Islamic Republic of Afghanistan
Technical Assistance Report-Report on Government Finance Statistics Technical Assistance Mission (October 18-31, 2018)
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International Monetary Fund. Statistics Dept.
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This Technical Assistance paper assesses Islamic Republic of Afghanistan government’s finance statistics (GFS). The mission updated the AFMIS bridge tables to enable producing Budgetary Central Government data according to the GFSM 2014 classifications including the economic (object) and functional classifications, reviewed government debt compilation, assisted developing bridge tables for extrabudgetary units, and provided hands-on training for GFS compilers in compiling the data for the general government. Despite good outcomes, the capacity for GFS compilation remains slim and securing support of the management remains critical for both maintaining the current achievements and further improving the government financial data consistent with the GFSM 2014 methodology. Afghanistan has made good steps toward further improving GFS and starting to provide supplementary accrual information, while there have been issues with the quality of the source data. The mission suggests that a GFS Technical Working Group should be set up to coordinate the GFS reforms, address the issues in applying the GFSM 2014 methodology, and advise the Ministry of Finance management on important matters requiring attention.

Abstract

This Technical Assistance paper assesses Islamic Republic of Afghanistan government’s finance statistics (GFS). The mission updated the AFMIS bridge tables to enable producing Budgetary Central Government data according to the GFSM 2014 classifications including the economic (object) and functional classifications, reviewed government debt compilation, assisted developing bridge tables for extrabudgetary units, and provided hands-on training for GFS compilers in compiling the data for the general government. Despite good outcomes, the capacity for GFS compilation remains slim and securing support of the management remains critical for both maintaining the current achievements and further improving the government financial data consistent with the GFSM 2014 methodology. Afghanistan has made good steps toward further improving GFS and starting to provide supplementary accrual information, while there have been issues with the quality of the source data. The mission suggests that a GFS Technical Working Group should be set up to coordinate the GFS reforms, address the issues in applying the GFSM 2014 methodology, and advise the Ministry of Finance management on important matters requiring attention.

Summary of Mission Outcomes and Priority Recommendations

1. In response to the Islamic Republic of Afghanistan authorities’ request, a government finance statistics (GFS) mission visited Amman, Jordan during the period October 18–31, 2018 to provide technical assistance (TA) to further improve GFS compilation and dissemination, consistent with the Government Finance Statistics Manual 2014 (GFSM 2014) and developing GFS that can better support IMF surveillance. TA in GFS was previously provided to the Afghan GFS compilers in 2010 following the methodology of the GFSM 2001. The mapping from Afghanistan Financial Management Information System (AFMIS) to the classification of GFS and Classification of Functions of Government (COFOG) have come out of date, requiring review, and update in line with GFSM 2014. These have been the key reasons for the authorities discontinuing to produce GFS consistent with the GFSM 2014 methodology, while financial data has been produced on time according to the national methodology.

2. The mission updated the AFMIS bridge tables to enable producing Budgetary Central Government (BCG) data according to the GFSM 2014 classifications including the economic (object) and functional (COFOG) classifications, reviewed government debt compilation, assisted developing bridge tables for extrabudgetary units, and provided hands-on training for GFS compilers in compiling the data for the general government. Following the mission, the Afghan GFS compilers substantially improved their understanding of the GFS framework and have been able to ensure the completion of GFS annual datasets for the financial years FY2016 and FY2017 completing the compilation using the templates according to GFSM 2014 for the first time, as well as adding some stock data. The updated bridge tables allowed them to produce monthly GFS data for the BCG. Extended effort has been made on improving the accuracy of the data on COFOG for the central government expenditure both on the on-budget and donor-implemented projects.

3. Despite good outcomes, the capacity for GFS compilation remains slim and securing support of the management remains critical for both maintaining the current achievements and further improving the government financial data consistent with the GFSM 2014 methodology. Specifically:

  • Annual GFS can be produced for the general government. Underlying accounting processes and systems help providing the essential source data on a timely basis for producing reliable and comprehensive GFS.

  • Recent improvements on the budget formulation side, using the GFSM 2014 methodology in the budget presentation are encouraging. This includes the presentation of medium-term budget framework and expenditure classification according to COFOG.

