Across the globe, public ﬁnances are under mounting pressure for a variety of reasons, including escalating costs of basic service provision, more intense international competition, and requirements linked to sustainable development. More rigorous cost and revenue control is required if governments are to navigate a successful course. Although countries face different challenges, not least linked to their state of development, most will have to make difﬁcult choices to sustain essential public services (such as health and education), and to achieve economic growth.
The provision of an effective national statistics system is an important part of PFM, but goes much wider than this. National statistics result from the collection and processing of data into statistical information by a government institution, for example. Reliable statistics describe the reality of people’s everyday lives. This information provides the evidence required to develop and monitor effective development policies. It highlights where resources are most needed, and it provides the means to track progress and assess the impact of different policies. Good statistics also improve the transparency and accountability of policy making, both of which are essential for good governance, by enabling electorates to judge the success of government policies and to hold their governments accountable for these policies. Last but not least, good statistics are essential for managing the effective delivery of basic services. Building systems and human capacity to enable these is vital.
The key to success will be to critically review budgets against essential policy priorities, giving special attention to accountability and transparency, and to ensure that there is an efﬁciently functioning transaction system, especially for cash management. Amongst other areas, this includes:
Tax systems, including customs, should be reviewed in depth to identify revenue leakage and opportunities. Cash and cost management systems should also be reassessed, with non-core functions possibly decentralised to local units to minimise administrative overheads. Introducing public tax centres and helplines to facilitate the inﬂow of cash should be considered, together with additional revenue-generating mechanisms, such as bonds.
From a planning perspective, a rigorous framework for multi-year revenue and expenditure planning is essential, based on high-quality modelling and risk assessments. More critically, budgets need to be aligned with policy priorities and trade-offs between planned expenditure and cost reductions analysed, sector by sector. Efﬁciencies in certain ﬁelds will almost certainly have to be realised.
A sound legal framework for appropriation and authorisation, coupled with clear deﬁnitions of principles of ﬁscal management and reporting obligations, must be ﬁrmly established. These building blocks, in turn, must be supported by clear legislative oversight, including the necessary human skills and capacity to ensure effective information ﬂows, as well as watertight management systems. The entire system needs to be transparent with clear, traceable lines of responsibility, and both internal and external control mechanisms.
Although such steps are fundamentally technical in nature, they have to be set in a strategic context that recognises both the country’s long-term aspirations and the short- to medium-term practical constraints that can delay the implementation of a world-class PFM system. A phased approach is often best.
Financial management information systems (FMIS) are necessary to orchestrate and monitor all aspects of PFM, and these systems often need to be integrated. However, evaluating and selecting the optimum ICT hardware and software for FMIS is not easy. In addition to value-for-money, any purchasing decision should take into account the adaptability of the system to internal reforms and the need for user-friendly interfaces for all departments, the public and other stakeholders (where appropriate) in order to ensure transparency. Ease of use, or more speciﬁcally the training demands, will ultimately determine its success; training should always be a top priority, together with ensuring sufﬁcient human resources to maintain the system.
Human Dynamics has extensive experience and proven ability to develop and deliver integrated PFM strategies drawing on best international practice.
It is important for national statistics to observe a number of underlying principles if they are to be credible, reliable, as well as regarded as such by users, the public and international audiences. These principles relate to:
Building is essential of appropriate national and/or trans-national systems and frameworks that incorporate and accord with all of these elements.
For countries aspiring to a closer relationship with the European Union, a key component of the process is alignment with the European Statistical System, widely recognised as one of the leading examples of international best practice. With a comprehensive structure of harmonised methodologies for statistics – supported by legislation – the European Statistical System supports development, internal cohesion policy, and – in particular – the effective implementation of policy in the areas of poverty and social exclusion.