The second ‘hidden gem’ in the IMF Fiscal Transparency Code (2018) is related to PFM accounting practice used for fiscal reconciliation

Fiscal reports should include reconciliations between alternative measures of summary fiscal aggregates (page 38 under the principle of Internal Consistency):
-   Fiscal balance with net financing (linking the ‘above-the-line’ to the ‘below-the-line’)
-   The stock of debt issued with the stock of debt held by counterparties
-   Net financing with the change in the stock of government debt

Where countries are producing accrual accounts, operating, cash flow, and balance sheet statements make these reconciliations easy to produce. If countries are operating on a cash basis without financial statements, the reconciliations need to be integrated with and/or informed by data produced by the central bank.

Memorandum items
'Most countries have cash-based budgets, while financial statements and fiscal statistics are increasingly being prepared on an accrual basis. These differences could lead to large discrepancies among various reports. For example, arrears may be reported in accrual terms in debt management reports but ignored in cash accounting’.

A reported fiscal deficit “above-the-line” that is smaller than the net financing (below-the-line) may indicate that there are many off-budget operations.

Any discrepancies between the government’s debt liabilities and private-sector debt holdings may indicate misreporting of public debt figure'.

This is a series of posts presenting ‘hidden gems’ i.e. elements, considerations and recommendations in PFM, which might have gone under the radar, not being referenced often by practitioners.

My posts will present ‘hidden gems’ from the Fiscal Transparency Code Handbook by the IMF (2018).

If you feel like it, post your own 'hidden gems' from other evaluation manuals. Or enter the conversation to add your views on the presented ones.   

HI everyone - after quite some time away from being active in PFM Board discussions, I wanted to provide some thoughts and question marks regarding an increasingly important topic in Public Finance Management (PFM):  digitalization and its relationship with governance and PFM performance.

Digitalization is now becoming a central priority in Governance and PFM.  Governments are investing heavily in:

• IFMIS platforms
• e-procurement systems
• AI tools
• interoperability frameworks
• digital reporting, and
• data analytics

At the same time, frameworks such as PEFA continue to assess core dimensions of PFM performance:

• Budget reliability
• Transparency
• Asset and liability management
• Policy based fiscal strategy and budgeting
• Accounting and reporting
• External scrutiny and audit

This raises an important question:

Are current digitalization reforms actually strengthening PFM performance, or are they mainly modernizing administrative processes?

Some questions worth discussing:

• Should PFM digitalization be designed around technology architecture or around governance outcomes?
• Are interoperability and data governance recieving enough attention?
• Can AI-based tools function effectively where financial data structures are inconsistent?
• Should PEFA assessments place greater focus on digital maturity and system integration
• Are digital reforms helping institutions make better decisions, or mainly improving reporting interfaces?
• Are government investing sufficiently in institutional processes before investing in technology?
• Can digitalization improve accountability if underlying controls and data quality remain weak
• Are donor-supported digital projects sometimes creating parallel systems instead of integrated public financial governance

Përhaps the broader issue is this:

Can public finance management truly become "digital" without first becomming institutionally integrated?

Interested to hear perspectives from colleagues working in:

• PFM
• treasury
• budgeting
• audit
• procurement
• Governance Technology, and
• PEFA-related reforms

Looking forward to hearing different perspectives and practical experiences from colleagues across institutions and countries.

Interesting article in the Lancet on the use of GDP/GNI as the base for inter country comparisons, this time on health.


Rethinking country classifications towards a more equitable global health future
Esmita Charania esmita.charani@uct.ac.za ∙ Tlangelani Makamua ∙ Sheetal Silalb,c ∙ Ramanan Laxminarayand ∙ Marc Mendelsona

https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(26)00457-5/abstract?dgcid=raven_jbs_etoc_email

Introduction
The World Bank classification of low-income, middle-income, and high-income country groups, that uses gross national income per capita, shapes financing, research priorities, and political narratives. Existing evidence suggests that income alone is a poor proxy for health needs, system capacity, and vulnerability, particularly where rising national wealth coexists with persistent poverty and high disease burden. This gross national income-based classification that remains deeply embedded in global health governance obscures health system realities, masks inequities, and misdirects resources. In this system, low-income and middle-income countries (LMICs) are routinely treated as a homogeneous block, despite the fact that they represent nearly two-thirds of the world's countries and 84% of its population, the majority of whom are in middle-income countries (MICs). National averages conceal profound heterogeneity driven by intersecting inequalities related to gender, race, geography, age, migration status, and the environment These blind spots distort global priorities and systematically overlook vulnerable populations.