  • Afghanistan has made good steps towards further improving GFS and starting to provide supplementary accrual information, while there have been issues with the quality of the source data. With some additional effort BCG could also add stock data to all financial assets and liabilities. Steps also have been made towards starting to record the stocks of fixed assets. Meanwhile, a number of decisions has been made disregarding the GFSM 2014 methodology. Specifically, the classification of non-financial assets acquired and disposed (sold) has not been aligned to support comprehensive records and allow their consolidation. Accounting treatments have not been devised for segregating transactions from holding gains and losses or other volume changes. Government claims on banks for currency and deposits set aside for the future claims against letters of credit are not recognized as part of cash balances, while expenditure outflows are recorded at the time of opening the letters of credit.

  • Despite financial data being produced on a timely basis, data dissemination has been interrupted by inability to continue the support for the Treasury website. Alternative ways of publication of the monthly and annual data for BCG and quarterly debt data have not been identified.

  • Cooperation among departments in improving the GFS source data and addressing the compilation issues requires improvement. Little cooperation among departments happens outside routine public financial management processes complicating the resolution of issues in the source data and the maintenance of the Chart of Accounts, including the GFS and COFOG bridge tables. Cooperation becomes critically important as there has been progress achieved including for the GFSM 2014 migration.

4. Publication of Government Finance Statistics (GFS) and government debt data should resume. These data are already produced – monthly BCG data are available within three weeks after the end of a month; quarterly government debt data – within a month after the end of a quarter; and audited BCG budget account – within six months after the end of the year. Publication would make the data available to a broad range of users and would reduce the demands on the staff for providing the data by e-mail. The gradual improvement of the data consistent with the GFSM 2014 methodology would further provide support for essential reforms. The reforms should focus on enabling producing balance sheets, initially aiming at the compilation of comprehensive financial assets and liabilities data.

5. A GFS Technical Working Group should be set up to coordinate the GFS reforms, address the issues in applying the GFSM 2014 methodology, and advise the MoF management on important matters requiring attention. The lack of coordination at this stage causes gaps in reporting, accounting and reporting reforms as well as increase the workload in addressing the ongoing issues. The matters of expanding the use of GFSM 2014 methodology should be addressed first on technical level before management decisions are made. Further reforms should be encouraged to further strengthen the cooperation among different stakeholders, improving the compliance with the GFSM 2014 methodology, and gradual migration to expand reporting of balance sheet data. Still many achievements remain fragile. The obstacles to effective and timely flow of the source data, compilation and dissemination of GFS and government debt should be effectively addressed.

6. AFMIS Chart of Accounts (CoA) should be updated with GFS and COFOG mapping tables and appropriate maintenance ensured thereafter. The mapping updated during the mission should be added to AFMIS CoA to enable AFMIS producing data according to GFS and COFOG classification structure. Arrangements for regular update of the bridge tables should be adopted to avoid the data quality deteriorating over time, specifically while lacking consultation with technical experts during assigning GFS and COFOG coding from new economic (object) codes and program activity codes. Technical consultation will also be critical for considering reform plans and executing key activities, particularly improving the compliance with the GFSM 2014 methodology.

7. A GFSM 2014 migration plan should be adopted. Afghanistan should use its favorable situation to enable further reforms benefiting both richer information for the government financial management and macroeconomic statistics. The plan would facilitate the coordination of the reform processes and activities, assist allocating the necessary resources and engaging the necessary technical assistance.

8. To support progress in the above work areas, the mission assisted to develop a Multi-Year GFSM 2014 and Public-Sector Debt Statistics (PSDS) Work Plan with the following priority recommendations carrying particular weight to make headway in improving GFS reliability/quality/timeliness/completeness:

Table 1.

