How to make order in public finance

Last update: 12.07.2005 06:00

The ten most important outcomes in public finance management reform

How to make order in public finance

  1. Multi-year budgeting.  A three-year budget of the public administration provides substantially better information to individual public organizations, enables higher-quality planning, and therefore also more effective use of public resources. A multi-year budget likewise provides the public, including economists and financial analysts, with clear information on the medium-term objectives of economic policy
  2. Programme budgeting. The use of programme budgeting significantly improved awareness of the facts about to which spheres public funds are directed.  Also awareness of what the Government wants to achieve specifically by using taxpayers money is increased by gradual improvement in defining the objectives.
  3. Institutional – organizational change of the budgeting process.  Significant organizational changes in the Department of budgeting policy on one hand extended its responsibility for co-ordination of the budgeting of the whole complex of public finance, and not only of the state budget, in spite of this, however, the number of employees decreased from 140 to 90. Important institutional – organizational changes of the budgeting process also began to be realized in some Ministries.
  4. Significant improvement of macroeconomic analyses and forecasts produced by the Ministry of Finance. The forecasts of the Ministry of Finance are regularly, three times a year, evaluated by the best independent experts – members of the Board for macroeconomic forecasting and Board for tax forecasting. Their opinions are always released, together with the forecasts of the Ministry of Finance. The whole process thus became transparent and credible.
  5. Treasury  Since 2004, the functioning of the Treasury system has centralized the financial flows of public organizations, wherewith it made the public finance management more effective and brought cheaper resources for covering the National Debt. The Treasury at the same time significantly improved the information base for the public finance management. 
  6.  The Debt and Liquidity Management Agency (DLMA) This agency, which is independent of the Ministry of Finance, is responsible for operational management of the National Debt in accordance with the strategy, which is always approved by the Government. It achieves better conditions during financing the national debt through more flexible procedures, which is reflected in reduced expenditure.
  7. Fiscal decentralization. State budget subsidies as a main source of funding the self-governments were replaced by own tax revenues, wherewith the authority as well as responsibility of self-governments were strengthened. It contributes to an increase in efficiency of the public administration functioning.
  8. Using the European System of Accounts ESA95. In the recent past different methodologies of public finance accounts were applied – national methodology, methodology of MMF or ESA95, that were moreover, often combined. Significant enhancement of transparency in the discussion on public finance brought application of ESA95 methodology as the basic tool that also enables a very precise comparison with other EU states. 
  9. State guarantees and the use of revenues from privatization. Since the year 2002 the Government has provided virtually no new state guarantees and revenues from privatisation have been used, except for the cost of the activity of the Fund for National Assets, only for reducing the National Debt.
  10. Public Accounting Reform  Through replacing the different systems of accounts that are used by public organizations with a unified system based on International Accounting Standards for the public administration, the information base will improve, not only for the management staff of these organizations, but also for the Ministry of Finance and the public.