Public Finance Management Reform The Georgian Experience

1
Public Finance Management ReformThe Georgian
Experience

• 2008 ICGFM Winter Conference
• December, 2008

2
Introductions

• Speakers
• Papuna Petriashvili, Deputy Minister
• Budget Department
• Georgian Ministry of Finance
• Liana Skhirtladze
• MTEF Advisor
• Georgian Minister of Finance
• Moderator
• Tim Grewe, Resident Advisor
• US Department of Treasury
• Office of Technical Assistance

3
Presentation Overview

• History of Public Financial Reforms (PFR)
• Objectives of PFR
• Primary Elements
• Public Financial Management Vision Strategy
• Medium Term Expenditure Framework

4
Reasons PFMR Initiated in Georgia

• Develop Government Strategic Directions, make
  priorities more sophisticated
• Make a reasonable forecast on the bases of good
  macroeconomic parameters
• Develop united e-Treasury system
• Tax reform
• Improve revenue planning
• Local budget system reform
• Develop Integrated Information System

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Reasons PFMR Initiated in Georgia

• Anticorruption activities to improve State
  Finance Management and increase transparency
• Conformance to International Standards
• Donor coordination and using the international
  financial assistance money more effectively and
  efficiently
• Implement Neighbor policy and NATO entry
  conditions (international liabilities)
• Improve public finances and services

6
PFM System Goals

• Maintain fiscal discipline, macro-economic
  stability and budget predictability.
• Promote a strategic approach in allocating
  resources to priorities.
• Ensure the effective and efficient use of
  resources.
• Accountability in the use of public resources.

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PFRM Components
National Priorities
Annual Budget
Government Strategy
Medium Term Expenditure Framework
Sector Strategies
Basic Data Direction
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Budget Planning Reform

• Establish program budgeting system.
• Improve budgeting and reporting for PLEs.
• Improve capital budgeting
• Extend reforms on local government level
• Improved public involvement and information

9
Resource Management Reforms

• Continued Treasury Reforms
• E-treasury functional Design prepared
• E-treasury System technical specification
  prepared
• Financial Module and Software Licenses Procured
• Financial Module customized
• Security system designed and implemented
• Pilot phase launched

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Resource Management Reforms

• Consolidating and further improving revenue
  management
• Complete on-going reforms including
  simplification of customs and tax codes.
• Strengthen tax and customs administration.
• Improve management of tax arrears
• Implement risk based system for audit
  identification
• Improve oversight of MOF budget execution
• Improve capital asset management

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Macroeconomic Indicators
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Strategic Budgeting Reform Actions

• Budget reform goals
• Improve budget and reflect comments of
  Independent Public Expenditure Financial
  Accounting (PEFA) Assessment
• Simplify the budget process
• Increase linkage between budget documents
• Strengthen management and improve expenditure
  policy
• Improve budget process coordination
• Increase transparency and availability to the
  public

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Strategic Budgeting Reform Actions

• Improve legislation base
• Integrarte MTEF into Budget process and
  institutionalize it
• Introduce medium term thinking and medium term
  action plan on the state and local level
• Link state policy, planning and budget processes
  in the medium term
• Reallocate resources to meet government
  priorities
• Basic Data and Direction Document (BDD)
• State Budget Forms
• State Budget Format

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MTEF and Annual Budget MTEF should be closely
linked to the technical and institutional
processes of the budget preparation
MTEF approach in annual budgeting
Forecast
Budget
T
T 1
Budget
Forecast
Forecast
Budget
T 2
T1
T 2
T 3
T 4
T 5
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Budget Process Reforms

• Adoption of the regulation by the Govenment of
  Georgia
• Complete involvement of spending agencies on all
  levels
• Medium term action plan a bases for developing
  the BDD document
• Fully integrate MTEF into budget process and
  format.
• Improve linkages to BDD and sector priorities
• Comprehensive goals
• Performance indicators
• GFS 2001 at all levels
• Revised budget legislation
• Improved intergovernmental finance systems
  (Formula)

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Budget Planning Reforms

• Improved and simplified budget systems
• Circular
• Execution
• Strengthen capacity of Parliament to review
  budget proposals.
• Improve capital investment project planning and
  budgeting.

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Lessons Learned

• PFRM is an ongoing, multi-year process
• Multi-year systems provide stability
• Political transition
• Economic swings
• Conflicts
• Quality of systems improve over time
• Political and Executive support required for
  success
• Danger of over-committing to reforms

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Whats Next for PFRM

• Update plan based upon
• Post conflict needs
• PEFA Report
• Focus for next three year
• PFMIS Implementation
• Improved budget system law
• Improved annual budget law
• Implement MTF in local governments
• Program budgeting system
• Capital budgeting systems

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Questions and Comments