Priority Recommendations

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Further Improving GFS Compilation and Dissemination

A. Applying the GFSM 2014 Methodology for Recording and Reporting BCG Operations

9. The Public Finance and Expenditure Management Law (PFEML) mandates the use of IMF GFS methodology in the budget presentation, classification and reporting creating a solid legal backing for the use of GFS approach. The steps made in the aligning national accounting practices with the international accounting and financial reporting standards have further strengthened the regulatory backing and support. Moreover, timely and disciplined bank reconciliation provides valuable cash basis data in close to real-time basis and useful source for supporting the management processes. Meanwhile, the processes and procedures in the MoF to spread these practices to a broader government coverage require further upgrade and support.

10. The authorities have expanded the use of the GFSM 2014 methodology in government financial management. A new template, based on GFSM 2014 cash basis has been adopted at the end of 2017 for the budget preparation starting from the FY2018 (solar year 1397) (see Appendix I). Adopting a new GFSM 2014 compatible budget presentation has been a major step towards improved communication of the key budget aggregates according to the new methodology and better coordination of macroeconomic policy management.

11. Meanwhile, the GFS compilation for BCG according to the GFSM 2014 methodology has experienced a number of setbacks. The MoF proceeded with an upgrade of Afghanistan Financial Management Information System (AFMIS) starting from FY2017 without adding a new bridge table from the object (economic) classification to GFS. It has been acknowledged that the previous mapping of object codes to GFS codes based on GFSM 2001 methodology had become outdated, while there was no agreement on a new mapping without additional external TA. Moreover, the shortage of expertise on the GFSM 2014 methodology and the lack of appropriate institutional arrangements for maintaining the mapping to GFS coding have resulted into further deterioration of the facilities for reporting GFS.

12. The bridge tables for BCG have been updated during the mission to comply with the requirements of the GFSM 2014 methodology. Because of the features of the AFMIS database configuration and the use of MS Excel for data sorting the IMF GFS codes in the bridge tables have been styled as numerical 7digit codes (see Appendix II). The bridge tables have been used for the conversion of the BCG data into GFSM 2014 structure to use for the compilation of GFS for FY2016 and FY2017. The updated bridge tables have been provided in Appendix II. GFS compilers should seek for approval of the updated bridge tables and add these to AFMIS.

13. Annual GFS has been compiled during the mission according to the GFSM 2014 methodology for FY2016 and FY2017. GFS compilers now have the capacity to produce the BCG data according to GFSM 2014 methodology. This includes the production of monthly GFS data for the BCG.

14. The experience during the compilation of the annual GFS has indicated weaknesses in accounting for and reporting of stock data. The stocks of assets and liabilities are not properly reconciled and carried forward to the next accounting period. These should first be addressed for all financial assets and liabilities before focusing on the stocks of non-financial assets. The reconciliation of opening and closing balances of assets and liabilities should be introduced first in the Treasury, followed by improved guidance for the units of BCG. These reforms could allow competing a financial balance sheet for the Treasury followed by BCG.

15. A GFS Technical Working Group should be set up to accommodate the GFS capacity and experience accumulated for better coordination of the efforts. The Working Group specifically should: (i) review the mapping of new economic object and program (activity) codes to be set up in AFMIS to GFS and COFOG according to IMF GFS methodology; (ii) address the issues in GFS compilation and dissemination; (iii) advise the management on the GFSM 2014 migration plan and related accounting reforms and budget presentation matters; and (iv) address other issues to facilitate the compilation of macroeconomic statistics.

Recommended Action:

  • The MoF should set up a GFS Technical Working Group to address the issues in the GFS compilation and the application of GFSM 2014 methodology addressing specific accounting issues as well as advise the MoF management as appropriate by April 2019.

  • The MoF should review and approve the mapping from object code to GFS code and upload the bridge tables to AFMIS by June 2019.

  • The MoF should adopt a plan to enable preparing a financial balance sheet for the Treasury and BCG by July 2019.

