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Digital public finance: top trends in July 2023

Expert comment

Written by Nicholas Gates, Stephanie Diepeveen, Cathal Long

Image credit:wilsan u / Unsplash

Welcome back to the Budgets and Bytes blog, where it is time for another monthly review of the top trends in public finance and digital.

We have been busy this past month preparing for ODI’s 2023 Public Finance Conference in September. The theme of this year’s conference — ‘Navigating the poly-crisis’ — promises to address some urgent questions around the trade-offs finance ministries need to make in an era characterised by multiple crises. For more info and to sign up, head over to the event webpage.

Meanwhile, July saw the level of scrutiny and debate around digital public infrastructure (DPI) intensify, as India’s G20 presidency moves into its final months. We also reflect on other topics of interest, such as getting the framing right for digital reforms, the importance of digital registers for combating corruption, and the challenges of transitioning to a cashless and paperless society.

Without further ado, here are some of July’s top trends in digital and public finance.

1. The continuing geopolitics of DPI

DPI enjoyed some mainstream attention this month. In a write-up for The Economist, Professor David Eaves notes that ‘the digitisation of government is taking on a more geopolitical hue [with] competition between [big economies] intensifying, and tensions rising, as they encode their values into their digital infrastructure — and export it’. The article calls for more debate on the question of whether these new digital capabilities will be used to ‘increase or limit access to public services, to enhance or curb economic opportunity, and to promote or smother democratic values’.

Meanwhile, India’s G20 presidency is entering its concluding months, with data and DPI very much on the agenda. Last week, the T20 — the G20’s official engagement group for think tanks and research centres — met for the final time before the G20 leaders’ summit in September. It published a communiqué for leaders as well as individual Task Force Statements (including one on DPI).

While the T20 process highlights a growing consensus that DPI is important, it also reveals a lot of questions that need answering in order to determine if and how governments can reap the benefits and manage the risks of DPI, including:

  • How does DPI relate to outcomes for citizens? What new forms of exclusion and risk are emerging within specific country experiences?
  • Where does the private sector sit in DPI? What are the impacts of different models for private sector involvement in DPI, and what are the benefits and risks for citizens?

In short, we agree with Eaves that debates over DPI need to happen now — especially as complex digital infrastructure is being developed and integrated into people’s interactions with businesses, governments and one another. However, the G20 process also affirms the need and demand for these debates to consider the diverse histories, capabilities and priorities of the ‘global majority’.

2. Are cost savings the right framing for digital government?

So asks Jason Kitcat in his recent blog post, in which he concludes that the more vital question is: ‘What can we do today for the public benefit which wasn’t possible before?’ He argues that the conversation needs to move beyond cost savings, which have often been used as a politically savvy way of selling digital reforms.

In our own work, we have also highlighted cost savings as one of the main benefits of digital public financial management (PFM). While there are certainly more efficient ways of bringing digital into PFM than what has been done to date, we also agree with Kitcat that the real prize is to be found in developing the capabilities to do things that were previously difficult or seemed implausible, like bringing together data to better allocate resources and being able to target payments to vulnerable populations in response to shocks.

The main benefit of digital PFM should be about having the capability to do new things as well as doing old things better, and being able to tackle issues around equity as well as efficiency. This broader framing is also more likely to be appealing to politicians and the experts that governments will need to hire to bring public finance into the digital era.

3. The importance of registers for combating corruption

Since launching the Digital Public Finance Hub, we have been strong advocates for data as the foundation for digital government, emphasising the importance of having authoritative lists (registers) of service delivery facilities like health centres that are used across government. Having a register of health centres as a single source of truth across government IT systems allows us to more easily compile data on inputs, outputs and outcomes to better inform resource allocation decisions. In lower-income countries, there is also a more fundamental reason — registers are the first line of defence in combating corruption.

A powerful new documentary – the Ghosts of Ntungamo – highlights what can happen when registers of health facilities are allowed to diverge across IT systems. In this instance, ‘ghost’ facilities were created on the payroll system to pay salaries and allowances to people who were not entitled to them. The documentary also raises concerns about the quality of contractors’ work for the payroll system and the pace of decentralising PFM responsibilities. While disappointing, the fact that these investigative journalists were able to use other sources of data including the health facility master list to uncover the malfeasance is encouraging from a transparency and accountability perspective.

4. Cash is still king

A new study from the International Centre for Tax and Development in July highlighted the persistence of manual practices in Rwandan tax administration. While some of this is particular to Rwanda, countries like Sweden and Estonia have gone almost fully cashless. Looking ahead, tensions in the digitalisation of both cash payments and associated government revenue collection is a trend that requires some consideration.

The resonance of cash as a motivation for more manual practices in delivering electronic PFM systems has partly become a political issue too. In Austria, for example, there has been political attention around the idea of enshrining the ‘right to cash’ in the country’s constitution. While seen in large part as a result of the far right’s influence, it is nevertheless a political idea that is resonant in some contexts.

News from our network

A big thanks to the eGov Foundation, which helped us organise the first in our new BudgetBytes webinar series. Titled ‘Can standards for fiscal data exchange support better service delivery?’, it reflected on standards-based approaches to data exchange for PFM by interrogating the potential of the eGov Foundation’s iFIX, a platform for fiscal information exchange. Check out our round-up blog here, and watch back on YouTube if you missed it the first time.

Elsewhere, Tom Hart represented ODI at the International Health Economics Association 2023 Congress, which took place on 8 July in Cape Town, South Africa. Tom addressed the attendees on the potential for leveraging digital PFM platforms for health resource tracking. He also shared his thoughts on the potential benefits for the health sector in moving from closed and siloed PFM technology architecture towards a more open architecture as part of a wider ecosystem of platforms and services – with data, data governance and shared registries as cornerstones.

Finally, a new Public Digital blog highlights some of the challenges that come with digital approaches to PFM. It focuses on the fact that international best practices do not always translate into better policy outcomes, particularly when it comes to digital. As we saw with the Rwanda tax study, governments often introduce new financial management information systems without thinking of creating processes and business models that help those systems meet the needs of the digital era.

Please note: There will be no round-up next month due to the summer holidays, but we will return in October with September’s recap.