The COVID-19 pandemic exposed the inadequacy of income as a proxy for preparedness; many MICs, despite moderate gross national income, lacked basic infrastructure, workforce, and fiscal resilience to mount effective responses.6 Similar mismatches persist across communicable diseases, including tuberculosis, HIV, malaria, vaccine-preventable diseases, and antimicrobial resistance, where high burdens remain concentrated in countries no longer eligible for sustained international support.7,8 Recent global health reforms increasingly acknowledge these failures. The Lusaka Agenda and related initiatives call for equity-focused metrics that better reflect disease burden, system capacity, and vulnerability.9 Established frameworks such as WHO's social determinants of health and the Multidimensional Poverty Index demonstrate that complex deprivation can be measured beyond income alone. Operational examples already exist: the Global Fund incorporating disease burden and system capacity into allocation decisions; climate vulnerability indices integrating social and environmental risk; and water, sanitation, and hygiene (WASH) programmes, which increasingly use subnational data to target interventions and demonstrate impact.

Income-based classifications continue to create systemic blind spots (panel). Challenges such as antimicrobial resistance, WASH inequities, and maternal mortality cannot be understood through income alone; they require multidimensional indicators of vulnerability and resilience. These pitfalls have tangible consequences, reinforcing donor–recipient hierarchies and mischaracterising countries as either responsible stewards or problematic hotspots.

Full article:
Charani E, Makamu T, Silal S et al.
Rethinking country classifications towards a more equitable global health future
The Lancet, 2026; 407, 1406-1408

Foreword


"Building effective, inclusive, and accountable institutions has long been central to the development agenda—but today, it is more urgent than ever. Citizens worldwide expect governments to deliver services efficiently, equitably, and with the highest standards of integrity and accountability. When these expectations are met, societies thrive, private sectors grow, and jobs are created. In an era of declining trust in public institutions, enhancing public sector workforce performance is not just a priority; it is a decisive step toward driving meaningful change and unlocking shared prosperity.

In today’s rapidly evolving global context, the skills, motivation, and integrity of the world’s 400 million public sector workers—both those on the front lines serving communities and the administrators managing resources and operations—is key for effective and efficient governments. Drawing on an extensive evidence base of academic research and original data, including unique surveys and cross-national indicators compiled by the World Bank’s Bureaucracy Lab, this report proposes a framework for understanding and improving workforce performance. The analysis focuses on three key drivers: the wage bill (how governments hire and compensate staff), management practices (how workers are motivated and developed), and digital technologies (how innovation transforms the workplace).

The report has several important findings. Governments in low- and middle-income countries are understaffed compared to high-income countries, and the staff that they do have are poorly skilled, in part because of a lack of merit and transparency in recruitment. While government jobs tend to offer better pay and benefits—the public sector wages are, on average 9 percent higher compared to the formal private sector—weaknesses in pay structures result in weak incentives for workers to perform. Reforming pay structures, monitoring wage competitiveness, and ensuring merit-based hiring are urgent measures for a more efficient and equitable workforce.

The report also investigates the pivotal role of management practices in motivating public servants, promoting integrity, and encouraging collaboration. It advocates for a balanced approach that combines accountability with empowerment, recognizing the intrinsic motivation of public sector workers to serve the public good. Strengthening performance evaluations; supporting women’s career advancement (women constitute 50 percent of clerical roles in the public sector but only 34 percent of managerial positions); promoting community engagement; and protecting whistleblowers to empower workers to act with integrity are among the recommended strategies to raise productivity and restore trust.

Digital technology emerges as both a catalyst and a challenge. Governments have made substantial investments in management information systems but often underuse these tools for strategic workforce planning and evidence-based decision-making. Digital skills, both basic ones in the use of workplace software and advanced ones to take advantage of the rapidly changing digital technologies, are lacking in governments. Providing foundational digital training, creating specialized career paths for technology specialists, and fostering a culture of innovation are essential to harness the full potential of these systems.

This report offers practical guidance for policymakers, administrators, and development partners, including both “quick wins” and longer-term reforms, such as eliminating ghost workers and improving recruitment processes; advancing pay equity; and adopting mission-driven management strategies. By prioritizing these areas and adapting to changing needs, governments can transform their workforce into engines of progress, trust, and resilience."


https://www.worldbank.org/en/publication/public-workforce-performance-and-prosperity?deliveryName=DM275385