08/26/10In recent years, governments in the Middle East have been taking steps to become more modern and transparent, thus providing better services to their constituents—both business and citizens. A critical element of this process has been fiscal reform, which makes governments more efficient and ensures that taxpayers’ money is being used effectively. As finance ministers in the Middle East seek to improve their fiscal oversight, one approach gaining favor is the adoption of a government fiscal management information system (GFMIS). This standardized, robust and automated system for managing government revenues and expenditures is giving finance ministers and other decision-makers the tools they need to improve government services, reduce costs and attract better borrowing terms. Egypt, Jordan, and the UAE are among the leaders implementing new systems to gain greater transparency into their fiscal management processes.
To date, sub-standard budgeting practices have constrained MENA governments’ ability to use fiscal policy tools and improve the quality of their services while remaining within their budgets. Many government entities lack clear and consistent methods to determine the level of funds they require to perform their duties.
Once budgets are approved and appropriated, government accounts are generally kept at several banks, rendering centralized cash management – and thus stable short-term liquidity – nearly impossible. Liquidity shortages force governments to take on additional costly debt to fund unexpected cash shortfalls. Additionally, Middle Eastern countries often lack transparency into the standard budget lines across government entities; this shortcoming complicates the aggregation and analysis of financial activities, leading to preventable delays in budget reporting as well as inaccurate information.
Given that fiscal policy is one of government’s primary tools to achieve short, medium, and long-term economic objectives, these basic capability gaps may hinder the growth potential of many Middle East countries.
As finance ministers in the Middle East seek to improve their fiscal oversight, few available options offer the same impact that a GFMIS can deliver. A GFMIS works by automating each step of the fiscal management cycle and integrating the steps with each other. This enables automated communication between the ministry of finance and all government entities and spending units, standardizes processes across the fiscal management cycle, and allows up-to-date visibility on government-wide expenditures and receipts.
Incorporating a GFMIS into a reform plan must take into consideration specific characteristics of a country’s budget cycle. The three-tier framework aimed to develop GFMIS design elements includes overarching, process-specific, and support elements that together complete the GFMIS operating model:
- Overarching elements: These elements typically address issues that affect parts or all of the budget cycle.
- Process-specific elements: These are more detailed elements that aim to address flaws in the existing processes within the country’s budget cycle or establish new processes.
- Support elements: These elements are key to the successful implementation of a GFMIS platform as they are the building blocks required to make GFMIS operational. Support elements typically include the necessary IT infrastructure, training programs, and capabilities in internal communications, change management, and implementation management.
The overall design and implementation of the GFMIS program must be seen as more than an IT endeavor. Such programs hinge just as much on a thorough understanding of budgeting mechanisms, laws, accounting procedures, and other factors that demand a business-centric governance model. It is imperative to ensure that all design elements drive and enhance business requirements, and not merely automate existing, inefficient business processes.