B. Compilation of Public Sector Debt Statistics

16. Debt statistics currently compiled and reported covers external loans of the BCG, Special Drawing rights (SDR) liabilities, and domestic securities issued to Da Afghanistan Bank (DAB – the central bank) to compensate for the losses incurred during the rescue of Kabul Bank in 2010. Debt statistics include loans from foreign governments and international financial institutions. Borrowing from the IMF, as part of past financial arrangements with the IMF ought to be recorded as SDR liabilities only in DAB’s accounts, and proceeds from the borrowing, when passed on to government recorded as a domestic loan from DAB. The Treasury currently records the debt data into the Commonwealth Secretariat – Debt Reporting and Management System (CS-DRMS) based on the transactions of loan disbursement and amortization. The authorities have issued promissory notes to address a shortfall in the DAB equity resulting from support provided to the Kabul Bank, which faced financial turmoil and depositor’s run on the bank in 2010. The staff of the Debt Management Unit (DMU) compiles the data and reconciles the transactions with records in AFMIS. Inconsistencies in AFMIS and CS-DRMS records are usually addressed and rectified within a month.

17. Debt reporting does not follow GFSM 2014 and Public-Sector Debt Statistics Guide for Compilers and Users (PSDSG 2013) methodology. Methodology in these prescribe reporting debt according to both nominal value and market value, which add to the stock of debt the amount of interest accrued and not paid at the date of reporting (Table 2 below describes valuation methods according to the PSDSG 2013). Afghanistan MoF does not add interest accrued not paid to the debt stock at the end of the reporting period. Debt compilers explained that the current practice was due to the domestic legal requirement of recognizing the transactions and balances strictly on cash basis. Accounts payable for the units of the BCG are not added to the stock of debt. AFMIS has started recognizing the transactions of goods received before initiating a payment, while outstanding balances of accounts payable have not been maintained and carried forward to the next reporting period. The MoF occasionally requires BCG units to report outstanding arrears as part of the financial management process, while the data is not considered to be comprehensive to be used in the financial reporting.

Table 2.

Valuation Methods According to the PSDS

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18. The data on debt incurred by the extrabudgetary units (EBU), public corporations (state-owned enterprises), and municipalities is not reported to the DMU in the Treasury. EBUs prepare annual financial statements on accrual basis for their accounts and include the data on debts incurred. Public corporations have been reporting their financial data to the State-owned enterprise department of the MoF, while the arrangements have not been made to receive the data to the DMU in the Treasury for the compilation. The data on debt liabilities incurred by entities managed by foreign donors in the interest of the Government of Afghanistan is not reported to the MoF. Municipalities do not produce comprehensive financial accounts at the moment and do not report their debt data to the MoF.

19. The requirements of the PFEML to report assets and liabilities have not been fully supported by adequate upgrade of the accounting and reporting systems. Cash basis focus of the accounting systems in BCG and municipalities does not facilitate comprehensive recording the assets and liabilities as well as improving useful information for better financial management. The accounting guidance and records in public corporations require further assessment for the purposes of public debt reporting.

Recommended Action:

  • The DMU should ensure reporting debt at market value and nominal value consistent with the PSDSG 2013 methodology by June 2021.

  • The MoF should adopt a plan to update accounting and reporting to ensure the collection of accounts payable data and arrears data by the units of the general government by June 2020.

  • The MoF should engage CS-DRMS suppliers to configure the system to produce the debt data according to PSDS methodology, specifically ensuring the computation of accrued interest and debt in nominal value by December 2020.

  • The DMU should engage counterpart agencies to acquire the debt data from municipalities, public corporations, and other entities holding public debt on their record to the degree possible by January 2021.

C. Developing the Sources of GFS Data for Extrabudgetary Units and Municipalities

20. Annual GFS data is being compiled for the general government. EBU comprises of extrabudgetary units and donor-managed aid operations benefitting the government. Significant amounts of donor aid are donor executed and do not appear in the BCG accounts, which include only the aid flows channelled through the Treasury.

21. The Government benefits significantly from military and security aid provided by foreign governments, most of which has been donor executed and treated as extrabudgetary operations of the government. The data for military and security assistance received from and executed by the Government of the USA are compiled based on cost to the donor from the publications on the websites of the donor government. The data on the overall outlays (cash expenditure) and the structure of the expenditure is obtained separately from the websites of the US Treasury and the Congress of the U.S.A.. Transfers by the Government of the USA to the United Nations Development Programme (UNDP) for the purposes of funding police salaries are subtracted from the total of the extra-budgetary funding to the Government of Afghanistan and reflected as the flows processed through BCG. Similarly eliminated here is part of the aid channeled through the Treasury and reflected in BCG accounts.

