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Module

Introduction to Public Financial Management

Public Financial Management (PFMx)1

1

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(Notforinstructornotes.)

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PFM in the World

Sustainable Development

Goals

Management Of

ResourcesFinancial

Crises

Natural Disasters

DevelopmentAid

Natural Resource

Management

5




Public Financial Management


PFM is concerned with the laws, organizations, systems and procedures available to governments wanting to secure and use resources effectively, efficiently and transparently.





Organizations

SystemsGovernment Fiscal

Policy

Laws


Procedures

PFM Institutions

Economic policy

Public Financial

ManagementImplementation

Political economy Laws and regulations




What is Public Financial Management?

… the management of government finances – both expenditure and revenue.

Public Financial Management is…

Narrow : budget process and cash management

Broad : all aspects of generating and spending resources




Political Economy Aspects of PFM

Laws

ProceduresPolitical economy

Cultural norms Change Management Citizens




Defining Public Financial Management

EfficientUseof

resourcesUseof

resources

Effective

Transparent

Laws

Organizations

Systemsandprocedures

Institutionalaspects

PublicFinancialManagement

Laws

Organizations

Systemsandprocedures

Institutionalaspects

PublicFinancialManagement



Pleasedonotadjusttextfieldpositions.DESIGN

What?

IMPLEMENTATION

How?

Public Financial Management in action

OBJECTIVE: Achieve a sustainable fiscal position

Development of a medium term frameworkLink rule to the budget processReporting or monitoring requirements

What is the desired level of debt?

Adopt anexpenditure rule

PFM makes Fiscal Policy work

FiscalPolicy

Howpoliciesshouldbedesigned

Whattodo Howtodo

PublicFinancial

Management

Howpoliciesshouldbeimplemented





PFM : Management of Government Finances

How

Laws

SystemsGovernment Fiscal

Policy

Organizations

Procedures

Coverage of the Public Sector

Public expenditure is a large share of GDP

Source:IMFWEOdatabase.*2014,2015or2016

0

20

40

60

80

100

Belarus

Spain

Serbia

Sloven

iaMaldives

Germ

any

Barbados

Nethe

rland

sSlovakRep

ublic

Solomon

Island

sTimor-Leste

Croatia

Norway

Portugal

Repu

blicofC

ongo

Swed

enMon

tene

gro

Italy

Lesotho

Greece

Hungary

Oman

Austria

Denm

ark

Belgium

Kuwait

MarshallIsla

nds

Microne

siaFinland

France

Djibou

tiNauru

Generalgovernmentexpenditure(PercentofGDP,latestavailable*)

Why PFM is important

Public Financial

Management

Laws and regulations

Sustainability

Fiscal Space

Accountability




Sustainability

PFM Promotes Sustainability

FiscalPolicy

DESIGN

What?

PublicFinancial

Management

IMPLEMENTATION

How?

Sustainableandinclusiveeconomicgrowth




Defining Fiscal Space

… the capacity to finance additional or new public spending through increased resources and/or expenditure rationalization or reallocation.

Fiscal space is…

Increased resources

Expenditure rationalization




PFM Allocates Resources

SustainabilityofPublicDebt

FiscalPolicyObjectives

FiscalSpace

Accountability

Government Accountability

• Citizens

• Companies

• Investors

Stakeholders How

• Fiscal reporting• Transparency

standards• Information




Oversight Mechanisms and Transparency

Executive

Legislature

Citizens/Voters

Fiscal Responsibility: • Accountability

Role of the Budget in PFM

InstitutionsSystemsProcesses

UseofResources

Efficient

Effective

Transparent

AnnualBudget

Legal framework

The Budget Cycle

Legal framework

The Budget Cycle

Legal framework




The Fiscal Framework




Budget Preparation




Budget Execution




Accounting and Reporting




Control and Audit




Legal Framework

#1 #2 #3

#4 #5

Modern Perspectives

of PFM

The Budget as a Strategic Policy Tool

Managing Budgetary Resources Effectively

Strengthening Fiscal

Responsibility

PFM Reform Challenges

PFMx:Introduction to PFM

Medium term

approach

Key Elements of PFM

1. Fiscal Framework

2. Budget Preparation

3. Budget Execution

ConsolidatedReporting

4. Accounting and Reporting

5. Control and Audit

Fiscal Policy

Fiscal Policy Implementation

Tax Policy

Cash Management

International Standards

Fiscal Council

Supreme Audit Institutions

PIMAControls

Annual Budget MTFs

The Budget Cycle

Legal framework




The Legal Basis for PFM

Country context

Laws

Regulations

Accounting principles

The Legal Framework

Legal framework

Fiscal Policy

Areas of PFM

Core Specialized

Other

Specialized Areas of PFM

Specialized

Fiscal Councils

Fiscal risks

External Aid

Fiscal rules

Coverage of Public Sector

FMIS

1.

2.

3.

Current issues in PFM

40

‘Good’ practice

Country context

Pace and sequencing of reform

Current issues


Organizations

Systems

Laws

Procedures

Public Financial

Management

Sustainability

Fiscal Space

Accountability

Legal framework

MinistryofFinance/Treasury

Legislature

Citizens/Voters

Documents

Public Financial Management (PFMx) Module 1 · PDF fileRequired Negative Space (Not for instructor notes.) Please do not adjust text field positions. Public Financial Management Public