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Public finance and development: six things to read in October

Written by Mark Miller

Hero image description: Loans and repayment schedules, Mumbai, India. Photo: Simone D. McCourtie/World Bank (CC BY-NC-ND 2.0) Image credit:Simone D. McCourtie/World Bank Image license:CC BY-NC-ND 2.0
Loans and repayment schedules, Mumbai, India
Image credit:Simone D. McCourtie/World Bank ~ Image license:CC BY-NC-ND 2.0

Addressing geographical inequalities in access to quality services

When it comes to accessing quality public services, inequalities often manifest themselves in geographical terms. This is a major theme picked up in the latest Goalkeepers Report from the Gates Foundation. One potential driver of varied access to services within countries is that the level of spending by region is not equitable (see for instance this ODI paper earlier this year which was updated last month).  

Another possible reason (although one that is much harder to measure) is that the efficiency of spending can vary across different geographies. This study by Ruth Carlitz in Tanzania uses geocoded data to show that aggregate efficiency metrics (like efficiency frontiers that show how far a country is away from the most efficient comparator countries) can mask large distributional differences in efficiency. She shows how certain districts in Tanzania had much larger impacts in terms of easing access to community water points despite building fewer water points.

Using similar approaches, this study shows that while Chinese aid is politically biased in its allocation, it supports local economic development irrespective of where investments take place.

Balancing control and flexibility in spending

A perennial issue in public expenditure management is how to strike an appropriate balance between ensuring fiduciary control while allowing managers flexibility. This paper from Moritz Piatti and Ali Hashim makes a very sensible proposition to make greater use of new technologies to help minimise the administrative burden of processing thousands of low-value transactions through a centralised financial management information system (FMIS).

I am less optimistic about the benefits of the proposed ‘purposeful policy shift’ to use the FMIS to control all high-value transactions. From an accounting perspective the information is of course useful. But it is difficult to imagine that processing salaries through an FMIS would have prevented the cited examples of unbudgeted salary hikes in Zambia and Ghana. Similarly, a FMIS does not prevent overruns in large investments projects or escalating legal obligations to service debt.

The latest on the ‘shake-up of global tax’

The OECD has published its proposals that change century old rules on how corporations pay tax  (reported on in the Financial Times). This map of ‘missing profits’ is a fantastic visual representation of why it is so important to find ways to prevent multinational companies from shifting profits for the purposes of lowering their tax liabilities.

The proposed reforms pave the way for multinational companies to be taxed based on where value is created, rather than the physical location of their subsidiaries. The specifics of how exactly this should be done will have large ramifications for which countries most benefit from the changes as this blog from the Tax Justice Network points out. Rasmus Christensen and Martin Hearson set out the global trends in international political economy that have contributed to these sweeping changes in global economic governance.

Generating a fair share of revenues from the extractive sector

The extractive sector is a major source of revenues in many of the world’s poorest countries. There are some new really useful materials aimed at helping governments collect a fair share of revenues from their resource endowments. The Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) have published this practice note that helps decision-makers to critically evaluate the case for tax incentives and how they might be designed most appropriately.  Building upon recent gains in greater transparency in the extractive sector, the IGF have also been able to compile a database of tax incentives across 21 countries in the mining sector.

This joint publication from ODI and GIZ focuses more on ways in which governments can make sure that tax obligations from existing mining investments are actually met. It gives some nice practical examples of how four West African countries have taken measures to strengthen the capacity of revenue authorities in collecting revenues from the sector. ODI's Gundula Löffler also reflects in this blog about the importance of sharing information across countries to help conduct audits of extractive firms in West Africa.

The Africa Debt Monitor

Recent months have seen increased focus of debt dynamics in Africa. The Collaborative African Budget Reform Institute (CABRI) have worked with debt management offices across the region to build up a new platform for sharing information around debt. The debt monitor is particularly useful for bringing together comparative information on institutional practices in debt management offices that would be ripe for researchers to explore further.

The challenges in using data on government contracts

Earlier this year, I asked one of our research associates to dig in to new publicly available data on government contracts. I was keen to get some descriptive information around what governments actually spend their money on to see if it was possible to inform procurement reforms that were better tailored to the bulk of procurement spending. This blog very nicely sums up why such kinds of questions are still so ‘damned difficult’ to answer despite advances in transparency.

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