22. The MoF engages foreign governments and international organizations to obtain the data regarding aid flows executed by the donors without channeling the funds through the accounts controlled by the Government of Afghanistan. The data has been compiled based on the cost of the activities to donors. Some donor activities should be excluded from the total because these do not benefit the government operations or are implemented without engaging the government. Examples of such operations include the aid provided to Afghan refugees in foreign countries or some operations of managing and coordinating donor aid to Afghanistan without engaging the agencies of the Government of Afghanistan. The mission engaged Afghan participants of the mission to review the schedule of donor executed projects as recorded in the Donor Assistance Database (DAD) for the purposes of assigning a GFS code and a COFOG code to specific activities for creating a record regarding extrabudgetary operations of the central government. A methodology to estimate quarterly data on the donor-managed aid operations should also been devised to enable reporting on the general government operations. The data could be further improved in the future, if GFS and COFOG assignment would be discussed, while coordinating with donor representatives and the properties included in the DAD.

23. The institutional table have seen changes in the number of the EBUs. The Government has incorporated Afghanistan Investment Support Agency into BCG, which is not any more reflected among EBUs. Afghanistan Telecommunications Regulatory Authority (ATRA) has compiled and published financial accounts for the agency as well as the Telecommunications Development Fund (TDF). These have been added to the GFS compilation for the first time. Mapping of extrabudgetary unit financial data to GFS Yearbook (GFSY) templates has been developed during the mission to allow the compilation of the annual GFS data (Appendix III). Further review to identify public corporations that should be re-classified to the general government should be conducted, engaging the Central Statistical Office (CSO) and DAB.

24. Both the MoF and the Independent Directorate of Local Governance (IDLG) collect quarterly the financial accounts from municipalities. The MoF acknowledges reduced cooperation from municipalities reporting their financial data to compilers. On several occasions municipalities have not been complying with the MoF’s requests to provide the data even if the PFEML stipulates such reporting through provincial finance offices. The Financial Regulations of the Government stipulate the use of administrative penalties, if rightful requests for reporting financial data to the Treasury are not met, while the practice still has not been used. Moreover, the segregation of the staff in municipalities producing revenue and expenditure data does not facilitate consolidated view of the finances of municipalities. The procedures for reconciling the mutual transactions between the units of the central government and local governments have not yet been adopted. Currently the consolidation is made based on the data of the BCG only.

25. The MoF should seek technical assistance (TA) to improve the accounting standards, recording, procedures, and reports for the BCG, EBUs, and municipalities to supply the data for GFS compilation. The improvements should initially focus on aligning the classification with GFSM 2014 methodology and enable the reconciliation of cash and debt stocks with the flows. Unified forms should provide core information for the GFS compilation.

Recommended Action:

  • The MoF should revise the regulations to strengthen the responsibility of government units and public corporations for reporting and the ability of the Treasury to enforce these requirements by June 2020.

  • The MoF in collaboration with the CSO and DAB should review the institutional table with focus on the public corporations that should be reclassified within the general government sector in compiling GFS by June 2020.

  • The MoF should revise according to GFSM 2014 methodology the accounting guidance and reporting forms for general government units, including municipalities, EBUs, and public corporations, to enable the Treasury to compile quarterly GFS for the general government December 2021.

  • The MoF should develop approach to engage foreign donors to facilitate the data flow and accuracy as well as the estimating of quarterly operations by December 2021.

D. Compilation of COFOG for the General Government

26. COFOG data has been compiled for the BCG based on bridge tables incorporated in AFMIS. COFOG mapping has been made based on the activity structure in the program classification for the BCG budget. The Budget General Directorate has been responsible for assigning COFOG coding. The mission identified a number of deficiencies in assigning COFOG codes and updated the mapping. The reasons for the deficiencies are the lack of clarification of the key outputs and outcomes during the formulation of the program activities as these are first established in the budget structure.

