The recently released 2020 Global Report on Public Financial Management (PFM) by the Public Expenditure and Financial Accountability (PEFA) initiative finds that countries do better in preparing their budgets than implementing them. PEFA assessments measures the performance of various aspects of PFM through thirty-one Performance Indicators (PIs) by scoring them on a scale grade from A (the highest) to D (the lowest). The generally low PEFA country scores on related indicators across all regions points to weaknesses in budget execution globally. One area where countries can make significant gains is by improving their digital and electronic capacities work better for PFM. Foundational GovTech solutions as well as disruptive technologies can play a huge role in improving budget execution in a post-COVID19 world. Here are four such GovTech solutions.
1. IFMIS system with a Treasury Single Account (TSA) could contribute to improvements in budget execution in following ways:
i) Improved predictability of resource allocation (Current global average PEFA score is a C+): IFMIS can help improve predictability by (i) supporting consolidation of cash balances in government (ii) providing information necessary for cash forecasting and monitoring, (iii) enabling commitment ceilings, and (iv) establishing effective approach towards making budget adjustments during the year.
ii) Management of expenditure arrears (Current global average PEFA score is a D+). IFMIS can be effectively used to record and monitor expenditure arrears (i.e, overdue debts, liabilities, or obligations that have not been paid on due date) for timely clearance.
2. Debt accounting and management systems for sustainable public finances. With global public debt mounting and many countries at breaking points, systems for debt accounting and management warrant greater attention where the current global average PEFA score is a C+. Developing a government-wide centralized general ledger comprehensively covering all public debt including debt taken on by public corporations that are controlled by government, could strengthen debt management. The approach could combine several GovTech solutions like IT systems that help with debt accounting and management, with analytical insights from Debt Sustainability Analysis (DSA) and accrual based accounting that use robust standards like International Public Sector Accounting Standards (IPSAS). Debt accounting and management GovTech systems support credible data about recording, validating and maintaining debt.
3. Electronic procurement systems that support better value government procurement. Public procurement accounts as high as 12% of global GDP. Weak public procurement systems, where the current global average PEFA score is a C, adversely affects quality of budget execution. eGovernment procurement (eProcurement) systems can improve speed, quality and effectiveness of the government procurement processes while reducing waste and corruption. Stronger eProcurement systems can strengthen procurement monitoring and methods, improve public access to procurement information and procurement complaint management. Further, disruptive technologies like Cloud, Big data & analytics, artificial intelligence are gaining traction in their application in public procurement and are likely to continue growing post-COVID19.
4. one-third of potential benefits from infrastructure investment due to inefficiencies. The current global average PEFA score of PIM is a D+. The ability of countries to allocate budgets towards capital investments is adversely affected in many countries due to COVID-19. This necessitates stronger focus on capital investment decisions and PIM processes. GovTech solutions can help here. An effective public investment management (PIM) Information systems could support the entire PIM lifecycle. It could contribute to overall improvement of Public Investment Management by enhancing governments’ ability to strengthen (i) economic analysis of investment proposals, and (ii) investment project selection, costing and monitoring.Countries lose over
Budgets are key political instruments of governments in power; effective budget execution is as important as preparing budgets that reflect the priorities of the government.Technology is only a means to solve PFM problems. At the end of the day, governments need to better align GovTech solutions with the underlying PFM problems. When properly implemented,