Strengthening central fiscal institutions

1. Strengthening central fiscal institutions International experiences and good practices

2. Outline • Drivers for institutional change • MOFs in three types of countries • Developing • Advanced • Emerging • Planning ministries • Non-finance functions • Recommendations

3. Institutional drivers • Objectives • Control versus efficiency • Long-term versus short-term • Centralization versus decentralization • Economies of scope and scale • Capacities • Staff • Management • Technology • Markets (services, financial)

4. Control focus Short term Centralized Broad scope Staff/management limitations Basic IT system Little outsourcing Operational focus Many control departments Little delegation or decentralization Simple procedures Lack of enforcement In-house services Covers many non-finance functions Developing country MOF

5. Developing country MOF • Many departments! • Treasury/accounting main department • Focus budget execution • Financial inspection department(s) • Budget department has limited role • “Second Treasury” • Weak macroeconomic capacity • Competition with planning ministry • Many administration departments

6. Efficiency focus Medium to long-term Extensive decentralization Very focused Highly skilled staff and management Advanced FMIS Automation Strategic focus No control departments Extensive delegation Advanced procedures Effective enforcement Out-sourced services No non-finance functions Advanced economy MOF

7. Advanced economy MOF • Four main departments • Macroeconomic policy • Budget (including treasury, accounting) • Tax policy • Financial market policy • Separate agencies • Revenue administration • Debt/cash management • Financial supervision

8. Balanced objectives Control and efficiency Short – medium term Still quite centralized Scope is evolving Mixed skill levels Emerging IT integration Some outsourcing Operational and strategic focus Introduction of internal control Some delegation Complex procedures Weak enforcement capacity Still many non-finance functions Emerging economy MOF

9. Emerging economy MOF • Comprehensive treasury function • Integrated debt management function • Domestic and foreign • In Treasury or separate department • Central Bank fiscal agent • Strong internal audit • Separate revenue policy and collection • Separate macroeconomic/budget? • Some state administration functions?

10. Planning ministries disappear • Shift from planning to strategy coordination • Done by PMO and MOF • Budget = Strategy = Plan • Projects are prepared by line ministries • Project QA by state property agency • Projects approved through budget • Statistics prepared by separate agency

11. Non-Finance functions • Civil service database • Public sector wage policies • Public pension schemes • Procurement • Administration of state property • Issuing certificates • Quasi-banking services

12. Recommendations • Long-term approach to institutional development • Define clear objectives and priorities • Based on PEFA assessment • Consensus on institutional roles • Avoid premature restructuring • Regularly assess institutions and procedures • Update development plan