27. COFOG data for donor-managed aid has been compiled through assigning specific codes to over 600 projects extracted from the Donor Assistance Database (DAD). Repeating the exercise of assigning COFOG coding to individual projects annually is labor intensive and potentially error prone. The exercise would be substantially improved, if DAD would incorporate GFS and COFOG mapping to allow assigning to the respective projects when such projects are formulated. Interaction with donors on the project objectives would furthermore allow shaping the projects and improving their planning and management.

28. The compilation of COFOG data for the financial operations of municipalities requires improvement the most. The MoF makes estimates on the purpose of own operations of municipalities, while it is possible to derive the COFOG data from the external donor funding passed through the Treasury to municipalities from the accounting data. The MoF has powers established in the PFEML to prescribe financial reporting forms and requirements for municipalities. Specialized surveys should be considered to determine the structure of the expenditure of municipalities, if establishing better reporting arrangements from municipalities is not deemed practicable.

Recommended Action:

  • The MoF internal procedure should be adopted to mandate assigning a COFOG code to all program activities and projects at the time of establishing a classification item as well as coordinating to use single coding in budget preparation and budget execution by September 2019.

  • The MoF should adopt a plan for municipality reporting on the purposes of the expenditure or survey municipalities to establish the COFOG breakdown of the expenditures by September 2020.

E. Dissemination of GFS and PSDS

29. The Treasury discontinued the publication of monthly and annual GFS in 2016, when the external support for the Treasury webpage expired. GFS for BCG according to the national methodology (cash basis) has been compiled monthly and annually, while these have been disseminated by e-mail to key recipients in the absence of an operating website. Meanwhile, arrangements have not been made for the publication of the accounts elsewhere, e.g. the website of the MoF.

30. Debt data is not reported, while it is being compiled quarterly, normally within one month after the end of a quarter. Since the Treasury website has not been operational the debt reports have been provided to users by e-mail upon request. No alternative means of dissemination have been used at the moment.

31. The issues in updating economic (object) mapping to GFS codes have caused disruptions in reporting GFS to STA over the past few years. These issues should be addressed and reporting of annual (GFSY) and monthly (high-frequency) data resumed, including through the update of AFMIS bridge tables (see paragraph 12).

32. The publication of financial data of other units of the general government does not follow a systematic pattern. PFEML mandates the publication of the approved budget, quarterly and annual (final account) financial data. There is no comprehensive guidance for the publication of the financial data by the government units, including those not part of the BCG.

33. The MoF should consider mandating the publication of the financial data by general government units. Publishing of annual and quarterly financial data would promote transparency and indicate the capacity of individual units to conduct their financial operations responsibly. The requirements should particularly apply to the municipalities, extrabudgetary units as well as public corporations.

Recommended Action:

  • The Treasury should resume the publication of monthly and annual financial data and quarterly debt data on its website or make arrangements for the publication on the MoF’s website by April 2019.

  • The Treasury should resume the submission of annual and monthly (high-frequency) GFS to STA by April 2019.

  • The MoF should mandate extrabudgetary units, municipalities, and public corporations to publish their quarterly financial data, as well as establish dissemination requirements by June 2021.

  • The MoF should enable the compilation and dissemination debt statistics at market value and nominal value by June 2021.

F. Further Steps to Transition to Full GFS

34. Afghanistan is well placed to further improve the compilation of GFS according to GFSM 2014 methodology. AFMIS has a powerful general ledger and double entry accounting system at its core to enable a comprehensive record of stocks and flows for the financial accounts. A number of reforms in accounting over the last two decades have also further improved the outlook for better financial data.

35. The GFS Technical Working Group should develop a GFSM 2014 migration plan for approval by the MoF management. The migration plan should accommodate the priorities along the path of improved compliance with the GFSM 2014 methodology. The government should consider its financial information requirements and align these with the improvements necessary in the public financial management. The transition to accrual accounting and budgeting should not be considered as an ultimate objective, while important priorities, such as meeting the requirements for reporting assets and liabilities under PFEML, the preservation of assets under the control of the government and comprehensive measurement and control of the costs of the government operations should be carefully considered as the plan is developed and adopted. The resource availability, capacity and security constraints should also be considered. Tentative key measures and timing have been provided in the detailed technical assessment and recommendations section.

