© 1999 International Monetary Fund
Production: IMF Graphics Section
Cover design and figures: Luisa Menjivar-Macdonald
Cover photograph: Tony Stone Images
Typesetting: Choon Lee
Library of Congress Cataloging-in-Publication Data
Guidelines for public expenditure management / editors, Barry H. Potter and Jack Diamond.
p. cm.
ISBN 9781557757876
1. Expenditures, Public. 2. Budget. 3. Government spending policy. 4. Finance, Public. I. Potter, Barry H. II. Diamond, Jack.
HJ7461.G85 1999
352.4’6—dc21
99-10980
CIP
Price: $15.00
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Contents
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Preface
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Acknowledgments
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1. Introduction
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2. The Expenditure Aggregates and Data Sources
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What government activities should be covered?
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What are the data sources?
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How are short-run expenditure projections to be made?
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3. Budget Preparation
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What is the framework in which budget decisions are made?
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Recognizing the usefulness of budget principles
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Knowing the rules
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Identifying the responsibilities within the budget system
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Who is responsible for preparation of the budget?
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What are the basic steps in budget preparation?
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What are the typical weaknesses of budget preparation systems?
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What are the typical questions?
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Is the central government’s budget really unified?
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Is the macroeconomic constraint explicitly taken into account? Are the assumptions underlying the budget accurate and consistent?
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Are recent budget execution figures known and analyzed?
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Do procedures exist for resource prioritization?
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Is there any multiyear planning?
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Is there a legitimate need for extrabudgetary funds?
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How are quasi-fiscal activities and contingent liabilities to be taken into account?
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How should appropriations-in-aid be handled?
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How are changes in expenditure plans to be targeted?
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4. Budget Execution
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What are the different stages of the budget execution process?
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Who is responsible for budget execution?
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How can budget appropriations be revised during the year?
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How good is the information on outturn expenditure?
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What are the problems encountered in budget execution procedures?
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What are the typical questions?
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How should the multiplication of exceptional procedures be dealt with?
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How can the reconciliation of budgetary and banking data be handled?
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How can the accumulation of arrears be measured—and avoided?
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Is there a complete consolidation of funds?
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How efficient is foreign aid management?
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How can expenditure be adjusted in-year?
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How should good governance be pursued?
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5. Cash Planning and Management
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What are the essential features of cash planning?
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Who is responsible for preparing and monitoring the cash plan?
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What are the main constraints that disrupt smooth financing of expenditure plans?
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What are the typical questions?
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Is the budget realistic?
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Are the procedures for the release of appropriations adequate?
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Are there adequate experienced and skilled staff to carry out this task?
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Are there clear borrowing rules?
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Glossary
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Text Tables
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1. Potential Weaknesses in Budget Preparation
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2. Stages in the Expenditure Process
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Text Boxes
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1. Assessing the Soundness of the Budget
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2. The Framework that Regulates the Budget: What Do You Need to Know?
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3. Pros and Cons of Extrabudgetary Funds
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4. Key Questions Concerning Extrabudgetary Funds
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5. Cash Accounting vs. Accrual Accounting
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6. Payment Delays and Arrears
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Figures
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1. The Budget Countdown: A Timeline for Budget Preparation
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2. Budget Execution
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3. Cash Planning
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Preface
When mission teams from the International Monetary Fund visit countries for either surveillance or program work, one person is usually designated as the “fiscal economist.” This economist’s duties extend over both the revenue and expenditure sides of the fiscal accounts.
Traditionally, economics training in public finances has focused more on tax than expenditure issues, and within expenditure, more on policy considerations than the more mundane matters of public expenditure management. Thus, many economists participating in their first IMF mission may have relatively little experience of practical issues in public expenditure management; typically, they face questions that are more about accounting and institutional structures than economic theory or policy.
For many years, the IMF’s Public Expenditure Management Division has answered specific questions raised by fiscal economists on such missions. Based on this experience, these guidelines arose from the need to provide a general overview of the principles and practices observed in three key aspects of public expenditure management: budget preparation, budget execution, and cash planning. For each aspect of public expenditure management, the guidelines identify separately the differing practices in four groups of countries—the francophone systems, the Commonwealth systems, Latin America, and those in the transition economies.
Following the preparation of an internal document for training and guidance purposes in early 1998, it was suggested that this document might be made more widely available to the public. This publication is thus intended for a general fiscal, or a general budget, advisor interested in the macroeconomic dimension of public expenditure management.
Acknowledgments
The authors wish to acknowledge the contributions from other members and former members of the Public Expenditure Management Division of the Fiscal Affairs Department, particularly Taryn Parry, José-Luis Ruiz, Véronique Bédague, and Ian Lienert. In addition, comments from G.A. Mackenzie, Sanjeev Gupta, and Adrienne Cheasty on earlier versions were especially helpful in assisting the authors in the preparation of the final text. Special thanks are due to Theresa Garrison for her patience and diligent production of many drafts of this manuscript and her editorial suggestions. Jeff Hayden of the External Relations Department edited the manuscript and coordinated its production.