Finance ministers, auditors-general, and leaders of professional accounting organizations are meeting Tuesday in Nassau to discuss a topic that is often hidden from view, but is critical to quality of life in the Caribbean: Capacity and standards in public financial management.
How governments manage taxes, borrowing and spending is essential to economic growth, to poverty-reduction, and to ensuring that the region’s poorest can improve their lives. It is a core function of accountability in government. Improvements in this area could increase the health of small and medium-sized enterprises, create jobs, and bring in additional government revenues to spend on essential public services. Residents of Caribbean nations: this strategic dialogue will be about how the government manages your money.
The dialogue will be opened by Bahamas Minister of State for Finance, the Hon Michael Halkitis, and in addition to government sponsorship, will include the expertise of international and private-sector organizations: the Institute of Chartered Accountants of the Caribbean (ICAC) and the International Federation of Accountants (IFAC). World Bank Group staff will be there to offer our institution’s assistance in countries’ efforts to improve their accounting systems, audit capacity, and other skills critical to the transparent and effective functioning of government.
In a recent report published by the Bank Group, “Strengthening Financial Reporting Regimes and the Accountancy Profession and Practices in Selected Caribbean Countries,” we found that the region faces a number of challenge in public financial management. In most Caribbean countries, the public financial management system is not yet fully mature. The statutory frameworks and regulatory practices used by Caribbean nations are not up to the standards of international best practice, despite good-faith efforts and recent advances. There are also long delays in the preparation of the financial statements of governments and state-owned entities.
In addition, the region has a significant shortage of qualified professional accountants. For example, a healthy ratio of professional accountants per thousand population is around 2.74, the ratio found in Singapore. By comparison, that ratio is 0.07 in Suriname, 0.44 in The Bahamas, 0.81 in Trinidad &Tobago.
The general state of the economy also hinders success in bolstering public financial management. For example, unemployment remains high, especially among young people. Small and medium-sized enterprises have limited access to credit, and the government itself finds itself with limited resources to invest in infrastructure and social services.
Improving financial reporting is key to increasing private sector investment. It increases investors’ confidence and willingness to take risks. Modernization of public sector management can improve service delivery and increase transparency, assuring citizens that the government is making good use of scarce resources.
We have carried out work to address these challenges, including performing detailed evaluations of accounting and auditing practices in various countries– known as a Report on Standards and Codes. At the request of the members of the Organisation of Eastern Caribbean States (OECS), for example, the World Bank Group evaluated the regulatory and oversight mechanisms pertaining to credit unions, which hold deposits for more than half of the working population and primarily target low- and middle-income groups. The insight and recommendations of this evaluation helped improve financial regulations in those countries, consumer protections and general oversight of these institutions. The result was that the savings of some of the region’s poorest are now more secure and protected from systemic risk.
In Guyana, the World Bank Group is advising the government on how best to strengthen regulation in the pension and insurance markets. In part this is an effort to recover from and avoid a repeat occurrence of the 2009 collapse of CLICO Guyana, a systemic insurer with assets amounting to 3 percent of GDP. That collapse reduced the insurance market by 75 percent.
We believe the accountancy profession can play a big role in promoting higher standards of accounting education and help address the skills shortages in this area. We also think the profession can play a leading role in advocating for stronger financial reporting, helping to bridge the challenges posed by the small size of the countries in the region and promoting the sharing of good practices and experiences between these countries.
With the collective wisdom of government, technical experts and private sector practitioners, we can find the best solutions to the public sector management challenges faced by Caribbean countries. Tuesday’s strategic dialogue is a step in the right direction.
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