government’s official debt. This has become a world leader in the application of modern portfolio management techniques to government debt management.

Why are PFM experts not talking about Climate Change?

Scientists Sunday said they could no longer rule out a fast-track melting of the Greenland icesheet -- a prospect, once the preserve of doomsayers, that would see much of the world's coastline drowned by rising seas.

The researchers found that the great Laurentide icesheet which smothered much of North America during the last Ice Age melted far swifter than realised, dumping billions of tonnes of water into the ocean.

-Past evidence boosts concern for Greenland icesheet: scientists

Sea level rises may accelerate due to melting ice sheet;

The most recent report from the UN's Intergovernmental Panel on Climate Change predicts that sea levels will have risen by around 10cm at most by 2100, but according to Carlson's analysis, rapid melting of the Greenland ice sheet could cause much greater rises.

"For planning purposes, we should see the IPCC projections as conservative," he said. "We think this is a very low estimate of what the Greenland ice sheet will contribute to sea level."

In an accompanying article, Mark Sidall at Bristol University describes how a 1 metre rise in sea level would submerge an estimated 2.2m square kilometres of land, largely in Asia, and displace around 145 million people at a global cost of $944 billion.

Hoisted from Comments

KL from India commented;

I think "From Line-item to Program Budgeting" edited by John M Kim is a good document on how MTEF is at the core of Program Budgeting.
I am also currently working in evovling MTEFs for selected departments for a DFID funded project in India.

Thanks for the appreciation-hoisted from comment

Dear MAI,

Its an excellent idea to start a blog on MTEF. I am also working on MTEFs at the Sub-national level.Congratulations on being recognized by IMF_PFM.
In India MAI would mean mother, hope this becomes mother of PFM.

Regards,

KL
India

Assorted Technical Assistance- ADB

Nepal: Knowledge Transfer for Public Procurement

Bhutan- Strengthening the Debt Management Capacity of the Department of Aid and Debt Management-Undisbursed $6,672;

• A debt policy. The TA final report produced a “borrowing policy and strategy.” It includes a framework for government borrowing, recommended borrowing ceiling and parameters, an on-lend policy, and guidelines on the use of guarantees. Despite the delivered output, it took additional Government efforts to finalize the debt policy, which was drafted independently by the Government after the TA completion. Nonetheless, the exposure from the consultants’ preparation of the “borrowing policy and strategy” was helpful to the DADM staff in finalizing the debt policy. In 2008, the debt policy is in the process of being mainstreamed into the decision-making process. This TA output was therefore relevant but not sufficient, as well as less effective.

A loan procedures and regulations manual. A brief loan manual was prepared under the TA. The manual described government borrowing cycle and the responsible agency functions. MOF used such information to produce the Standards Operating Procedures (SOP). SOP is in use and effective. However, this TA component did not contribute to the more comprehensive “Aid and Debt Management Manual” because of government reorganization that separated aid and debt management functions. Therefore, the Government was unable to produce a combined manual. Under such a circumstance, this TA output was still relevant, effective, and sustainable.

• A complete and consolidated database on all loans and grants. Procurement and installation of the database were the largest TA component. In early 2006, the CS-DRMS for loan and grant recording was procured. Significant efforts were made by ADB to reduce the price for a non-Commonwealth member. As a result, the system procured was cost effective and suitable in the Bhutanese context. The system has been essential for the country’s debt policy management and formulation. This TA output was highly relevant, highly effective, and most likely sustainable.

• Strengthened debt management capacity of public debt management staff. Continuous ADB TA support from 2003 to DADM delivered concrete results in strengthened debt management capacity. Six DADM staff members have been trained and are now proficient in using the CS-DRMS. All six are still with DMD, and the developed capacity is retained. Because of the complex nature of the software system, DMD staff requires continuous support to use the new database. This TA output was highly relevant, highly effective, efficient, and most likely sustainable.

• Timely feedback provided in the form of descriptive and analytical reports to other user departments of the Government and aid agencies. The information generated by CS-DRMS provides descriptive and analytical reports to line ministries. Such reports helped MOF formulate critical decisions in macroeconomic management and development planning. This TA output was highly relevant, effective, efficient, and sustainable.

Major Lessons
The TA completion was delayed because the TA design did not foresee the extended time required for software procurement and launch. The selection of a suitable system, especially fitting the Bhutanese context was time consuming. The Government conducted exhaustive reviews, including country site visits, and extensive negotiation of the price. Database conversation from original Excel sheets to the CS-DRMS also took longer time than originally planned. The extensive time on software procurement and launch therefore affected some remaining TA outputs. These issues need to be taken into consideration for the subsequent TA design and implementation.

Capacity Building for Fiscal Reforms in Sikkim- Undisbursed-$183,889;

Overall Assessment and Rating: The TA was successful in introducing VAT in the State, and designing a fiscal consolidation program in conjunction with capacity building trainings in several areas (see the previous section). The consulting firm was selected under the Quality and Cost Based Selection Process (QCBS) at a significantly lower cost than anticipated during TA processing. Thus, the objective of the TA was accomplished without utilizing the entire amount of the original TA budget. The proposed overall rating of the TA is successful

Major Lessons: Sustaining the capacity building effort in a small state like Sikkim is a difficult challenge. The follow-up actions are often not pursued after the period of assistance. In such a situation, designs of the capacity building initiatives become very crucial. The capacity building process needs to be completed within the TA period so that the desired sector outputs could be achieved without immediate follow-up actions. For example, the VAT manual and the VAT rules were designed under the TA, and adequate training was provided to the concerned staff. In other words, the desired output was not exposed to exogenous risks in terms of Government’s commitment for training.