36. Integrating the accounting procedures and the new requirements are still to be considered and implemented for effective improvement of the government financial data. First steps should specifically focus on the reconciliation and carry forward of the closing balances of stocks to the following accounting periods in order to improve the financial accounts. These tasks have been partially completed for the government stocks of currency and deposits, while these practices should be extended to all financial assets and liabilities as a priority for the Treasury accounts and the BCG.

37. The financial record of non-financial assets could be substantially improved. The requirements for keeping records of physical assets have been enforced for many decades. An asset management plan has been mandated in the government Financial Regulations and draft policies have been developed. The recent improvements in AFMIS facilities would provide for further reforms and integration of the financial information. Recording of goods and services received in AFMIS has been made mandatory over the last few years. The integration and reconciliation of the nonfinancial assets information based on the GFSM 2014 methodology would be a good and logical step to continue the improvements in the public financial management.

Recommended Action:

  • The GFS Technical Working Group should develop a GFSM 2014 migration plan incorporating key accounting and reporting measures and secure the management approval by December 2019.

G. Addressing Capacity Constraints

38. The authorities have achieved good outcomes in GFS compilation and dissemination despite limited capacity and tight demand on the limited resources. Systematic effort since mid-2000s has helped building a solid foundation for improved accounting and fiscal reporting as the basis for GFS compilation and dissemination.

39. Donor fatigue and declining interest compared to earlier years reduces the resource allocation for important reforms and sustaining earlier achievements. The MoF has benefited substantially from the support by foreign governments and international organizations since the fall of Taliban. Meanwhile, the donors have been expecting that the authorities of Afghanistan would gradually take over the responsibilities for funding the government operations, including those executed by the MoF. The latter causes risks for significant part of expertise accumulated in the government, which has been enjoying substantial support by external donors.

40. Ambiguous reform agenda and resource constraints cause risks for accurate development of the GFS compilation and successful outcomes. More emphasis on the GFSM 2014 methodology in financial management has prompted the authorities allocating key responsibilities for the budget classification to the Budget Department, which has limited experience in GFS compilation and practical application of the GFS methodology. World Bank has been requested to arrange TA on improving the compliance with GFS methodology, devising an alternative mapping from economic (object) classification the GFS.

41. The resources for GFS compilation and dissemination remain rather limited and should be augmented. Further progress substantially depends on a small team of qualified accounting staff, while it would be critical to supplement the GFS team by a statistician. This is important taking into account the agenda of the migration to GFSM 2014 and reforming the accounting and financial reporting functions in the government. Furthermore, large scale staff rotations and the increase of the share of politically appointed management without extensive technical expertise increase risks for effective implementation of reforms.

42. The GFS Technical Working Group should be the focus of the capacity development, with the key role allocated to the GFS compilers. Based on the adopted GFSM 2014 migration plan the authorities should source the necessary technical assistance (TA) and secure GFS training for a broader group of the government officials. The GFS and PSDS compilers should apply for the available IMF capacity development facilities, both courses and online training.

43. The GFS compilation methods and data sources should be documented to enable continuity of producing GFS in the conditions of uncertainty. Documented guidance for the GFS compilation would describe the data sources and contacts, the data manipulation to convert into GFS compatible dataset, support the operations analysis to further improve the processes and regulation, as well as training and transition of the tasks from outgoing to incoming staff. The guidance should be updated as changes to the data sources and methodology occur.

Recommended Action:

  • The MoF should ensure that the GFS and PSDS compilation are adequately staffed and encourage GFS and PSDS compilers to apply for the available IMF training.

  • The GFS Technical Working Group should develop and adopt a GFS Compilation Guide for the use of the GFS compilers by December 2020 and continue updating thereafter.

Detailed Technical Assessment and Recommendations

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Appendix I. Budget Framework Presentation for FY 2018

Table 4

– Budget Aggregates

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Appendix II. Mapping of AFMIS Economic (Object) Code to GFS

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Appendix III. Bridge Table for Extrabudgetary Units

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Appendix IV. Officials Met During the Mission

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